The Minister of Transportation, Mr. RotimiAmaechi, recently disclosed that the federal government is negotiating $15 billion fund for the execution of Port Harcourt–Maiduguri rail project. After a meeting with President Muhammadu Buhari in the Presidential Villa, he told reporters that the president has approved negotiations for the fund. The fund will also cater for the cost of implementing Lagos– Calabar rail project.
According to him, “Don’t forget that the Lagos-Calabar project is yet to start because of funds; the Port Harcourt – Maiduguri is yet to start because of funds, but the President has approved that we negotiate for funds. We are almost concluding negotiations for the Port Harcourt-Maiduguri. We are looking at the cost –it is in the neighbourhood of between $14 billion and $15 billion.”
Capital deficit has forestalled Nigeria’s aspiration to create an enabling environment for industries to thrive. The nonexistentor decrepit state of critical growth infrastructure in Nigeria has contributed to our unreasonable dependence on oil revenue; other sectors are malfunctioning due to infrastructural degeneration. For Nigeria to diversify her economic base, remain at the vanguard of economic development in the continent, and create jobs for her teeming youth population, it is expedient to finance growth through non-strangulating aid-loans.
Nigeria is maximizing her access to foreign credit facilities. To put it in non-euphemistic terms, our proclivity to borrow investible resources has gone into overdrive. Our public debt profile is now in excess of 20 trillion naira. Our predisposition to acquire foreign loans to fund public spending presents some concerns. Our enchainment by loans may become obvious, if oil revenue dwindles due to youth restiveness in the Niger Delta region or because of the vagaries of international oil price. This will force the government into borrowing more, so that, it can meet its basic financial responsibilities. This possible scenario spells misfortune for posterity.
According to the head sovereign risk analyst of Export-Import Bank of China, China seeks to provide “Africa with USD 1 trillion in financing, including direct investment, soft loans and commercial loans” by 2025. This is sounds laudable, but it is not altogether altruistic.
The malignant effects of borrowing often appear in the long run. Hence, the vociferous Editor-in-Chief of the South Sudan News Agency,DuopChakWuol, once counseled; “African leaders should not turn the continent into a giant collector of donations and loans from wealthy nations—they must find other plausible means to help established their economic security so as to minimize poverty. This incoherent blunder on the mainland must be scrutinized.”
Similarly, we should bemindful of the sound counsel of the outgoingUnited States Secretary of State, Rex Tillerson. During his recent visit to Africa, he admonished African countries to deal cautiously with the Chinese government and prudently consider its loan facilities. According to him, China “encouraged dependency, utilised corrupt deals and endangered Africa’s natural resources… We are not in any way attempting to keep Chinese ‘dollars’ from Africa, (but) it is important that African countries carefully consider the terms of those agreements and not forfeit their sovereignty.” Indeed, the predominant opinion is that Chinese credit facilities do not support the growth of domestic industries and create jobs. The facilities are package in such a way that they contribute to the development of Chinese companies.
The foregoing does not negate the fact that many economists say that when developing economies borrow sensibly it stimulates impressive economic performance. Financing infrastructural development with foreign loans holds the promise of enhancing the fortunes of the productive sectors of national economies. Public debts are meant to boost domestic savings, encourage investment and promote growth. Enhanced economic growth is a panacea for poverty reduction, could foster universal access to quality education, and efficient healthcare.
There are counter viewpoints to theabove rosy perspective on the effects of foreign loans on domestic economy.Some development economists are adverse to public debts. There aversion often stem from the fact that the prohibitive cost of debt servicing impoverishes governments, and militates against widespread infrastructural renewal. In other words, they consider high debt burden as cripplers of sustainable economic development. They argue that in the long run heavy borrowing is anti-growth.
Before the cancellation, reduction or renegotiation of Nigeria’s debt in 2006, we saw how soaring debt commitment can render an economy almost comatose. A significant per cent of Nigeria’s earnings from the export of crude oil was allocated to debt servicing. The implication of this was that paucity of funds made public sector spending on education, healthcare, social services, and infrastructural development to be abysmally low, and thereby, unable to ensure high economic growth.
Former President OlusegunObasanjo was persuaded that Nigeria cannot experience economic security and advance the wellbeing of posterity without extricating itself from debt trap. Hence, his administration did all that was diplomatically feasible to obtain debt cancellation or relief deals. The salutary efforts of the then Minister of Finance, Dr. NgoziOkonjo-Iweala, will remain evergreen in our national consciousness. However, it is troubling that slightly over a decade later; Nigeria is back to the borrowers’ den. If proper debt sustainability analysis is undertaken we may not be so eager to borrow, particularly, when it is clear that the projected proceeds from the invested loans will be minimal, and cannot lift many out of poverty.
It is an act of swindling posterity if we borrow to fix immediate problems that have no significant bearing on future prosperity. We should be wary of borrowing to fix roads in administrative capitals that have aesthetic values, but no economic value. Financing prestige driven projects with foreign loan is unwise.
Any credit facility that is capable of undermining the sovereignty of Nigeria amounts to swindling posterity. In a bid to achieve our noble aspirations for infrastructural development we should not compromise our politico-legal independence. Similarly, whatever credit facility that weakens our autonomy to formulate policies that will engender inclusive economic development should be jettisoned. We must open our history books and learn from the sad experiences of the Structural Adjustment Programme imposed on us by the IMF, and say never again are we going to relinquish national control over policy and development outcomes for western or Chinese palliatives.
It amounts to swindling posterity if loans are not utilised for what they are meant for. When political interests count more than economic consideration, there is the tendency to squander loans on frivolities. Corruption erodes the bedrock of future wellbeing. We must stop it before it mortgage the future of unborn Nigerians. One way to stop is to ensure loans are wisely obtained and wisely invested. It is unwise to obtain credit facility to fund projects that enhance the political capital of leaders, but lack the economic potential to create jobs and lift people out of poverty.
There seems to be no better way to conclude than to extensively quote Reuben Clark Jr.: “It is a rule . . . in all the world that interest is to be paid on borrowed money. May I say something about interest? Interest never sleeps nor sickens nor dies; it never goes to the hospital; it works on Sundays and holidays; it never takes a vacation; it never visits nor travels . . . it has no love, no sympathy; it is as hard and soulless as a granite cliff. Once in debt, interest is your companion every minute of the day and night; you cannot shun it or slip away from it; you cannot dismiss it; it yields neither to entreaties, demands nor orders; and whenever you get in its way or cross its course or fail to meet its demands, it crushes you.”