By Adanna Nnamani and Okwe Obi
The $2.2 billion loan request made by President Bola Tinubu, which the National Assembly recently approved, has attracted reactions from economic and development experts as well as interest groups.
The president had requested the approval to enable the government to partially finance the N9.7 trillion budget deficits for the 2024 budget.
While some economic experts have given more insight and offered advice on how the government can make the best out of the loan, some others have expressed reservations on the government’s penchant for borrowing.
According to the National Bureau of Statistics (NBS) Nigeria’s public debt stock – external and domestic stood at N134. 30 trillion, about $91.35billion, as at the second quarter of 2024.
Dr. Chijioke Ekechukwu, a former Director-General of the Abuja Chamber of Commerce and Industry (ACCI) and CEO of Dignity Finance, said there is an urgent need for Nigeria to explore alternatives to borrowing.
To reduce reliance on external borrowing, Ekechukwu urged the government to monetize underutilized assets, adding that increased oil production capacity and revenue could help reduce deficits, provided fiscal discipline is maintained.
He also criticised the manner in which the government is handling resources, and advocated more fiscal discipline.
“As long as we have the kind of budget deficit that we have, which obviously can only be funded by loans, we will continue to have more loans borrowed from international bodies. Unfortunately, we have not been so circumspect about the interest rates and the conditions of these loans. We need to actually assess loans that have better conditions than others, and I do not think those kinds of loans can come from the IMF or World Bank.
“What we need to do to reduce the deficit that we have is to look inwards and see whatever assets that we have today that we can actually dispose of and use them to form part of funding of the deficit of the 2025 budget. If you look very well, you will see there are too many assets that can actually be disposed of and get a lot of money to be able to form part of this budget. The second thing we need to do going forward is to reduce the size of our deficits.
“We do not have to continue carrying big and heavy deficits all the time. As individuals, you don’t want to spend money you do not have. If you don’t have it, then don’t spend it, and so that we can curtail our expenditure to the extent of the revenue that we have, and that way we will manage ourselves.”
Ekechukwu advised the government that as individuals are tightening their belts, the government should also tighten its own. He expressed the view that if the country does not have enough money to fund certain projects, it should not resort to borrowing to execute such projects, especially given the fact that the country already has a huge debt burden.
“Another way is to see whatever savings we can make when there is an increase in oil production and oil revenue. Of course, you know that we have made a benchmark for oil price where it is now, and so when the price of oil goes up, we’re expected to get more revenue from there. When the capacity we have today is exceeded, we’re also expected to get more money.
“So the excess we’re going to get from increased capacity and then the extra money we’re going to get from increased price of oil can actually help to reduce the deficit which we are going to have. So as far as we continue to have huge deficits, we’ll continue to borrow. Again, there needs to be enough fiscal discipline.
He further expressed concern that “the kind of monies that are going into different tiers of government and the ways that they’re being utilized, they don’t really show that we have fiscal discipline. We need to indeed have it in order for us to manage our economic situation.
Another economist and development expert, Aliyu Ilias said he supports government borrowing but cautioned against its misuse. He recommended that Nigeria should avoid further borrowing until 2025, as current loans are being used to supplement the 2024 budget, which is nearing its end.
“I do not think it is bad to borrow. Most countries of the world including the US and China borrow. But the question is what are we borrowing for? Also, I would advise the government not to borrow again until 2025 because what they are borrowing now is to augment the 2024 budget, and 2024, in less than 50 days will be over, which means that in 2025, they will borrow again to augment the budget deficit. So for me, they should not borrow again until 2025.
“So it all depends on what we are borrowing for. If it’s project tied, then it’s okay. In fact, for me, I think Nigeria’s budget is too small. We should be doing like 100 trillion so we should borrow more to augment. If we borrow for capital projects, it is okay because those are the things Nigerians will benefit from like roads, healthcare, education and the rest,” he said.
Prof. Adegbemi Onakoya, a quality management and business transformation expert also noted that borrowing is acceptable but only if it is directed toward infrastructure and projects that yield economic returns.
According to him, “The basic principle of loan is the productivity of it. The loan itself is not the problem; the problem is what it is used for. If it is used for capital expenditure, then there is no problem. But, if it is used for recurrent expenditure, that is where the problem lies.”
Whether successive governments in the country made judicious use of such loans is another contentious issue.
In the words of Onakoya, “for Nigeria to qualify for those loans, it means that it is bankable. And do not forget that Nigeria has been able to reduce the percentage of its revenue spent on debt servicing from 105 per cent to 68 per cent. So, as long as it is used for the right course, borrowing is okay.”
But Emmanuael Bechi, another economist and financial analyst accused the government of being insensitive to complaints from Nigerians.
He lamented that despite incessant borrowings, public infrastructure and social services are still in deplorable states.
Bechi does not have kind words for the National Assembly for yielding to the demands of President Tinubu without questioning the utilisation of previous loans taken by the country.
He said: “The painful part is that the loans collected by the previous governments to finance the budget did not change the living conditions of the masses.
“I do not think the planned loan by the government of President Bola Tinubu will change anything.
“The arm of government responsible, the legislature, has failed. The short-term effect is glaring. Citizens are suffering. The exchange rate is alarming. It is always going up each passing day.
“The long-term effect is that our children will pay for the loans. The government must understand that there is economic growth and economic development. When you say the GDP has grown from 1 per cent to 10 per cent, it is just mere economic growth.
“If the GDP does not translate to good governance, then we have succeeded in achieving nothing. Is that what we want for the country? Certainly not.
“Even though we are handicapped, we will continue to advise the government. A loan of $2.2 billion is a huge amount of money. We cannot keep quiet.”
Executive Director, Centre for Human Rights and Civic Education, Ibrahim Zikirullahi, described the approval of the loan as outrageous.
Zikirullahi said the government has failed to make use of the country’s natural resources to boost the economy.
“So, if you’re content with your God-given resources, you will be respected globally. There is no way you will live in pain. But what you see today is that the government does not have the interest of the masses and the country at heart.”
According to the activist, “All they do is to flaunt wealth. Every now and then, when you have a little problem, we go cap in hand to our creditors; for me that is not a way to run a system.”
Source: Daily Sun
