$30bn External Loans: Putting the Cart before the Horse



Emmanuel Nwosu posits that the campaign for the $30 billion external loans and disposal of national assets, as the panacea to the recession and economic stagnation, is ill-advised

Loans can help, no doubt, but we do not have what it takes, culturally and technically and by track record.

Nigeria had seen money again and again but only to little avail. It had sold assets and taken loans for all sorts of empowerment only to revert to more debt – rather than economic bouyancy – sooner than later. When you scrutinize the packaging, costing and management of related projects, it would seem that public loans are mostly rushed for pecuniary interests more than public interest. Over-invoicing and lapses in management contracts, technology transfer and other derivatives (the recipe for non-performance) are rampant. We should, then, become circumspect and not fly off the handle into more rot than we are facing. Why have we been in recession and what must we do to finally get out of it? That is the high-gain question. It goes beyond unguarded loans and sale of assets, in the manner of the past.

The causes of our recession are many and intertwined, among them, endemic corruption and frittering away of resources; failure to diversify the economy in production; import-dependency with a delusive and ostentatious lifestyle and, above all, the refusal to restructure the Nigerian federation in a manner that compels everyone to become prudent and to produce with the abundant resources in his domain.

We are spoilt children of a polygamous home, unequally yoked together, squabbling over limited food in the kitchen, in the manner of predators – instead of each mother daring the weather to the fertile fields with her children to compete and harvest food in abundance. Those in power manipulate the system in favour of their enclave, at the expense of objective measures that can move the country forward. The situation is compounded by the fact that the current government has been slothful in communication, economic management and decision-making, generally. Susceptibility to fall in oil price is an aftermath.

Put in another way, the problem is not the quantum of money (the ‘hardware’) but, among others, the quantum of appetite; insincerity and rascality of our leaders; tribalism and enclave mentality; endemic corruption; import-dependency and the frustrating atmosphere for investment and production – all of which revolve round the unjust, predatory, structure and operating system of the federation (the ‘software’) Let us first deal with this software. Money without character cannot transform any society.

Loans are meant to be repaid from operational cashflow, as bankers would say and, in the case of sovereign or public loans – directly or implicitly – from enhanced well-being, economic activity and taxes in an expanding cycle of revenues that they are supposed to galvanize, in the short-term and/or in the long-term. Thus, the question of what the loan is spent on, where it is spent and “how” it is spent is very important because when the loan fails to expand the revenue cycle, owing to the software and other lapses already highlighted, there will be a permanent diversion of funds from other activities to its repayment which might trigger cashflow and service delivery problems throughout the system. It is worse when borrowing for both recurrent (operating) expenditure and capital expenditure as in our case where cost of government alone exceeds all revenue, with the debt to revenue ratio rising out of reach.

Unfortunately, there isn’t much in this era indicative of a positive result from new loans, yet. Even ordinary analysis and presentation of the proposed $30 Billion loans have been faulted by the Senate. The Senate may latter be appeased to pass it but the weaknesses are already in the public domain.

For example, a lot of money had been sunk on power and railways which will get large portions of the loans. What are the intended outcomes of the additional investment? Are these outcomes historically justified? What have been the returns and the debt service capacity of previous investment? If not satisfactory, what is the different strategy this time round? How come the most itinerant Nigerians and key commercial centres of the South-East, moving millions of tons of passengers and cargo, daily, are not covered by the rail package, if viability (and not political patronage) is paramount? What about the devastated Niger Delta region from where the revenues for loan repayment might still be derived?

There is also the tension arising from President Buhari’s lopsided utterances, body language and actions to contend with. Most bothersome is his government’s lukewarm response to the perennial conflict between herdsmen and farming communities that is tending towards nationwide ethno-religious conflagration (once potential victims begin to arm for self-defence) while the Boko Haram debacle still lingers. It is a matter of special pleading whether the herdsmen are Nigerian or foreign or the attacks reprisal or spontaneous. Lives and properties are serially lost. In many cases, communities have been sacked. The government should be seen to descend on the militia with more bile than it descends on protesters in the South-East and Niger Delta who do not take life. The aggressors (on both feuding sides) and their sponsors are not ghosts who cannot be rounded up, disarmed and prosecuted for deterence.

However, there can be no lasting peace without justice, even in a garrison. Measures whereby farmers can possess their farmlands in peace, without avoidable trespass and loss while herdsmen become less nomadic and yet bountifully feed their cattle and earn better returns without incidents should be taken.

Since conflict arises mostly from itinerant and random cattle grazing and rustling, isn’t it more sagacious to have cattle-growing states (and other interested states anywhere) collaborate with the private sector to develop ranches where cattle can be best husbanded to global health, productivity and return-on-investment standards, without hindering crop farming and food security? The option of grazing routes and reserves – in the face of diminishing arable land and vegetation (owing to environmental, population explosion and urbanization challenges) is outdated, predatory, prone to incidents, unsustainable and a recipe for internal colonization which is inimical to lasting conflict resolution. Herders and their cattle must stray and the Fulani (the main stock holders) are, generally, domineering and conquest-oriented.

His government is also perceived to be hijacked by an unpatriotic cabal priming it for Northern (nay, Fulani) hegemony, given the pattern of distribution of security and executive powers of the federation. Separation of powers, independence of institutions, improvements in election, Freedom of Speech and Rule of Law generally, which were fostered by his predecessor, are all being threatened under his watch.

Consequently, cynicism and tension mount, with a resurgence of militancy, separatist agitation, capital flight, speculative demand for forex by anxious Nigerians and foreigners and inflation and financial markets volatility. Genuine investors are either sitting on the fence or migrating. Production continues to decline. The aftermath of unguarded loans in this dishearted situation will be a worsened economy!

