As Buhari pulls Nigeria into the second debt trap …
It was a season of borrowing for the Buhari administration. President Muhammadu Buhari’s government assets face a revenue challenge and his most “innovative” way to overcome the challenge is to take his path. The administration has more than tripled the country’s external and local debt portfolio and is expected to continue increasing the country’s debt, regardless of its short- and long-term impact on the economy. Most Nigerians do not see the rationale for loans, as their impact has not been impressively felt. For many experts, this is again déjà vu; a second debt trap imposed on Nigerians by Buhari. Nosa James-Igbinadolor reports
The administration of President Muhammadu Buhari took office on May 29, 2015, full of promises to change everything for good.
At the end of former President Goodluck Jonathan’s administration in the second quarter of 2015, Nigeria’s total external debt outstanding stood at $ 10.316 billion. The country’s GDP was $ 486.8 billion and the unemployment rate was 8.19%.
And then the loan madness started. Intoxicated by foreign loans, Buhari has always justified the accumulation of loans as the only credible avenue his government has to finance infrastructure projects.
In a meeting with members of the Presidential Economic Advisory Council (PEAC) in September last year, Buhari said, “We have so many challenges with infrastructure. We only need to take out loans to build roads, railways and electricity, so that investors find us attractive and come here to put their money. “
On April 21 of this year, the Senate gave the federal government the green light to borrow a total of $ 2.7 billion on the external borrowing request of $ 5.5 billion sent to the National Assembly by Buhari. in May of last year.
External loans include $ 1.5 billion, to come from the World Bank, and € 995 million ($ 1.2 billion) from other international agencies, for federal and state governments.
If the loans are secured, it will increase Nigeria’s total public debt, which as of December 31, 2020 stood at 32.915 trillion naira ($ 84.574 billion), according to data from the Debt Management Bureau (DMO). .
Six years of unlimited borrowing has neither grown the economy nor created more jobs. On the contrary, this Nigerian economy over the past six years has been characterized by the worst economic indices in 40 years. The more the Buhari administration borrows, the more the economy sinks into poor growth and regression.
From a GDP of $ 486.8 billion in the second quarter of 2015, the country’s gross domestic product fell to $ 442 billion, with an unemployment rate currently above 33 percent, the second highest in the world. More than one in two Nigerians in the country’s labor force are either unemployed or underemployed. This means that the country is not producing enough goods and services to attract more people to employment.
It is increasingly believed that Buhari’s administration was particularly reckless in its greedy quest for loans from all parts of the world. As a national daily correctly noted last year, the Buhari administration shattered “all previous records for borrowing. Figures from the Bureau of Debt Management show that the total stock of public debt – federal, states; indoor and outdoor – was 12.35 trillion naira in September 2015, rose to 16.88 trillion naira a year later, 20.37 trillion naira in September 2017, 26.21 trillion naira in September 2019 and 31 trillion naira this year. Ahmed predicts that it will reach 38.6 trillion naira by December 2021. External debt in September 2015, four months after Buhari took office, was only $ 10.61 billion, but has increased exponentially, reaching $ 15.35 billion in 2017, $ 26.94 billion in 2019 and $ 31.47 billion. by June 30, 2020. Worse, beyond claiming to pay civil servants’ salaries, Nigerians see little to justify the debt accumulated in their name.
As Buhari’s government plunges the country into a new debt trap with the active complicity of the leadership of the National Assembly, the question most Nigerians want answered is what is Buhari and his government have done with all the elephantine loans they have taken out across the world?
It was the deputy chairman of the Senate Foreign and Local Debt Committee, Senator Muhammad Enagi, who in March last year agreed that: “The big question in the minds of average Nigerians aware of this fact is; what did we do with the money? In other words, where did the money go? What do we have to show as a people for these huge debts? “
He explained that borrowing has always served as true financial platforms for many countries around the world in managing their economies, but the judicious use of these loans for planned projects and the proper servicing of debt have also been achieved. posed problems for developing countries like Nigeria. According to him, the realities on the ground in the country in terms of required infrastructure and debt accumulation between 2006 and today appear disjointed.
