The Senate and Buhari’s Borrowing Plan

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Olu Isaac
Nigerian legislators love to call the National Assembly the “People’s Parliament.” But since 1999 when the country returned to civil rule, many would agree that the National Assembly has not been in the highest estimation of ordinary Nigerians.

While there is little doubt that some of the brightest and patriotic Nigerians have been elected into top lawmaking body, the group act of both chambers have not reflected such. Yes, leaders of the parliament have mouthed populists’ rhetoric, and even intervened on a few occasion on the side of the people, but what has defined the character of the parliament in the minds of Nigerians are those issues that have stirred the greatest passion in the legislators.

The issues of “urgent national attention” for the legislators are more often than not those bothering on slander of leaders of the legislature, perceived lopsidedness in appointments and issues affecting their emoluments and welfare. Those issues directly affecting the masses get secondary attention or no attention at all. And when they do get attention, it is because the legislators want to spar with the executive.

That, to my mind, is the case with the Senate’s rejection of the borrowing plan of President Muhammadu Buhari. The president had forwarded a request to the National Assembly to approve external borrowing plan of $29.960 billion to execute key infrastructural projects across the country between 2016 and 2018.

He made the requests in two separate letters to the President of the Senate, Bukola Saraki, and Speaker of the House of Representatives, Yakubu Dogara. But when the request came up for consideration, senators rejected the proposal entirely.

It was, to say the least, a shocking outcome to the executive and to most Nigerians, especially since the president spelt out in details of what the loan would do.
In a letter explaining the purpose of the loan, the president said the fund target projects cutting across all sectors. It states: “Considering the huge infrastructural deficit currently being experienced in the country and the enormous financial resources required to fill the gap in the face of dwindling resources and the inability of our annual budget to bridge the infrastructure deficit, it has become necessary to resort to prudent external borrowing to bridge the financial gap which will largely be applied to key infrastructure projects namely power, railway and road project amongst others.”

Other sectors, it said, included poverty reduction through social safety net programmes and governance and financial management reforms, among others. The cost of the projects and programmes under the borrowing (rolling) plan is $29.960 billion. This is made up of proposed projects and programmes loan of $11.274 billion, special national infrastructure projects $10.686 billion, Euro bonds of $4.5 billion and Federal Government budget support of $3.5 billion.

It is doubtful whether the senate consulted economic or development experts before arriving at its decision to throw out the president’s external loan request. Explanations coming from the national assembly do not suggest the legislators’ bothered to seek professional advice. And if they sought expert advice, then their rejection of the loan request was done against good advice, and perhaps, as many think, for political gains.

It does not require a PhD in economics to know that spending on essential capital projects is one of the surest and fastest ways of reflating an economy in depression. Not only would businesses that have closed shop open for business again, but Nigerians who had lost their jobs due to recession would get them back. This would have immediate multiplier effect on all sectors of the economy.

Now the argument that borrowing such huge amount would mortgage the future of the country is not only pedestrian but laughable. One way of putting debts in perspective is to compare it to the gross domestic product (GDP) of a country. The debt-to-GDP is one primary indicator of a country’s economic health as lower ratio is generally perceived as more favourable.

The statistics certainly favour the president’s borrowing plan, and economists have said so too. Nigeria recorded a dent-to-GDP ratio of 11.50 percent in 2015. The highest ratio was in 2001 when it was 88 per cent. Compare this figure with that of the United States, the country with the highest debt burden in the world, whose debt profile is approaching $13 trillion. Though the US is the most indebted country on earth, it debt-to-GDP is still favourable, at 92 percent. That is why it is still the strongest economy in the world.
And it is the reason why the US is not on the list of countries with the worst debt-to-GDP ratio such as Japan, Greece and Iceland, whose debt-to-GDP exceeds 120 percent.

The cerebral DG of the Debt Management Office, Dr. Abraham Nwankwo, also found it unbelievable that Nigerian legislators would throw out a plan as favourable to the country as the one being proposed by the president. Nwankwo has been speaking on the matter since the Senate’s unpopular decision. He revealed that the concessionary interest rate of the loan, at 1.5 percent, was a far cry from previous loan arrangements with the Paris Club of creditors, which came with floating interest rates as high as 18 percent.

The DMO DG said during one of his interviews that for Nigeria to pull the economy out of recession, government must embrace what he called a “conventional public borrowing” to fund critical infrastructures as President Buhari planned. This is not a loan to be disbursed at the whims and caprices of the presidency; it is projects –specific loan that can be tracked by the public and the legislature.

Nwankwo also made more interesting revelations. He said long before the drop in global crude oil prices in mid-2014, it was clear Nigeria needed to invest about $25 billion per annum for 7 to 10 years to cover its huge infrastructure deficit. But with the drastic drop in oil revenues, he said the country faced additional challenge in financing gap in public revenues estimated at about $20 billion per annum.

“This means Nigeria’s total investment deficit is not $25 billion per annum, but $45 billion per annum,” Nwankwo said, stressing that with the huge structural financing gap, the country needed to tap capital from all available sources, including short- term and long-term borrowing with tenors of 15 years and above, to survive.

Another interesting observation about the loan is that the projects to be funded cut across all sector-infrastructure, agriculture, health, education, water supply and employment generation. Other sectors include poverty reduction through social safety net programmes, governance and management reforms, among others.

Many development experts have suggested that more investments in agriculture alone could turn around the economy as the sector employs more than 70 per cent of Nigerians. If you add that to infrastructure projects such as road and railway construction, and power, you are talking about a recipe for one of the fastest economic recoveries in modern times.

It is truly confounding that our legislators are blind to these potentials, and have chosen instead to dissipate energy on technicalities and protocols, making mountains out of mole hills always. If the executive fails to include certain statements or details in a proposal, is that enough to warrant the loud noise we hear from the legislators’ chambers? Why is the legislature regarded as the third arm of government? Or has the Nigerian legislature become a government of its own, competing with the president popularly elected to lead the government of the country?

When there are gaps in executive proposals, is it not the job of the leaders of the national assembly to quietly sort out contending issues before they are laid on the floors during plenaries? Why are we daily treated to unpleasant melodrama in a National Assembly controlled by the ruling party? If the legislators feel compelled to draw out the executive, it should wait for such opportunities to present itself. It is bad politics when projects that are beneficial to the people are blocked just to spite the executive, which in truth, may deserve some doses of legislative jabs.

Olu is a public affairs analyst.