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President Muhammadu Buhari’s request for approval to take external loan of about $30 billion runs into problem at the National Assembly, while the understanding of how it will benefit Nigerians remain foggy
| By Olu Ojewale | Nov 14, 2016 @ 01:00 GMT |
THAT Nigeria is going through an economic crisis is obvious to everyone. The rate at which prices of goods and services are going upward is quite alarming. The nation has never had it this bad in recent years. According to report of the National Bureau of Statistics, core inflation rate in the country increased by 17.70 percent last September compared to the same month in the previous year. What makes the situation scary is that the country averaged 9.76 percent from 2007 until this year, 2016. The last time we had an inflationary situation like this was in January of 2007 when it was 19.28. Since that time we have been having a record low of 0.49 percent inflation rate in March of 2008.
Facing the daunting situation, the President Muhammadu Buhari administration looked into all the options available to it and a few weeks ago flirted with the idea of selling some of the nation’s valuable national assets. That did not go down well with a lot of Nigerians as it appears that the idea has been jettisoned and pushed into the cooler.
Now, the government wants to borrow about $30 billion to deal with some infrastructure deficit which has been the bane of the nation’s development, which it is hoped, would help the economy get out of its cul-de-sac.
The idea too appears to be running into storming waters as divided opinions make the proposed loan looks uncharitable.
The proposal for the loan hit the concrete slab at the Senate on Tuesday, November 1, as the Senate, unanimously, threw out Buhari’s request for external loan of $29.96 billion to execute key infrastructural projects across the country between 2016 and 2018. The Senate did not even discuss the request because the letter conveying the application for approval of the loan was not accompanied by a borrowing plan as it died immediately it was mentioned as an executive communication by Senate Leader, Senator Ali Ndume.
The Presidency, in a swift reaction by Ita Enang, a former senator and senior special assistant to the president on National Assembly Matters, promised to engage the Senate in further discussions and provide all the necessary documents, including borrowing plan.
It was later learnt that the request died on arrival on technical ground and for two key reasons. The Senate decided to throw out the application for the loan because in the letter written by Buhari, he had indicated that he was attaching a breakdown of the $29.9 billion which he never did because only his letter dated October 20, got to the Senate.
Besides, the president also failed to send federal government’s borrowing plan 2016 to 2018 to the Senate as expected. “The president in the letter said there was an attachment containing the breakdown of the external loan request. But there is no attachment. President Buhari did not attach the breakdown. There is no way we can consider such a request.
“Secondly, the president has not sent federal government’s 2016-2018 borrowing plan to the Senate. That ought to have been sent first for consideration and passage before this request. If we consider this request, how do we do that? These are the obvious reasons. There is no political undertone here,” a senator, who wishes anonymity because he is not authorised to speak for the Senate, said.
Indeed, Ali Ndume, Senate leader, while answering questions from journalists after plenary, agreed that the president’s application for the external loan was rejected because of some technical faults. “I am going to appeal to my colleagues to take a look at it again and see how we are going to bring it back… We were thinking that there was going to be details but there was no detail of the borrowing plan. I believe that those will be included in the next one,” Ndume said.
Femi Gbajabiamila, majority leader at the House of Representatives, on Monday, October 31, had assured that the House would approve the president’s request to borrow $29.9 billion (about N12 trillion).
Gbajabiamila, who made the promise while addressing his constituents in Lagos, said: “The House of Representatives will respond to Mr. President’s requests in the interest of Nigerians and quickly set the process in motion for its committees to carry out appropriate oversight functions on all project executing agencies until 2016 budget is fully implemented according to law.
“Our interest in attracting federal presence to our constituencies is same as Mr. President’s resolve to keep his campaign promises so Nigerians can be assured that both arms of government will work harmoniously to bring the country out of economic recession soon.”
It is believed in some quarters that the House may also be in collision with the government if the loan does not accommodate funding for their constituency projects.
Nevertheless, Ndume and Gbajabiamila’s statements appeared to have given the government a level of assurance that the loan application would be approved. During an interaction with the State correspondents on Wednesday, November 2, Lai Mohammed, minister of Information and Culture, said the federal government would resubmit the application to borrow $29.96bn to the Senate.
Mohammed also gave an assurance that said the administration would continue to engage the senators on the benefits inherent in the borrowing plan. He expressed the optimism that at the end of the day, the federal lawmakers would see reasons and approve the request. He said: “We will give them all the information they need. We are sure that by the time we finish, they (the lawmakers) will approve the request.”
