Doubts over Buhari’s fresh $800m loan request
President Muhammadu Buhari has asked the Senate to approve a new loan request of $800m, which he said would be sourced from the World Bank.
Buhari made the request in a letter read by Senate President Ahmad Lawan at yesterday’s plenary.
This is just as the Budget Office of the Federation raised the alarm that Nigeria was fast exceeding its borrowing limit.
The Debt Management Office had in March, disclosed that Nigeria’s total public debt stock, including external and domestic debts, increased to N46.25 trillion or $103.11 billion in the fourth quarter of 2022.
The president, in a letter read yesterday by Senate President Ahmed Lawan, said the fresh $800m loan would be used to scale up the National Social Safety Net Programme (NASSP) to assist poor and vulnerable Nigerians in coping with the costs of meeting basic needs.
He expressed optimism that the new request would receive expeditious consideration by the Senate.
He wrote: “You may wish to note that, the Federal Government of Nigeria under the conditional cash transfer window of the programme will transfer the sum of N5,000 per month to 10.2 million poor and low-income households for a period of six months with a multiplier effect on about 60 million individuals.
“In order to guarantee the credibility of the process, digital transfers will be made directly to beneficiaries’ accounts and mobile wallets.
“The NASSP being a social intervention programme will stimulate activities in the informal sector, improve nutrition, health, education and human capital development of beneficiary households.
“Given the above, I wish to invite the Senate to kindly approve an additional loan facility to the tune of USD 800 million to be secured from the World Bank for the National Social Safety Net Programme (NASSP).”
The fresh loan request came few days after the Senate approved Buhari’s request to restructure the N22.7 trillion loans the Central Bank of Nigeria (CBN) extended to the federal government under its Ways and Means provision.
The president had said that the CBN Ways and Means fund was used to finance critical infrastructure projects.
Nigeria fast exceeding its borrowing limit – Budget Office
Office of the Federation, Ben Akabueze, yesterday said Nigeria was fast exceeding its limited borrowing space.
He spoke at the induction of newly-elected lawmakers of the 10th National Assembly at the International Conference Centre, Abuja.
He said: “While the size of the FG budget for 2023 created some excitement, the aggregate budgets of all governments in the country amount to about 30 trillion Naira. That is less than 15 per cent in terms of ratio to GDP.
“Even on the African continent, the ratio of spending is about 20 per cent. South Africa is about 30 percent, Morocco is about 40 per cent and at 15 per cent, that is too small for our needs.
“That is why there is a fierce competition for the limited resources. That can determine how much we can relatively borrow. We now have very limited borrowing space, not because our debt to GDP is high, but because our revenue is too small to sustain the size of our debt. That explains our high debt service ratio.
“Once a country’s debt service ratio exceeds 30 per cent, that country is in trouble and we are pushing towards 100 per cent and that tells you how much trouble we are in. We have limited space to borrow.
“When you take how much you can generate in terms of revenue and what you can reasonably borrow, that establishes the size of the budget. The next thing would be to pay attention to government priority regarding what project gets what.
“The budget is not a shopping list. In the end, the budget only contained expenditure”.
New loan request parting gift – CDD
Reacting to the latest loan request, Director, Centre for
Democracy and Development (CDD), Idayat Hassan, said it was wrong for Buhari’s administration to further plunge Nigerians into more debt despite the current outrageous debt profile.
In a chat with Daily Trust, she said: “It is wrong for the outgoing administration to actually be burrowing a whopping $800m, 18 days to the end of the administration. How and when do they actually expect to spend this $800m?
“I think this is a set-up of failure for the incoming administration. It is more like they are strumming thorns in the pathway of the incoming administration for a country that is already overburdened with debt and is also planning to spend most of the revenue into servicing these debts”.
She said the fresh loan request ought to have been greeted by outrage from the legislature.
“I am suspicious of this humongous amount of money that is being borrowed. It is more or less like a handout or parting gift to officials who served under the Buhari administration,” she said.
Executive Director, Resource Centre for Human Rights and Civic Education (CHRICED), Dr Ibrahim M. Zikirullahi, said, “Most of the loans taken by the government were collected without proper scrutiny and oversight. It is unjustifiable that barely 18 days to the end of the tenure, the federal government wants to go ahead to plunge Nigeria into further unsustainable debt.
“In the same way the government postponed the National Census, CHRICED calls on the government to suspend this move to borrow more,” Zikirullahi said.
On his part, Chairman, Transition Monitoring Group, Mallam Auwal Musa Rafsanjani, urged the Senate not to approve the fresh loan request as “It is very clear that it is not for public interest but an additional financial burden for the nation and its people.”
Rafsanjani, who is also the Executive Director, Civil Society Legislative Advocacy Centre (CISLAC) and Chief Executive Transparency International Nigeria, said the government must provide a convincing explanation on why it had run out of ideas to stop looting.
He said, “This government has spent over N7trn financing fraudulent fuels subsidy, which Nigerians have not benefited, but a few individuals within the government and their contractors; this is the view of the majority of Nigerians.
“The whole subsidy governance has no transparency and accountability or benefits for the ordinary citizens, it is simply a process of legitimising public money diversion as there is evidence on how this borrowed money has reduced the suffering of Nigerians.
“So, to borrow another money in the name of subsidy is a clear testimony of the desperation to further mismanage or steal public funds when this government has less than four weeks to go. Again, there is no any framework on how this $800m will be transparently distributed. This is against the backdrop that the government has announced continuation of subsidy, so, if you have withdrawn the subsidy, why are you planning to use it for palliative purposes? This is a very suspicious and dubious intention.”
Also, Executive Director of African Centre for Leadership, Strategy and Development, Monday Osasah, said seeking to borrow fresh $800m 18 days to handover is wrong and “Is also sending wrong signals to citizens about the genuineness of his anti- corruption agenda.
“The National Assembly should not approve such a request, considering the nation’s daunting debt crises.
“Why should the president continue to do things that undermine the growth and development of the country? This is sad,” he said.
A constitutional lawyer and civil rights activist, Kayode Ajulo, also queried the rationale behind the $800 million request few days to the end of the Buhari administration, urging the Senate to decline approval.
“Why is the president borrowing money he can’t pay back? Why is he borrowing money for the next administration? The Senate should defer the approval till a new administration is swornin,” he said.
A former Director General of the Lagos Chamber of Commerce and Industry (LCCI), Dr Muda Yusuf, said that any conversation or engagement on subsidy removal and palliatives should be left to the incoming administration.
“We have had subsidy related palliatives in the past and none involved borrowing. The practice had been that palliatives were funded from the savings from subsidy removal, which makes the current proposition rather strange,” he said.
The economist counselled the government to explore fiscal and monetary policy options to incentivise investment in sectors that could mitigate the pains of subsidy removal.
“These include investment in refineries, pipelines, petrochemicals, petroleum products marketing, fertiliser plants, food production and processing etc. There should also be incentives to facilitate investment in the power sector, use of auto gas, etc,” added the Chief Executive Officer, Centre for the Promotion of Private Enterprise, CPPE.