Underestimating the dangers of endless borrowing

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By Albert Afeso Akanbi

ON April 21, 2006, President Olusegun Obasanjo’s government announced that it had paid the last of the nation’s multibillion-dollar debt to the Paris Club of creditor nations. Revealing Nigeria’s freedom from foreign debt, an elated Obasanjo proclaimed that from then on “Nigeria will not owe anybody in the Paris Club one kobo…” Analyst and every Nigerian and friends of the nation, home and abroad, praised the achievement. Prior to that time, Nigeria had owed $36 billion to nations that made up the Paris Club like the United States, Germany, France and other wealthy nations, monies which had been racked up during decades of military (including that of General Buhari in 1984) dictatorships.

President Obasanjo understood that debt relief was a central issue in the fight against poverty and an enemy of any nation that wanted to develop and so did everything to get us out of debt. The two governments after his, including that of President Jonathan, understood that too. But since 2015, it appears we have installed a government that doesn’t understand this fact. To put it properly, we now have a government that is underestimating the dangers of unending borrowing.

The Senate has approved another round of loans for the government, that is despite the fact that as at the time of approval, foreign debt, according to Channels TV, stood as follows; December 31, 2014 – $67.7bn; December 31, 2015 – $65.4bn; December 31, 2016 – $57bn; December 31, 2017 -$70bn; December 31, 2018 -$79bn; and as at September 30, 2019 -$85.3bn. Is it ok to borrow without first determining the clarity of information about the revenue basis with which to pay back?

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If wise individuals won’t make such a misstep, why should a government? This government knows, as President Buhari himself has often lamented, that the gap between what we earn as a nation and what we spend is so wide, and this is the major cause of the deficit we often experience, a deficit they now intend to plug by endless borrowing. Add this to dwindling oil prices, no thanks to the outbreak of Covid 19, and the fact that we are not an export-based economy with our poor production capabilities if government intends to borrow, should they not add borrowing for infrastructure that will somehow yield revenue returns to the list?

Though I am not an expert in such matters, at least I have listened to many experts speak on the subject to know enough to tell that this government’s excuse that the need to develop infrastructure is the major motivation for borrowing, is at best mere talk. Do we need to go far back memory lane to know that throughout the history of Nigeria, most governments have often cited infrastructural development as reason for borrowing, yet, what is the state of our infrastructure today? What has happened to all the money? Even a child knows that Nigeria is in a terrible state with development and that for there to be a massive improvement in infrastructure, the government needs to partner the private sector, simple!

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Take Lagos-Ibadan expressway, for example, over N134 billion, according to experts in economics, has gone into that road, yet what do we make of that? It is not as if it is bad to borrow, neither is it bad to want to develop, but it is a wrong move when you borrow to solely fund social amenities without a clear plan on how to pay back when servicing such debt is a problem in the first place. With the way this government is going, we will end up borrowing to service debt. Imagine if previous governments had not done what it did in telecommunication, broadcasting and banking, what the situation would have been like?

Today, apart from these sectors, what other sectors are as efficient as these, although they too are riddled with their issues? Many countries around the world, even in Africa, concede most of their infrastructural development to the private sector, while their governments provide the level playing field, adequate regulation, and world-class supervision. But what do we have here, especially under this government? Nepotism, corruption and buying off of government assets by cronies.

We should reform and restructure the nation, appoint the best people into positions, concede these things to the private sector and provide real time supervision and then see investment flow into the nation and development thrive in a way that can only be imagined. But sadly, as always, governments are held captive by an ever-evolving cabal made up of people who are not as smart as most people think anyway, and who put self-interest above national interest.

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Till this day, we have never had a government with the political will to fix this nation. Defenders of this government would say that Japan and even America borrow, but take a look at those countries, their infrastructure is world-class, their unemployment rate is on an all-time low, citizens’ rights are respected, etc. Take a look at us, we have not stopped borrowing since 2015, there are still indications we will keep borrowing till this government leaves office, creating problems for future governments. Yet what do we get in return? Decayed infrastructure, highest unemployment ratio and recently the tag, poverty capital of the world. 

If we continue to borrow and our debts increase beyond accepted level, our GDP needs may go into debt servicing or repayments. This could start to take the tax revenue that is needed for development. We have seen nations, especially developing ones like ours, suffer severely from such bloated debt burden, which means struggling to meet even the debt interest payments with nothing left to develop.  Does God have to come down to tell the President this hard truth? God Bless Nigeria