THE GROWING DEBT TRAP
It is uncertain whether more loans will be put to good use
The frequency of borrowing by the federal and state governments has become a source of worry to many analysts who sound a note of caution that the country may be heading for another debt trap. According to official reports, Nigeria’s debt stock is expected to rise by N6.72 trillion this year from the 2016 figure of N12.58tn. The total debt liability will also rise to N19.3tn by the end of 2017. This at a time the federal government is seeking $30 billion loans from the World Bank, African Development Bank and Japan International Cooperation Agency.
We must recall that in 2005, Nigeria successfully negotiated a complicated debt write-off deal of about $18 billion after a cash payment of $12 billion to free the nation from the Paris Club debts of over $30 billion, most of which were accumulated interests and charges. A chunk of these loans were secured in the 1980s to fund what turned out to be white elephant projects.
With about $3 billion dollars spent annually just on debt servicing at the time, the argument to exit the club was plausible. The idea was that the funds that would be saved from annual debt servicing would be channelled to productive sectors of the economy and to tackle some of the critical sectors that encompassed the Millennium Development Goals. But 12 years down the line, we are again engrossed in another national debate on the appropriateness of treading the debt path.
We are even more worried by the debts being accumulated by the states. Ordinarily, if the aim was to help the states bridge the gap between what
THE CURRENT PERCEPTION IS THAT MANY OF OUR GOVERNORS HAVE FAILED TO PLUG THE LEAKAGES AND WASTES, WHICH OVER THE YEARS HAVE BECOME INSTITUTIONALISED
they receive from the federation account and their developmental needs in the areas of infrastructure, health, education, power and transportation, it would have been a laudable idea. However, it is one thing to raise these funds and quite another to ensure accountability and their judicious application. Without the requisite oversight by their respective states’ legislature, a large chunk of these funds could be frittered away. In fact, some of the new governors inherited states that are heavily indebted with little to show for the accumulated debts.
The Emir of Kano, Muhammad Sanusi, a former Central Bank of Nigeria (CBN) Governor, recently painted a pathetic picture of how some of these loans were procured and what they were used for: “We have governors who go to China to spend one month on a tour and what do they come back with? China will lend you $1.8 billion to build light rail. The light rail will be done by the rail workers from China, the trains will come from China. The engines will come from China, the labour comes from China and the driver is Chinese”, said Sanusi. Querying the wisdom of incurring such debts, Sanusi said: “At the end of the day, what do you benefit from it? Your citizens will ride on a train, in northern Nigeria; in a state like Kano or Katsina, where are you going to? You are not going to an industrial estate to work. You are not going to school. You are not going to the farm. You borrow from China to invest in trains so that your citizens can ride on them and go for weddings and naming ceremonies.”
The current perception of the populace is that many of our governors have failed to plug the leakages and wastes, which over the years have become institutionalised. If they can manage their resources with prudence, there may be no need for some of the debts they keep piling up for future generations to settle. The same goes for the federal government.