The controversy over the request by President Muhammadu Buhari for legislative approval to acquire a foreign loan of $29.9 billion has continued to ra...
The controversy over the request by President Muhammadu Buhari for legislative approval to acquire a foreign loan of $29.9 billion has continued to rage, with positive and negative reactions trailing the bid despite frantic efforts by the presidency to curry the favour of the National Assembly and other stakeholders, JONATHAN NDA-ISAIAH writes
Nigeria is still in recession and, while the federal government has consistently blamed the past administration for the recession, analysts have insisted that the government must up its ante economic-wise, put on its thinking cap and stop the blame game.
On its part, the federal government has been proposing various ways of getting Nigeria out of the economic mess, including the sale of some national assets. However, the sale of assets gradually lost steam because of the strong opposition that greeted the proposal. But the federal government is not resting on its oars because, as the saying goes, “desperate times calls for desperate measures’. Recently, government resorted to taking loans to kick start the ailing economy.
President Buhari forwarded a request to the National Assembly seeking its approval for external borrowing plan of $29.960bn for the execution of key infrastructures and other projects across the country between 2016 and 2018. The president also requested for virement of N180.8bn in the 2016 budget for provision of needed votes for some sectors.
In seeking legislative approval, Buhari said, “The projects cut across all sectors with special emphasis on infrastructure, agriculture, health, education, water supply, growth and employment generation, poverty reduction through social safety net programmes and governance and financial management reforms among others.
“The total of the projects and programmes under the borrowing (rolling) plan is $29.960bn, made up of proposed projects and programmes loan of $11.274bn; special national infrastructure projects, $10.686bn; Euro bonds of $4.5bn and federal government budget support of $3.5bn.”
Sadly, the Senate unanimously threw out President Buhari’s request on the ground that the letter conveying it was not accompanied by a borrowing plan. The rejection skewed different dimensions into the issue, with some keen observers linking it to the executive and legislative feud which seems to have simmered over time. The executive and the legislature have been grappling with relationship problems since the beginning of this administration, following the way the leadership of the National Assembly emerged.
Even with this, President Buhari has remained persuasive with negotiating skills. He had met with Senate President, Bukola Saraki three times in the space of a week as part of moves by the executive to reach a truce with the legislature over the loan. Presidency sources said that there will be more of those meetings in the coming days to iron out grey areas before the executive resubmit the proposal to the National Assembly.
But Buhari and Saraki’s parley appears to be a wild goose chase or worst still, a snipe hunt, as reports in the media suggests that senators are angry with the presidency. Decrying their little or no details of President Buhari’s economic policies, some of the lawmakers have warned that this will consistently make the relationship between the National Assembly and the executive frosty.
Chairman, Senate Committee on Media and Public Affairs, Senator Sabi Abdullahi specifically said Buhari’s aides had shown that they were careless and incompetent.
But the Majority Leader of the House of Representatives, Femi Gbajabiamila does not buy the position of the senators. Instead, he applauded President Buhari’s external borrowing plan of $29.9bn for the execution of projects from 2016 to 2018, saying it is in the interest of Nigerians. He noted that borrowing to finance infrastructural projects will pull Nigeria out of recession.
Gbajabiamiala said, “Borrowing to finance infrastructural projects is not an irresponsible act; Lagos State did the same and the development witnessed in the state is obvious.
“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 the 2016 budget is fully implemented according to law.”
On its part, the opposition Peoples Democratic Party,(PDP) has called on Nigerians to stop President Buhari from borrowing the $29.960bn for the execution of key programmes and infrastructural projects across the country.
It also asked the National Assembly not to approve the request by the President. It said it disagreed with the federal government on this move, and called on President Buhari to explain to Nigerians what his administration had done with the recovered looted funds.
Spokesperson for the Senator Ahmed Makarfi-led faction of the party, Prince Dayo Adeyeye, in a statement said President Buhari must itemise what he intends to finance with the proposed borrowing of almost $30b instead of lumping it up in a coded term, “and to plunge the nation’s future into burden of debt.”
