DISSECTING NIGERIA'S BORROWING SYNDROME

by FRED NWAOZOR

Taking into cognizance the trend of events among Nigeria’s entities and individuals, one might be quick to assert that the country is synonymous with borrowing. On the other hand, someone might also be of the view that no one could currently live or survive in Nigeria without indulging in borrowing.

Penultimate week, precisely on 19th November 2024, the leadership of the National Assembly (NASS) announced to its members during plenary the receipt of a letter from the Presidency, requesting to borrow the sum of 2.2 billion dollars externally. In the letter, the President expressed that the targeted fund was for the complete implementation of the 2024 budget. He therefore stated that the appeal was in line with the provisions of Sections 21 (1) and 27 (1) of the Debt Management Office (DMO) Act, 2003 and the approval of the Federal Executive Council (FEC).

The President further clarified that the proposed loan of #1.7 trillion naira, equivalent to about $2.2bn at the 2024 budget exchange rate of “one dollar to #800, was to partly finance the budget deficit of #9.179trn. He disclosed the fund was needed to give more strength to the ongoing projects and programmes’ implementation as enshrined in the said budget, which were designed to stabilize the economy.

According to him, the key projects to which the proceeds would be deployed formed priority sectors of the country’s economy, such as power, transport, agriculture, defence, and security. He added it would equally increase the accrual to the external reserves as the proceeds would be directly received into the account of the Central Bank of Nigeria (CBN), thereby supporting the naira exchange rate.

Without equivocations, borrowing has become a norm among not just Nigerian political leaders, but on the African continent at large. It’s ostensibly endemic in our bloodstream, that, successive leaders have seen it as the only means of survival for any government in power. This is, no doubt, a pitiable point we have collectively found ourselves as a people.

I beg to be corrected; this isn’t the first time the incumbent administration would request for a loan to finance a budget, barely a year plus it came on board. Yet, some defenders of the government are busy trying to convince credulous Nigerians that the President has been more concerned about servicing the country’s already-incurred debt. I wonder how we intend to reconcile a situation whereby an individual or entity is servicing an incurred debt, but still requests to borrow more money to finance his/its budget for a given fiscal year.

Aside the fact that such a scenario, as mentioned above, appears or sounds paradoxical, it simply seems not unlike a situation where the led are being told by their leaders that more employment opportunities would be created for the citizens, yet most of those who are already gainfully employed are being relieved of their various jobs unannounced, citing inability of the government to sustain their wages.

It’s quite ridiculous and unheard of, that, when the Nigerian debt index has abruptly triggered to over 120 trillion naira, the government still possesses the moral ground to seek additional loan, not even internally but externally. Sometimes, I do not hesitate to ask myself how the lenders see or perceive Nigeria among the Comity of Nations, because If I were in their shoes, I wouldn’t further release any dime to the country in the name of lending. One who regularly borrows but refused to refund, or has no plan to pay back, doesn’t deserve any other lending hand.

I’m ashamed, our sister nations might be laughing at us, even though they are also chronic borrowers. Of course, two persons could be characterized by same unruly behaviour, but when that of the other becomes so extreme, his counterpart may be tempted to laugh at him not minding they both share similar lifestyle.

Another question that bothers me, or that’s earnestly begging for a candid answer is, having totally removed subsidy from petroleum products by the government, as we were informed, why then is the country’s coffer still apparently bleeding despite the huge savings achieved thus far? Does it imply the citizenry is being misinformed, or there’s something wrong somewhere, which the governed are yet to know? For Nigeria to heal of her present economic disease that requires a lobotomy, these disturbing enquiries must be candidly addressed by the government.

Let’s economically take a closer look at the actual amount involved in the loan request. Since it’s an external borrowing, the fund would be released to the beneficiary in foreign currency, precisely the US dollar. US$2.2bn is targeted to be borrowed. It’s estimated to be about #1.76trn, using #800 as the pegged exchange rate to one dollar in the 2024 budget.

In the actual sense, the naira equivalent of the proposed loan ought to base on the current economic reality, considering the fact that the present official exchange rate to a dollar has doubled (about #1760) compared to the figure stipulated in the budget. It is even more than twice the aforementioned amount (#800). In view of this prevailing reality, the naira equivalent of the external loan being requested by the Presidency should rather be about #3.8trn, contrary to the #1.7trn as was reported in the letter from the Presidency.

In other words, Nigeria intends to borrow additional approximately 3.87 trillion naira at a time when the country’s public debt, both external and domestic, had catapulted to almost #134.3trn (about $76.3bn) as at the second quarter of 2024, indicating a growth rate of 24.99% on a quarter-to-quarter basis, which marked the country’s highest debt-to-GDP ratio ever; at a time when her teeming citizens are struggling to feed, or could barely afford two-square meal per day; at a moment when small and medium-scale business ventures are liquidating on a daily basis; at a period when the economic quagmire of the followers seems irredeemable; at a time when the country’s inflation rate is about 29.90%.

If we are to be truthful to ourselves, we would comprehend that at such a critical and scary moment like this, the government is rather expected to sit at home and consider how to deeply think outside the box towards redeeming the shattered image of the Nigerian State. Our leaders must take into cognizance that a 50 naira note is almost presently useless in Nigeria’s currency.

At such a tight situation of this kind, my worry mostly lies with the members of the NASS, who are constitutionally referred to as the lawmakers. It’s noteworthy that the loan being sought was unanimously approved by the senators barely 48 hours after the request letter was read on the floor of the Senate. I strongly see no reason every requested loan by the Presidency must be approved by the legislators, irrespective of the consequences it bears. Does it signify they can’t – or have no immunity – to say NO, even when the reason for the expected rejection is so glaring?

The story remains the same in all the states across the federation. Each of the State governors has resorted to borrowing as the only means of survival, in spite of the astronomical hike in taxation in their respective revenue generations. The most painful part of it is the way and manner the legislators swiftly give any loan request an attention, without critically analyzing the factors that informed the financial demand from the governor. Similar melodrama occurs, on a regular basis, at the national level.

The Presidency might bear a genuine intention as regards utilization of the sourced funds, but the bitter truth remains that incessant borrowing has never done anyone, either a person or group, any good in whatever perspective it’s being considered. We were notified that the loan, if eventually accessed, would be channelled into critical sectors such as power, agriculture, security, and transport, but this wasn’t the first time Nigerians were served with such a palatable diet, yet in the long run, these sectors would remain unattended to.

More so, there’s reportedly a budget deficit of #9.179trn and what the government is about to borrow is just #3.87trn, which is less than 50% of the deficit. So, how does it intend to source for the remaining fund towards financing the 2024 fiscal year? Perhaps, in the nearest future, the Presidency might come up with another loan request.

In a clear term, borrowing isn’t the remedy to the Nigeria’s economic woes; rather, an avenue to further weaken the bleeding and epileptic economy. It’s high time we gave this prevailing syndrome a rethink before it consumes the entire system. Think about it! frednwaozor@gmail.com

N.B: Published in NewTelegraph Newspaper on 27/11/2024