Buhari had on October 25 written to the National Assembly seeking approval to borrow $29.9 billion to finance the nation’s infrastructure development. According to him, 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.
Buhari, in his letter, said the external loan, the biggest in Nigeria’s history, would fund targeted projects cutting across all sectors with special emphasis on infrastructure, agriculture, health, education, water supply, growth and employment generation.
Other sectors, he said, included poverty reduction through social safety net programmes and governance and financial management reforms, among others.
But, as expected, some persons and associations are not impressed with the loan plan. For instance, the opposition Peoples Democratic Party, PDP, had about a week earlier urged the National Assembly to reject the loan request.
The party said rather than borrowing, government should explain to Nigerians what the administration had done with the recovered looted funds and how the 2016 budget was faring.
Femi Falana, SAN, a human rights lawyer, made a similar demand in his statement on Tuesday, November 1, while commending the Senate for rejecting the loan request. Falana said the Senate’s rejection of the loan should be seen as a challenge to review the recovery of the nation’s looted wealth and spur investigation into the criminal diversion of billions of dollars from the Federation Account.
“A few months ago, I had urged the minister of finance to embark on an aggressive recovery policy. Apart from acknowledging the letter and assuring me that the letter was receiving attention, no measure has been put in place to recover the looted wealth of the nation.
“In frustration I was compelled to submit a petition to the Economic and Financial Crimes Commission to recover the fund and prosecute the indicted individuals and corporate organisations,” he said.
Similarly, ActionAid Nigeria, a non-governmental organisation, has called on the federal government of Nigeria to focus more on recovering looted funds from indicted public officials rather than taking fresh loans. Ojobo Atuluku, country director of the organisation, in a reaction to the Senate’s rejection of Buhari’s letter seeking for an approval of $29.960 billion external loan, stated that taking such loan over a period of two years as proposed by the government would put the nation under constraint in the future.
“The federal government should intensify efforts at recovering such funds illegally taken by the individuals who have abused their positions and public trust rather than push the nation into another future pains which such loan would become.
“In addition, the federal government should also plug other sources of revenue loss, especially tax fund loss which occur as a result of excessive and unnecessary tax waivers the country has been giving rich multinationals and large corporations,” Atuluku said.
According to her, the nation loses as much as $2.9 billion every year due to unnecessary tax waivers and other areas.
But the Debt Management Office, DMO, believes that the loan would be of great benefit to Nigeria. Abraham Nwankwo, director general of the DMO, while speaking on a Channels TV live programme, Sunrise Daily, explained that the loans, which would cover a period of three years and would help in addressing the biting infrastructure deficit in the country.
Nwankwo said: “When you are in this kind of economic situation, you have to decide where you want to start addressing the problem. You then come to the conclusion that the most critical point to start is to deal with infrastructure problem. If you deal with infrastructure problem, the cost of power will be lower, the cost of transportation will be lower, and the cost of most other services will be lower.”
Besides, he said one of the features of the proposed loan is the low concessionary nature of the interest rate, which is fixed at 1.5 percent, which makes it different from previous loan arrangements with the Paris Club of creditors, which came with floating interest rates as high as 18 per cent.
According to him, the loan facility will help revive infrastructure like railways which will smoothen movement of heavy goods across the country.
He argued: “That impacts the economy by bringing down the general price level, (they call it the consumer price index, which is a classical measure of the price level and the rate of inflation.) When you do this, the Central Bank of Nigeria will set the monetary policy rate low, because all over the world, the central bank knows it has to put the monetary policy rate high enough to catch up with inflation rate, otherwise we will be talking of negative real rate of interest which destroys the economy. So the way to go about it is that you have adequate infrastructure, power road, transportation ICT. All these make the cost of production in the economy much lower and when this happens, the cost of goods and services will be lower and then inflation will start coming down. And if inflation comes down, the monetary policy rate will be lower and this will translate to a lower lending rate. That is the sequence,” Nwankwo said.
He stated that the $30bn, which would run from 2016-2018 would be repaid in 20-30 years time. He said with such an arrangement, it would not be difficult for the country to repay.
Be that as it may, the next move by the Presidency on the controversy over the loan will be critical on whether it would be the eventual option to address the ailing economy and solve the nation’s infrastructural decay. In the meantime, Nigerians are also sceptical about what good the loan would do to the country.
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