Of New Debts And Economic Priorities

Eze Onyekpere

The coronavirus pandemic has negatively impacted on Nigeria’s revenues and exports to the extent that revenue from oil and gas exports, which accounts for 84 per cent of our exports, is expected to decline by about $26.5bn while the Gross Domestic Product will reduce by 3.5 per cent. A fiscal crisis is setting in and there is panic in the land. Before the pandemic and the oil revenue shock, revenue shortfall in 2019 was 58 per cent of the federal budget target; debt service to revenue stood at 58 per cent while debt to GDP stood at 29 per cent. This discourse will review a few steps taken by the Federal Government in response to this fiscal challenge and their implications for economic sustainability.

The government has so far reacted to the revenue shortfall by approaching and getting approval in the sum $3.4bn from the International Monetary Fund under the Fund’s Rapid Financing Instrument. Initially, Nigerians were told that the facility is not a loan. We were merely utilising our special drawing rights. But after the approval, the story changed indicating that we are bound to pay back, with a minimal interest over a period of five years. The $3.4bn is estimated to be about 24 per cent of Nigeria’s balance of payment financing gap of $14bn. The country is also seeking financial support from bilateral and multilateral institutions including the World Bank, African Development Bank, Islamic Development Bank and Afreximbank, in the sum of $3.6bn. This is about 26 per cent of the funding gap. If this succeeds, which is likely in the circumstances, this will bring the credit secured within this short period to $7bn. Just last week, the President requested, and the Senate approved domestic borrowing in the sum of N850bn.

The street value of all these loans is in excess of N5 trillion and they are not tied to any specific capital projects but are generally available to run the affairs of state. Recall that there is a loan procurement request in the sum of $22.9bn from the President still pending in the National Assembly. The last has not been heard of that request. With total debts at the end of 2019 at $84.053bn (N27.401tn) and adding these new facilities, there is bound to be a challenge of sustainability. Beyond the technicalities of sustainability, what exactly are we spending our revenue on?

In light of these facts, it appeared the Federal Government found no elbow room for fiscal manoeuvre than continued borrowing. This makes the call for the reduction in the cost of governance very timely. It is also time to think about how to pay back these debts in the coming years especially considering that oil price is not set for a rebound soon and we have no other source of earning foreign exchange and revenue to finance public expenditure. It will make no sense that we borrow money and all we do is to use the proceeds to procure a convoy of cars bought in foreign currency for ministers, legislators and governors; allow federal legislators to take home money they do not account to anyone; continue with bloated Ministries, Departments and Agencies that add little or no value to the economy. Legislators must be restricted to not more than the remuneration set by the Revenue Mobilisation Allocation and Fiscal Commission which has been enacted into law by the National Assembly. The long list of ministers, advisers and special assistants at the federal level will need to be pruned while boards of the MDAs need to be pruned to manageable levels – generally not more than seven members per board. Therefore, the President’s recent directive for the implementation of the Oronsaye Committee on the cost of governance is a very welcome development.

The expenditure of these borrowed sums should be accompanied by increased transparency and accountability. Public procurement must be done in a timely and value for money manner. Even though we need to avoid large gatherings, the National Assembly can ensure transparency and popular participation in legislative work through online and electronic platforms. This is not the time to shut out the public under any guise. It is also time for the finance ministry to disclose the terms of debts we incurred, especially the opaque Chinese debts. Nigerians, as a matter of right, are entitled to know the terms of these debts procured on their behalf. Again, we need to discontinue the efforts to borrow a further $22.9bn. It is a senseless and irresponsible venture.

The available foreign exchange cannot continue to be used for frivolous imports that add no value to our productive capacity. Even though international financial institutions like the IMF favour removal of foreign exchange restrictions on goods imports, they have not explained the source of funding for the free for all importation regime. Nigeria should use available foreign exchange to procure capital goods for the power sector, manufacturing, agriculture, etc., value chains rather than goods for consumption. We must ask and answer the critical questions about investments that can yield foreign exchange to position us, in the medium term, with the capacity to repay these huge debts, especially the foreign components at a time the naira is coming under intense pressure through official and unofficial devaluation. The continued importation of petroleum products is no longer sustainable and government, in our overall enlightened self-interest, should take targeted steps, to facilitate, so as to get the Dangote Refinery on stream as soon as possible while it enacts the legal framework for petroleum industry reforms through the Petroleum Industry Bills.

Since the COVID-19 outbreak, many Nigerian public and private firms have announced relevant innovations, especially around the much-needed ventilators and protective equipment. It is now time for the relevant ministries – science and technology, industry and trade, etc. in collaboration with the private sector to take steps to move these prototypes to the production lines. We cannot continue the medium-term importation of these products at a time local capacity for their production exists. Publicly funded research institutes must be given mandates and targets towards solving key existential challenges in Nigeria. The days of research institutes where the staff simply get paid and produce nothing to justify their remuneration should be gone for good. The developmental state, which Nigeria should target to be, should lead the way through appropriate policies, in technology development and mass production.

This is a crunch time when the fiscal push has become a shove and it is either we change or the fiscal edifice will collapse on all our heads. It is also time the younger generation get more interested in politics and public policy. The old men and women who are procuring debts and mismanaging the economy will leave the stage either voluntarily or nature will call them back. But what will the younger generation inherit – debts and fiscal crisis or a blooming and growing economy? The choice will be made by our action and inaction.