Thus, the first step to getting Nigeria out of recession is not $30 Billion loans. It is to get the government better guided on the affective (software) domain of leadership, in order to douse tension and negative perception and to restore the sense of belonging and faith in Nigeria among citizens and investors. Imagine the mileage to be gained by truce in the Niger Delta and increased output and sales of crude oil!

Second, that template for ample fiscal independence and economic activism of federating regions in the First Republic, that motivated them to be people-centred, resourceful, prudent, productive, prosperous, and culturally accountable – but which was dismantled by successive military governments into a unitary system, with the federal government as a noose on the citizens and the states, which are rendered servile and dependent on periodic allocation of crude oil revenues controlled by it – has to be regained by political cum economic restructuring. The current unitary structure and Constitution are inimical to healthy competition, ingenuity and quest for distinction by our diverse federating units which can better aggregate to a strong and economically vibrant country if empowered to take their fate in their hands with ample control over the natural resources, security and social services, etc, of their domains.

In our current system of paternalism, the multitude of governments and leaders live bigger than their counterparts in the developed world, from Asia to Europe and America, where the Gross Domestic Product of one local government can be greater than that of Nigeria as a whole – even when they have to borrow for the outlandish expenses and when salaries of their workers are outstanding, not to talk of capital expenditure. Restructuring can curb this rascality, discharge funds to capital expenditure and motivate creativity, accountability and economic activism and competition at all levels of government.

Third, the top-heavy recurrent expenditure profile of the present system should be quickly dismantled, starting from the National Budget in which the State House proposals, for example, could be trimmed by up to 75 per cent, like many other expenditure heads. Our leaders live in a world of their own, offering only platitudes for the abject condition of the people, rising unemployment and crime wave traceable to their selfishness and squandermania. There are still too many people, agencies and departments doing similar things, with all shades of staff milling about the President, governors and ministers, etc, yet, we are largely dependent on external consultants by whom funds can be easily siphoned. Merging some ministries merely scratches the surface. Political office holders and other senior public officers cannot cling to unwarranted security votes and allowances while the people they are supposed to be serving get increasingly famished and despondent. Nobody should be entitled to compensation for a previous office concurrently with the current one. It is time for austerity and for office holders to merit their pay.

Fourth, import of food, fuels and other items significantly within our comparative advantage to produce should be systematically ended in two years, whatever it takes. So also should cultism, labour unrest and the drift of faculty in our schools, so that more people can opt for formal education in Nigeria. Drastic measures need be taken on porous borders and on the immigration and customs services concerned.

The federal government and state governments should set the pace in patronizing made-in-Nigeria products. For example, imported vehicles budgeted in capital expenditure should be substituted with available ones produced by Innoson Motors and other Nigerian companies. The government could go further to specify thresholds for local content for the vehicles, to encourage backward integration. Political office holders and public servants and their dependants should be made to patronize local institutions (up to first degree) and local health facilities (except on specialist doctor’s recommendation)

Fifth, the campaign against corruption is highly commendable, particularly, with the addition of the whistle-blower initiative. But it is not yet encompassing, objective and penetrative enough. So far, it seems fixated on the graft of key members of the previous government whose counterparts in the current government, said to equally have questions to answer, are routinely absolved. And, among citizens and the private sector as well as most states and local governments, it is still business as usual.

Moreover, it is to be noted that corruption is pervasive and can manifest in various other strains (such as descrimination, manipulation and misrepresentation) beyond graft, all of which share similar genes and consequencies and are mutually regenerating. Curbing one strain without curbing the others which can regenerate it is only as good as hacking the branch instead of uprooting the evil tree. By limiting the current campaign to graft, you can have a situation where it declines temporarily while other strains that will regenerate it are at large. Above all, corruption cannot be wiped out without changing the patronage, unitary, system on which it feeds and which has failed to deliver good governance in more than 50 years of tinkering and test by various regimes since Aguiyi Ironsi’s Unification Decree of 1966. Therefore, the campaign must be quickly fine-tuned if it is not to be mired in cynicism and controversy.

While also commending it for degrading Boko Haram, the All Progressives Congress (APC)-government, should accept that, by failing to deliver on any other promise made to the people by its party, with knowledge of what was on ground, but, instead, dithering or going in reverse, for almost two years, it is liable for fraudulent misrepresentation and manipulation and is also sliding into the same incompetence (or cluelessness) the Peoples Democratic Party (PDP)-government is accused. Many key players of the PDP government, indicted for frittering away and looting public funds, are now prominent in the APC government which is doubling the domestic debt stock within two years and is pushing for the escalation of foreign debt from about $11 Billion it met to almost $50 Billion, all at once. The prevailing multiple exchange rates, preferential foreign exchange allocation and budget padding, etc, are also windows for looting. And, having since taken over the cabin is it tenable for the new pilot to still blame the former for the airplane’s failure to gain altitude, as the government is wont to? Either the latter is equally incompetent or the aircraft is defective and in need of repair (restructure) as demanded.

Therefore, the APC government owes us humility! Let it demonstrate greater circumspection, readiness and executive capacity by, among others: (1) taking measures to sincerely communicate its policies and programmes and to bond with the people, to douse tension in the polity, restore the faith of citizens and investors in the country and raise the output and sales of crude oil, quickly (2) expanding and selling down the anti-corruption campaign (3) embarking on political and economic restructuring of the country to put the federating units back in business and to facilitate the diversification of domestic production and revenue generation (4) curbing recurrent expenditure and imports, to beef up capital expenditure, foreign reserves, exchange rate and domestic production and employment and (5) publishing proposed policies, projects, budgets and loans, etc, for dissection by concerned Nigerians for better outcomes. Borrowing to “spend-out-the-recession” without these cultural and structural software measures will worsen our pre-industrial economy with inelastic, fragile, production base and absorptive capacity.