More so, he said that the President’s approach cannot be the preferred solution to the economic quagmire which he said was created by the present government.
Also, human rights lawyer, Femi Falana (SAN), said if President Buhari was serious about fighting corruption, he would not mortgage the future of the country by seeking a $29.9bn loan.
Falana said Buhari should stop chasing after the loan and rather engage in an aggressive recovery of looted funds stashed away in foreign banks by past military rulers in the country.
His words: “President Buhari wants to get a loan of $30bn. You know what that means? For generations unborn, we will mortgage their future, except the money is genuinely meant for infrastructural development, which is usually not the case once the money comes in. So Buhari should forget about the $30bn loan when he can get more than that if he goes after our stolen money in the West.”
But the All Progressives Congress (APC) in the South-east urged the Senate to revisit its decision to reject the $30bn loan. The Publicity Secretary of South East APC, Hyacinth Ngwu, described the Senate’s rejection as an “ill wind that would blow no one any good”.
Hyacinth said, “The All Progressives Congress in the South-East geo-political zone has appealed to the members of the Senate of the Federal Republic of Nigeria to rescind their rejection of the $29.680bn loan planned for the three fiscal years of 2016-2018. The rejection of the request by the Senate is ill-advised and an ill wind that blows no one any good.”
On his part, Director General, West African Institute of Financial and Economic Management (WAIFEM), Prof. Akpan Ekpo, said Buhari’s request is in order. He said, “The projects and/or areas listed by government are vital for the economy not only to get us out of recession but also to ensure sustainable growth. The government must spend on capital projects, power in particular to get the economy out of the recession. Asking for virement is to follow due process.
“In the short-term, the virement is necessary because you cannot raise taxes during a recession; even increased VAT by say 2 per cent would only increase the revenue of sub-national governments. That of the federal government would be marginal. Most of the windfall from oil was looted by previous administration from what we read every day in the news media. Hence, in my view government has no choice. The challenge is to monitor the spending on the relevant projects so that Nigerians get value for money. In addition, there is need for a drastic cut in expenditure, for example, the cost of governance is too high”.
On a general note, the effect of foreign loans on economic development of underdeveloped countries is still questionable and debatable. Some pundits argue that, while foreign loans can have both negative as well as positive consequences, the positive benefits outweigh the negative on balance, and hence the policy and strategy should be to maximize the positive effects and minimize the negative ones.
On the other hand, there are those who believe strongly that foreign loans don’t contribute toward financing sustained economic growth over the long term. The thinking is that foreign loans are falsely marketed to the developing countries as a solution to their underdevelopment. For this set of experts, there is no correlation between foreign loans and economic growth, or between foreign loans and development.
According to IMF, the seeds of the debt crisis in poor, underdeveloped countries were sown in the 1960’s when many governments of those countries pursued industrialization policies that were heavily dependent on imports. At the same time, many underdeveloped countries developed policies that lead production of export crops to fall, creating a gap between imports and exports.
To fill this gap, they borrowed money from abroad and by the 1970’s they were verging on crisis. The crisis deepened during the 1970’s with dramatic oil price hikes and associated high interest rates causing a global recession. Creditors lending for political reasons compounded the problem in some countries.
Consequently, the growth of the debt crisis meant that governments of most underdeveloped countries had to turn to the lenders of last resort for help with new loans to meet the finance payments on their original loans and to cover budget and trade deficits. Thus, these two institutions now wield considerable power in many poor countries.
Another reason why the presidency, National Assembly and governors are now running from pillar to post on how to justify the proposed borrowing may be premeditated on the fact that there are no good or bad foreign loans outside of national policy. Foreign loans can be described as good or bad only in relation to national policy. All foreign loans are inherently problematic. Such loans have not been given as a matter of charity; they were given to make profits.
Analysts have also argued that there should be no “open-door” policy towards foreign loans in general. It must be allowed in as and when required by national consensus between the government, the local private sector, the workers and small farmers, and other organs of civil society. Foreign loans must operate under certain nationally determined conditions and must conform to certain performance requirements.