Last time I checked, the 2016
appropriation bill that was tendered to a joint session of the National
Assembly few months ago, precisely on Tuesday December 22, 2015 by the Federal
Executive Council (FEC) ably led by President Mohammadu Buhari had been duly
passed unanimously by the law makers. As regards the content of the bill, #6.06
trillion was reportedly passed as the country’s 2016 budget contrary to the proposed
#6.08 trillion, which implies that about #20 billion was tagged as frivolous by
the legislators.
It’s noteworthy that the said approved bill has it that the projects to
be executed in Nigeria in the ongoing fiscal year would be financed by the
foreseen assistance of both local and international loans yet to be sought,
albeit mainly local borrowing, having estimated the expected oil benchmark for
the year among other sources of the finance.
It’s pertinent to acknowledge that governments in rich as well as poor
nations borrow money from such domestic and international markets as the World
Bank, the International Monetary Fund (IMF), and commercial banks. In rich
nations, government borrowing obviously stimulates the private economy; it
creates jobs and raises incomes of the majority of the population of the
affected nation thereby improving their standard of living.
However, in poor or developing nations, government borrowing does not
generally produce the same results or the required effect. In Nigeria, for
instance, for decades now, the government incessantly enjoys domestic and
international borrowing but pathetically such gesture hasn’t stimulated the
private economy as anticipated. To say the least, the role of Foreign Direct
Investment (FDI) in the country’s economy has not been significant.
Between 2009 and 2015 alone, the government engaged tremendously in
international borrowing. This gesture was reflected in the country’s balance of
payments deficits. In spite of the enormous borrowing by the government, grants
received out of benevolence, and debts rescheduled as well as forgiven, the
nominal income per capita hasn’t shown any significant improvement. The country
average income per capita on a monthly basis for the recent years was about
USD130 dollars or thereabouts which was far below the $500 average income for
the poorest African countries. And presently, pitiably, the country cannot
boast of up to USD80 dollars as its monthly average income per capita.
Conspicuously, Nigeria has recently faced an unprecedented population
growth. Although the population is increasing at an alarming pace, its
purchasing power is not. Such phenomenon has two cogent and inevitable effects
on the economy. The first is that the rapid increase in population impoverishes
the country as a whole, hence making the accumulation of capital very
difficult. Secondly, the low purchasing power limits the internal market.
The major economic plight in a country like ours remains that the
government has not been accountable to the people. Thus, it can borrow as it
pleases, and the unsuspecting electorate would still foot the bills. We must
acknowledge that the government will continue to borrow as long as there are
interested lenders provided the fiscal policies of the country remain docile;
this is why suchlike policies are seriously yearning for restructuring.
Besides, there’s enormous politics involved in international lending.
Though the Nigeria’s government can invariably find its way as regards
assessing loans from either official or unofficial sources via the use of its
international connections or immunity, but for how long shall we continue to
depend on external borrowing? This, among other paramount questions, is
required to be raised by any one or analyst who truly thinks good of this
country.
It would be recalled that during 1966-1974, or thereabouts, developing
nations were growing at a high rate simply because they were yet to be involved
in external borrowing or importation of goods and services. In view of this, their
annual average growth rate stood at 7%. But in order to meet their subsequent
population growth needs, many of them began to import heavily, particularly capital
goods, oil and foods; funnily enough, they are mostly involved in
export-oriented strategy as it’s presently witnessed in Nigeria in the oil
sector.
It’s not anymore news that the borrowing, especially external borrowing,
that is captured in the 2016 budget, which is not unusual in the Nigeria’s
budgeting pattern, has been generating a lot of ripples and mixed feelings in
various quarters thereby making several Nigerian analysts as well as social
commentators, both home and abroad, to be involved in series of fallacious
arguments, probably owing to partisanship, incompetence, quackery,
unpatriotism, ignorance, or what have you, as the case may be.
