Nigeria: Buhari's Foreign Loans - Matters Arising

11 December 2019

President Muhammadu Buhari sought for legislative approval for external loans during the eighth Senate but was turned down. Amongst them was US$29.96billion loan which, according to the object, was to fund critical infrastructure in the country. The Senate bawled that loans cannot be an option at all.

Superficially, the Senate was right in a part on account of daily mega inflows to the economy. Inarguably, the country is sufficiently rich to be self-reliant for most capital projects, all things being equal.

On the other hand, the Senate stumbled knowing that the major drain pipe in the country is the Senate and its counterpart; House of Representatives.

The funds allocated to these two chambers are sufficient to fund robust infrastructures across the nation with ease.

From records, Nigeria's lawmakers are most highly paid in the world and with outrageous allowances. To review these anomalies and possibly scrap one of the chambers remain a way forward.

On the foreign loans, first and foremost, it is imperative to distinguish between loans for recurrent expenditure or sustenance and that of infrastructure development.

The former is an index of economic recession. On the other hand, most developed countries didn't fund capital projects from money in the treasury but long-term infrastructure loans. To put the burden on funds in the treasury can slow down developments and negatively affect other operations.

The most important factor that must be necessarily considered while opting for infrastructure loans is the machinery; secure-and-stable revenue for possible repayments. Noticeably, President Buhari's government has created secure revenue for the nation. Amongst them are the Treasury Single Account, TSA; Value Added Tax, VAT; other internally-generated revenues that are active.

Above all, leakages in the economy have been substantially blocked which makes government to get more incomes unlike before. Beyond doubt, Nigeria has low tax moral - apathy on payment of taxes due to high level of corruption among the ruling class.

For example, it was revealed by the Research Director of the Fiscal Policy Roundtable of the Nigerian Economic Summit Group, NESG; Tayo Oyedele at the Nigeria Governors' Forum Secretariat, Abuja recently that more than 81 per cent of taxable adults and businesses in Nigeria do not pay their income tax. According to him, only 20 million out of nearly 200 million people do.

Suffice to say that the ruling class must vitally restore peoples' confidence by good leadership. For instance, during the tenure of Babatunde Fashola, SAN; as Lagos State governor, many residents enthusiastically paid taxes on account of visible transformations in the state.

After his exit, perceptively, the narratives changed. Hence, adequate revenue through taxes may not be a realistic option at the moment. The second option is concessionary technique whereby companies bid and execute projects with trade agreement; to manage infrastructure for a specified period for the purpose of recouping invested capital. Incidentally, concession of sensitive infrastructure may not augur well for the masses presently due to poverty level.

Back to the discourse, any government that has a secure revenue system, capacity to repay can comfortably opt for loans for infrastructural development.

This is because the loans can be prudently tied to the secure inflows for settlements. There would be issues where a government has no secure means of reimbursement but liberally securing loans, which is indicative of bad governance as witnessed in the past when governments owlishly relied only on crude oil.

From the records, the 2016-2018 External Borrowing Plan targeted thirty-nine projects spread across the country which includes the East-West Road; Mambilla Hydro Power Station; Standard gauge Ibadan-Kano Rail line; Calabar-PH-Aba-Makurdi-Bauchi-Maiduguri Rail Line; 2,500 km Power Transmission Lines and Power Transformers across Nigeria; total overhauling of Ajaokuta Steel Company and Dualization of Lokoja-Okene-Auchi-Benin Road. Thus, the loan apart from being secured is tied to infrastructure unlike the previous loan regimen.

President Buhari has presented the $29.96billion loan request to the ninth Senate for approval. Instructively, lawmakers must above all, be guided by objectivity and public interests rather than unnecessary show of power. The sensible action is to evaluate the capacity of the government vis-à-vis repayment by its protected revenue machinery in place and not fear of being labelled rubberstamped legislature.

The volume of loans is immaterial as long as there is a secure repayment mechanism and the objects are germane. Such arrangement will equally reduce corruption as inflows will be directed to repayment schedules. Interestingly, the Constitution clothed the lawmakers with oversight functions which empowers them to supervise executive's activities.

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