The Guardian (Lagos)

30 July 2014

Nigeria: No to Anti-Insurgency External Borrowing

editorial

PRESIDENT Goodluck Jonathan's letter to the National Assembly seeking approval to borrow US$1 billion from abroad as a result of the "urgent need to upgrade the equipment, training and logistics of our Armed Forces and Security Services to enable them more forcefully confront this serious threat" reveals the Jonathan administration's narrow notion of, and ad hoc awakening to the country's security needs. Government has the duty to eliminate any insurgencies in the land. Nevertheless, the National Assembly should summarily reject the President's request "for external borrowing of not more than $1 billion including government-to-government arrangements for this upgrade" for a number of reasons.

Firstly, the request, demeaning as it is, dresses the country in the garb of a beggarly banana republic. It is an obnoxious reminder of the apparent and intentional mismanagement of the resources of the country. Rather, there is need instead to draw the attention of the Jonathan administration to Nigeria's true security needs of constantly upgrading equipment, training and logistics to enable the military and security services to, at all times, not merely confront, as the President intends, but overpower and deter any acts of rebellion. The country possesses the wherewithal to fulfill the national security obligations as will be shown currently.

Secondly, the deliberately undefined government-to-government arrangements will cede to a posse of foreign governments (in contrast to competing individual foreign governments in a previous era) the upper hand in the management of the country's internal security affairs. That will compromise our sovereign independence and freedom to always act in the national interest. The innocuously termed government-to-government arrangements, therefore, should be seen as another but collective name for the defence pact which the United Kingdom singly attempted to foist on Nigeria in the 1960s. Nigerians rejected it then: and we do not need it today or tomorrow. There is absolute need to beware of the loan sum, which actually represents the tip of the iceberg. Going by the pedigree of the prospective foreign lenders (we know them even when they remain unnamed), their intention may be less altruistic than it seems. Nigeria should not be saddled with another external debt burden. Did this country not fight a 30-month Civil War without borrowing?

Therefore, the government should pay for the needed upgrade and handle any necessary government-to-government arrangements strictly at arm's length. Only prime quality equipment should be bought and at the right price. It is vital to obtain irrevocable guarantee for the supply of spare parts throughout the life of the equipment. The training period and place should be specified, and government should go through any other terms with a fine-tooth comb and eyes wide-open.

Thirdly, although there is longstanding public knowledge that the equipment available to the security arms is largely obsolete, the President waited till the eve of a long scheduled recess of the National Assembly before submitting the request which he deemed urgent. As a matter of fact, that is not the first time an important matter requiring legislative consideration has been delivered to the legislature on the eve of a scheduled recess. It is not clear if the now habitual tactic is intended to snatch the legislators' hurried endorsement without prior debate, necessary consultation with constituents and feeling the pulse of the public, which are sine qua non in a democracy.

Fourthly, recall that in 2012 the Federal Ministry of Finance (FMF) defended the request for $7.9 billion for the so-called pipeline project on grounds that it would attract low interest charge as against the prevailing high domestic lending rates. Today as in 2012, the Federal Government has access to its own interest-free dollar funds. It is, therefore, unnecessary to borrow. Pertinently, domestic interest rates are high and unattractive because the FMF, acting through the Accountant-General of the Federation and the Federation Account Allocation Committee, infringes the Central Bank of Nigeria Act 2007 and prevents the CBN from correctly implementing the managed float naira exchange rate regime which the FMF itself dictates every year in the medium term expenditure framework that the President presents to the National Assembly. It is also noteworthy that the IMF and World Bank though non-committal in public mockingly dubs the resulting faulty fiscal and monetary practices as home-grown policies. The Bretton Woods institutions agree that the home-grown practices do not measure up to "proper management of Nigeria's resources," to use the blanket phrase in a recent World Bank letter. In order to ensure sound economic management and transform Nigeria into a lender of funds to multilateral agencies and foreign countries, the FMF breaches of the CBN Act should stop.

Fifthly and sequel to the foregoing, the ultimate armour against the proliferation of acts that threaten national security generally is a strong and thriving economy with minimal unemployment rate. To that end, the CBN should begin to correctly implement the managed float naira exchange rate regime. That way, conducive conditions will evolve and facilitate deep-rooted economic production and also make the country to overcome the grave but unrecognised national security risk inherent in currently obtaining from abroad, 90 per cent of the country's capital needs for defence.

President Goodluck Jonathan should withdraw the letter asking for an external loan and instead submit a Supplementary Budget to the National Assembly for the appropriation of $1 billion from the external reserves for the needed upgrade.

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