It’s amusing and perhaps very awful to realize that sometimes most
Nigerians play politics with issues of national interest, particularly very
sensitive economic matters. We are not unaware that borrowing is necessary, but
it ought not to be seen or adopted as a measure that needs to be taken if a
country must survive or grow. Such economic approach becomes consequential only
in certain circumstances, and not in all, as being presumed in various
quarters. Even as an individual, if you dare take borrowing as a tradition or
norm, you will surely live to regret it. We, either as individual or group,
need to borrow sometimes but not always.
Of course, many are of the view that provided you are borrowing for a
tangible project, it’s a welcome development. No doubt, borrowing becomes
paramount and necessary only when the prospective borrower intends to use it
for feasible projects such as capital expenditure. Ab initio, Nigeria has been
borrowing for tangible reasons, but as a result of corruption, rather than
doing the needful or investing the borrowed funds meaningfully, she invariably
ends up doing otherwise. So, if we fail to address such lapse, the nauseous
phenomenon would continue to repeat itself thereby making us indulge in
borrowing perpetually.
On a yearly basis, Nigeria’s international debt increases colossally,
thus affecting negatively her current account balance which is expected to rise
steadily. Survey indicates that external debt in Nigeria averaged USD6.38
billion from 2008 till 2015 when it reached an all time high of USD56.74 billion
in the fourth or last quarter of the said fiscal year which was about 10.9% of
her GDP for that very year, though it recorded a low of about USD3.63 billion
in the first quarter of 2009. Worse still, a large portion of these debts are
owed to private lenders at variable interest rates.
Rather than being preoccupied with how to repay the backlog of debts,
the government keeps borrowing at the expense of our dearest economy. Nigeria
has apparently absorbed incessant borrowing as a tradition. Having acknowledged
that it isn’t a wholesome belief, there’s a compelling need to put up stiff
measures towards addressing the monumental anomaly. Against this backdrop,
let’s briefly take a tour to the history book; the IMF then imposed its Structural
Adjustment Programme (SAP) conditionality on the deficit countries, which
Nigeria was inclusive, to force them to take necessary steps toward reducing
their payments deficits and consequently earn sufficient foreign exchange to
enable them pay back their loans.
Hence, they had to devalue their official exchange rates, abolish or
liberalize foreign exchange controls, introduce anti-inflationary programmes as
well as adopt a free trade policy. Notwithstanding, the ‘almighty’ SAP didn’t
produce any successful result, rather it ended up constituting more problems,
perhaps still due to corruption. Now, the question is: how can Nigeria escape
from this lingering debt trap as well as desist from her unending borrowing
tradition?
The answer is simple. We need to embark on an economic lobotomy; the
Mohammadu Buhari led administration has to shift course from an
internationally-dependent growth to domestically-based economic development
plan. To this end, it has to strengthen most of the country’s fiscal policies,
participate in frugal expenditure, initiate deflationary economic measures,
detest construction of white-elephant projects, and most importantly tackle the
unbridled corruption as well as security challenges with the last drop of its
blood.
We must understand that growth can be self-generated by focusing on
products commonly consumed by the low-income citizens. Even a little
improvement in the productivity and income in such quarter will capture a sizeable
market and assist in sustaining development of other products and markets.
Therefore, instead of embarking on massive infrastructural projects, the
government ought to start with improving such capital-oriented projects that
make production cost-effective as road cum railway network, power cum water supply,
and refineries.
So, acknowledging that borrowing
is only regarded as a healthy practice when the borrowed funds are utilized
judiciously and selflessly, it’s needless to reiterate that we must invest
meaningfully and wisely to reap heavily and successfully. Think about it!
Comr Fred Doc Nwaozor
(TheMediaAmbassador)
-Researcher, Blogger,
Public Affairs analyst & Civil Rights activist-
Chief Executive Director, Centre for Counselling, Research
& Career Development - Owerri
_____________________________________
frednwaozor@gmail.com
+2348028608056
Twitter: @mediambassador
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