The truth is that we have a terrible record of loan repayment. With such embedded cultural profligacy, there is no way we will pay back our loans. If we incurred loans all through the 1970s, ’80s and ’90s and only managed to crawl out on hands and knees in 2006, there is no way we would have suddenly developed financial discipline in 2018 when we have only become worse…
I used to keep the list of ‘spurious’ loans that were written off for Nigeria in 2006. Our leaders in the 1970s, ’80s and ’90s had collected all sorts to build different monstrosities of their bizarre fancies. In those days, even local government chairmen collected foreign loans. Just before those loans were written off by the Paris Club, The PUNCH and Tribune, among other newspapers, published in detail the items that Nigeria had spent them on. Many were programmes which never took off at all, but were fully drawn down – ghost projects was a fitting moniker. In the 1980s especially, governors, local government chairmen and, of course, the federal government went on a mad borrowing binge. They had swallowed hook, line and sinker, the liberal KoolAid of economics which encouraged leveraging to the hilt, and preached that borrowing was the fastest way out of underdevelopment. It never worked, but that “zombie economics” idea is very much alive in Nigeria today.
The debate about our new Chinese loans raged a couple of weeks back. Nigerians found it curious that their leaders were borrowing almost the exact amount from China, as we were spending on freebies (“dash”) from the recovered Abacha loot. I have my own thinking about Chinese loans which I will share in a jiffy, but in the first instance there is a need to challenge this idea that has recently become mainstreamed – that borrowing is a first choice for financing projects. Some ‘enlightened’ Nigerians compare our borrowing culture with what happens in the U.S.A and elsewhere. They ignore the trajectory and history of these two different economies and the role these play in finance. Does U.S.A borrow to provide basic amenities for its people? Very doubtful. U.S. borrowings are mostly into its financial sector, which probably feeds its conglomerates. The U.S. government raises money today in bonds and treasury bills, which countries like China and Japan invest in. The country sometimes encourages consumption because it knows that there are U.S. companies that must continually be fueled by internal consumption. Some of the loans procured by the U.S.A also powers its aggressive export sector, wherein very complex goods are pushed all over the world. The U.S.A is the most diversified economy in the world, meaning that all aspects/sectors of its economy interact vigorously with each other. Here we produce nothing and import everything. I am not really sure that we can borrow to fund both consumption and export potentials. Something is broken in this economy. Permanently so. It must be noted that in the toddler stage of the U.S. economy, a lot of domestic borrowing was done for sundry purposes – including to finance wars. This strategy engenders ownership and patriotism among the people. The focus was therefore not merely on finance.
My advice is that countries like Nigeria should borrow only for projects that are self-funding, with cash flows that partly liquidate such loans. All loans for social or basic amenities should be funded from internally generated revenue as well. We have nothing to show for our being an independent country since 1960. It is a crying shame that we cut such a pathetic picture of a beggar nation, hopping from Asia to Europe to America, signing the future of our own children away for a mess of pottage. We cut a ridiculous picture with those we collect these loans from. They know we are irresponsible. They see the luxuries our leaders enjoy. It’s an open world more than ever. Their children see how ridiculous we are. They know we don’t want to know anything about financial responsibility, fiscal independence and accountability. Their children will take it out on our children. The other day we saw U.S. congressmen who were so broke they slept in their offices in Washington DC, while our own lawmakers probably own multiple properties in the same cities. Yet the same Nigeria goes a-borrowing from the U.S. government and its many institutions! We even beg them for grants and aids. How do these add up?
As things stand, Nigeria is as good as fully sold. Nobody thought of payback day for these loans. I don’t know what will happen on that day. Perhaps we would have become slaves in our own country. We have definitely not proven that we know what to do with this space called Nigeria. But we know the addresses of these people who sold us down the river.
The truth is that we have a terrible record of loan repayment. With such embedded cultural profligacy, there is no way we will pay back our loans. If we incurred loans all through the 1970s, ’80s and ’90s and only managed to crawl out on hands and knees in 2006, there is no way we would have suddenly developed financial discipline in 2018 when we have only become worse – with more disunity, indecent exposure to luxuries, and greed. Our governments are crazier today than they were in the ’70s, ’80s and ’90s, when we ended up using 70 per cent of our national revenue on debt servicing. I recall that Obasanjo had to embarrass the creditors then that Nigeria borrowed only $12 billion, repaid $38 billion in cash terms and was still owing $35 billion before we were availed the opportunity to pay cash of another $12 billion to the Paris Club in exchange of a write off $18 billion. We were then left with a total foreign debt of about $5 billion and our local debt stock was manageable. If we had so much trouble managing $35 billion, how can we manage and ever repay $73 billion today in total loan stock?