The very reason, he explained, is that many Nigerians are worried whenever they hear their government asking for one loan or another.
The debt issue in Nigeria has been a recurring problem that borders on the structure of the economy, the behavior of the ruling class and pervasive official corruption. It is even more apparent and worrying today when the economy is totally in a coma, and the socio-political and security landscape tarnished by violence on varying scales which fiercely repels any form of development.
The country’s current outstanding loans represent about a quarter of its economic output, and Africa’s largest oil producer currently spends more than half of its income servicing its debts. The International Monetary Fund had previously warned that without major revenue reforms, debts could reach nearly 36% of GDP by 2024, with interest payments accounting for up to 75% of government revenue.
The World Bank’s Africa’s Pulse 2018 report noted that the average public debt as a percentage of GDP in sub-Saharan Africa increased from 37 to 56 percent between 2012 and 2016. In 2018, 40 percent of countries in sub-Saharan Africa were a high standard. risk of debt distress – double the proportion recorded five years earlier. With a growing share of that debt owed to China – a country whose critics have accused the government of making unsustainable loans – fears are growing that a new debt crisis could be imminent.
In March last year, the Nigerian Senate approved President Muhammadu Buhari’s plan to borrow $ 22.7 billion from outside creditors to finance infrastructure projects. Lawmakers endorsed the government in Thursday’s proceedings in the capital, Abuja, to seek expected funding from the Islamic Development Bank, the African Development Bank, the World Bank and creditors in China, in Japan and Germany.
The president said he would use the money to expand railways, build a new hydroelectric dam and fund special response projects across the West African nation, according to a letter sent to parliament in November.
Nigerians and pundits have consistently pushed back record increases in government borrowing, an ominous sign for policymakers trying to revive economic growth with fiscal stimulus. While the government has rolled out extraordinary amounts of stimulus, there can be no assurance that all spending will be enough to get the economy out of the woods. In fact, six years of unprecedented borrowing by the Buhari administration did not grow the economy an inch, rather, the economy is constantly falling into recession and continues to be totally anemic and unresponsive today. .
As debt weighs more heavily on government revenues, Amara Ekerruche, associate researcher at the Center for the Study of African Economies, told World Finance that an important factor to consider is the opportunity cost of loan repayments – in other words, identify which areas are underfunding. “In Nigeria, for example, 60% of our public revenue is spent on debt service,” Ekerruche said. “To contextualize this, imagine an individual earning £ 1 [$1.27] pays £ 0.60 [$0.76] to creditors.
“I think critical development sectors are underfunded because of the large amounts spent on debt servicing. The education and health sectors are critical sectors for us, especially since we have a very young population. Failure to pay sufficient attention to these areas will have long-term consequences. “
Nigeria is unlikely not to fall into a new debt trap, as the Buhari administration has been indifferent to the quality of loans it gets from abroad and even more jaded about the views of the Most Nigerians. The government was more concerned with accessing large portions of funds to spend on infrastructure projects in order to sow a legacy. Long recorded by Nigerians as underperforming and severely deficient in economic management, the current administration has rejected caution in seeking more loans at a time when the nation’s ability to honor its debts becomes increasingly suspect.
What is increasingly evident is that Buhari and his administration will continue to beg and seize any loans that are given to them. He doesn’t care how the debts will be paid off. In fact, the current administration has absolutely no idea of a short or long term plan or strategy that will support the repayment of these loans in a way that does not jeopardize future economic growth and post-Buhari development.
This jaded attitude towards economic management and credit acquisition gives a boost to the understanding of former President Olusegun Obasanjo in 2005 after securing the country’s debt relief from international creditors, of how we ended up in the first debt trap. “How did we get to the point where our debt burden has become a challenge for peace, stability, growth and development? Without insisting too much, we can identify political rascality, bad governance, abuse of power and power, corruption, mismanagement and waste, misplaced priorities, fiscal indiscipline, weak control mechanisms, monitoring and evaluation, and a community openly tolerant of corruption and other underhand and extralegal methods of primitive accumulation.