A professor of Economics at the Olabisi Onabanjo University, Ogun State, Sheriffdeen Tella, speaks on Nigeria’s rising debt profile, the country’s dependence on foreign loans and related issues.
The Debt Management Office, a few weeks ago, stated that Nigeria’s debt under the President, Major General Muhammadu Buhari (retd.), had now risen to N31.01tn. What dangers, if any, do you foresee for the country going by these increasing debts?
The issue of debts has been a source of concern to many economists, including me. Sometimes, these loans are not needed. This is because when we get loans, it gives us an impression that we have a lot of money which is not true. With the loans, we increase our expenditure and forget that we need to cut our coat according to our cloth. In a situation like this where we cannot foresee the diversification of our economy within the next 10 to 15 years, there is danger. We have been talking about diversification of the economy since I was a young boy and we are still not there.
So, we still rely on oil which many countries are moving away from. In the next 10 years, the movement towards gas would have been completed and the revenue for our country would continue to drop further. The loans we acquired before, we had nothing to show for them. We cannot say within the next five to 10 years, these are the investments we have on the ground from which we expect to begin to repay those loans. So, all these indices make it very serious for us such that in the future, we may not be able to experience tangible developments. Presently, we are spending about one-quarter of our annual budget to service the loans – not even their repayment. We are servicing the various loans and that is a big concern.
Let us look at it this way. If we talk about domestic loans, it means the government only takes money from one group of people who have surplus. If you invest wisely, when you are repaying them, the money will still be within the system and it is in our naira. But when you talk about foreign loans, it means that the goods and services we sold and the money that should circulate within our economy would now be used to service foreign loans. This is unfortunate.
So, we should start thinking of how we are going to offset our foreign debts and manage our resources better. We don’t have to run a deficit budget. So, I foresee that we will have a serious problem in the future as regards repaying those loans unless there is a deliberate effort by the government to deal with it.
Also, according to the DMO, Nigeria owes the World Bank $10.46bn or N3.96tn; it owes the International Development Association and the International Bank for Reconstruction and Development $10.05bn and $409.51m respectively, among others. What can you say about the loan regime and choices of this present government?
You see, there is the need for the Federal Government to give us at least a report of what the loans have been used for in the last few years. One finds out that during the time of former President Olusegun Obasanjo, the revenue generated from oil for the eight years was over $10bn. For former President Goodluck Jonathan, it was over N92tn in the four years and we are not even counting the years he spent in former President Umar Yar’Adua’s tenure.
The budgets for our country in all these years were not up to the amounts we generated. So where are the monies? It is not as if we are not earning money in this country, but where is the money going? Under President Buhari, between 2015 and 2019, we have sold plenty of oil and the huge revenues, according to the Organisation of Petroleum Exporting Countries, are there. OPEC figures are more reliable than the government’s figures. So, what have we done with these revenues as we still crave to be borrowing money? This may mean that we are just used to borrowing.
Nigeria has a Presidential Economic Advisory Council and other various economic teams. Do you think our economy managers are incompetent and should have advised against foreign loans or do you think there is another problem?
I really don’t know the kind of advice they (the economic team) are giving the government. But this country is one that listens more to outsiders than insiders. People from the International Monetary Fund and the World Bank would come to tell us that we have an economy that can pay off these loans. Whereas, you cannot trust these people because they want to get us into a mess and some of our advisers are from these same agencies. At least, I know two of them.
So, if they are going to give advice, they give advice as mirrored by these organisations. Anybody who loves this country cannot say that we have to continue to get external loans. We should be thinking of borrowing within if we have to borrow. There is money in this country.
This was why for one of the bonds the government raised, it was put at three per cent and it was over-subscribed. Economics tells us that when the interest rate is very high, people will not want to save any money, People will want to bring out their money. So, we can actually raise funds from within this country and attend to all the infrastructural needs we have.
The country also owes the African Development Bank about $1.33bn presently, according to the DMO, what adjustments do you think Nigeria has to make to its economic and trade policies to reduce this overdependence on foreign loans?
I am sure that our President does not even look at any books. He does not look at the finance records. When they tell him, we have to borrow money, he just complies. The same mistake Obasanjo made when he first came and was gallivanting up and down, and his Vice President, Atiku Abubakar, was in charge of the economy.
Later, the ex-President woke up and began to inquire about the leakages. With the help of his finance minister, they were able to secure some debt pardon. The same went for former President Jonathan – we earned a lot of revenue from oil. But we cannot find the money. So in the future, Nigeria is going to have a decline in revenue – I think for the next 10 years. Also when countries start shifting their attention away from oil, we will be in serious trouble.
The country has an external debt stock of $31.47bn, including loans from China which many Nigerians, including the National Assembly are not comfortable with. Do you share the concerns of the National Assembly about Nigeria accumulating loans from China?
The National Assembly has been the one approving these loans, particularly during this period. They approve huge loans and then the executive begins to receive the loans in batches. Recently, without listening to public opinion or consultation, it was the National Assembly that still gave the executive approval to take a loan of over $30bn. So, what are they talking about? If they don’t approve these loans, the executive arm cannot get them.
That is why we say that the government does not really look at the books. They don’t really ask whether we need this money. So, the National Assembly is also guilty by approving these loans. And for every negotiation, those who are getting the loans for Nigeria also make their money from it. It is a business. If you are negotiating for your country, you get your share from these agencies.
There are people who are making money from our foreign loans. Look at it this way. If you are working in a firm and you ask your organisation to save with a particular bank and the bank knows that you are the one mobilising your organisation to save with them, the bank has an obligation to give you a percentage of the interests. It will be of benefit to you for assisting them to mobilise funds. So it is with foreign loans.
It appears that the Federal Government may still take more foreign loans for the country. President Buhari said last week when he held a meeting with the Presidential Economic Advisory Council, that Nigeria needs loans for roads, rail and power. How do you think Nigeria can get it right?
Many people have condemned these loans. I have published not less than three articles in the dailies to also condemn such steps. The popular consensus is that the Nigerian government should not continue to borrow loans in the name of socio-economic infrastructure. In 2019, the government raised the Sukuk bond to finance infrastructural projects, so which projects are they talking about again?
That is why I said if we have to borrow, let us borrow from within. But everything is bastardised in this country. The President is talking about loans because that was what was written for him. When they write all these things for him, nobody even cross-checks or queries them. If the President says we are going to borrow more money, is it from within the country or will it be another foreign loan because presently, we are spending about 25 per cent of our budget to service loans. This is not good enough.
Then a government minister will come and argue that America is the largest debtor in the world. Look, everybody is working for America. Every country is working to make dollars; who owns dollars? Is it not America? So, we are all working for America. If you say, they have debts; you are the one carrying the debts. So, we cannot compare America to Nigeria. This is because we are trading in American dollars. Every country is working to make more dollars; but who is working to make naira?
What should the government do now?
What the government should start doing now is to see how they can mobilise funds within the country and there is plenty of money within our country. Due to the fear of the Bank Verification Number and the Economic and Financial Crimes Commission, there are some wealthy Nigerians who keep a lot of money in their houses. Was it not last week I heard that someone kept N850m cash in his house and the money got burnt?
There is plenty of money within the country. The government should just give this class of Nigerians some interest rate and you will see how people would start to bring out money. If Nigeria wants Nigerians to raise foreign currency within the country, we can get people to provide the foreign exchange. This is because the foreign currencies are still stashed somewhere and the owners cannot take them to the bank because of BVN and EFCC.
We must also start using part of our reserves to offset these debts. There is no pride in keeping foreign reserves while servicing debts. – Culled from Punch.