This brings up the statement by Amina Muhammed, Nigeria’s export to the United Nations. She stated during a recent interview with Christine Lagarde that her friend, Dr. Mrs. Okonjo-Iweala took Nigeria out of debt but that we were now back in debt and the level of debt was going to be tough to manage. That was Amina passing a vote of no confidence on the government she just stopped serving months ago. But to make matters worse, she was dead wrong. Okonjo promptly returned Nigeria into the debt trap from whence we had emerged under her previous guidance. In fact deeper. The focus was not to take Nigeria out of debt per se, but to obtain that cash flow for the Paris Club. Nigeria was the ONLY country which had to repay anything in all of sub-saharan Africa. We were considered rich, not deprived. By the time she departed for her ‘global assignments’ the second time, Nigeria was owing a total debt of $60 billion. However most of that was local and attracting very high interest rates. I recall that this debt issue was one of the Achilles’ heels of the Jonathan government and the reason Buhari got massive votes. Only that Buhari government has now further worsened the situation.
Under the now-departed Kemi Adeosun, the first thing they did was to devalue the naira. In this way, a large proportion of the domestic debt simply lost value. At least $50 billion in naira terms was in domestic debt when the Buhari government came on board. With naira officially crashing from N177 to N305, that meant that such loans became an equivalent of $30 billion if Nigeria had to pay back at that point. This would have technically brought our loan portfolio down to about $40 billion (if we add the foreign component of about $10 billion). What this means is that Kemi Adeosun, who switched aggressively to foreign loans, contracted a fresh sum of about $33 billion for us in her roughly three-year sojourn – most of that in foreign loans. I recall that I begged her through my articles that she should please not contract any jumbo loan of $30 billion on behalf of our children. This must have slowed her down a bit as she pointedly accused me one day during a Channels interview with Kadaria Ahmed. If that proposed jumbo loan was collected, we will be over $100 billion in loans by now.
To emphasise this perennial brainlessness of successive governments, I ran into a World Bank document online the other day. It was a term paper for the borrowing of $13.5million from the World Bank in 1962 for the construction of Apapa Road. The pretext is that we needed to clear goods faster from the wharf. One Nigerian pound then was worth $2.80; almost $3.00! Today we are on the verge of taking (or have taken) another $50 million from the same World Bank for the reconstruction of the same Apapa-Wharf Road, for the same reason – to ease clearance of goods from Apapa Wharf. Of course we know there is now a total gridlock there due to our utter planlessness. What we also need to amplify is that the Nigerian currency has lost value since 1962 by a factor of at least 915 (3 by 305)! What did we do with all the revenue generated from the people/businesses that used the ports since 1962? Oh I forgot. We used it liberally to do ‘bigmanism’. We simply squandered everything and more. Stupidity they say, has no cure. Now I open newspapers and see how Nigeria wants to borrow $125 million for policy-making, for improving statistical information or something of the sort. We are taking an additional $400 million to ‘promote innovative approaches based on international best practices and community participation to tackle land degradation and gully erosion’. Another $350 million goes to the Nigerian Electrification Project, while $225 million will be for nutrition of pregnant women and children. Another $150 million is for polio eradication, while $100 million will be for training women in skills. And so on. Why do we need all these loans that we cannot repay? Why is Buhari borrowing from everywhere just so his government can look like it’s making progress? Why are we borrowing massively when our people loot this republic and fritter the funds abroad? Why have some of our best people become corporate ‘agberos’ for foreign capital/foreign investors looking for money laundering/legitimacy, socio-political leverage and huge returns at the same time, without a tinge of remorse on any side?
Just so I am very clear, these projects we borrow for, are such that commonsense will fix for us if we had any. These are projects that our universities and polytechnics should fix for us if we had any that was worth its name. These are projects that sane governments should sort out with internal revenue.
Just so I am very clear, these projects we borrow for, are such that commonsense will fix for us if we had any. These are projects that our universities and polytechnics should fix for us if we had any that was worth its name. These are projects that sane governments should sort out with internal revenue. Let all pseudo economists know that INFRASTRUCTURE is not enough excuse for mindless borrowing. What Nigeria should do now is THINK, and stop this criminal mortgaging of this country. God cannot forgive us for what we are doing to ourselves as a people.
To conclude, let’s go back to the China dilemma. Should we borrow $326 million from China when we are also spending $320 million recovered from Abacha by sharing to faceless poor Nigerians just to feed and with no work done in return? I confess I prefer the Chinese interactions to the major trauma we have suffered under the Westerners. In 2009, I was in ThisDay Dome, Abuja, when Tony Blair in an unguarded moment, admitted upon being asked about the growing Chinese influence in Africa, that he knows that ‘each time an African country ask China to build a road, the next day, the Chinese show up with a digger but if they come to the West, they are given a huge sheaf of papers and conditionalities to sign’. George W. Bush, who was also there snatched the mic and went on a long tirade about China despoiling Africa’s environment. So we know who is what, and Nigeria stands a far greater chance of real progress with Xi Jinping and his people. But Nigeria must not rest on its oars.
Old man Mahatir Mohamad said recently: “China comes with a lot of money and says you can borrow this money. But you must think, ‘How do I repay?’ Some countries see only the project and not the payment part of it. That’s how they lose chunks of their country. We don’t want that.” That is it. As things stand, Nigeria is as good as fully sold. Nobody thought of payback day for these loans. I don’t know what will happen on that day. Perhaps we would have become slaves in our own country. We have definitely not proven that we know what to do with this space called Nigeria. But we know the addresses of these people who sold us down the river.