Debt servicing amongst other things remains top priority in a nation’s economy especially because of the allocation of budget deficit to capital projects in the economy. Some European countries were short of finance after they gained independence and opted for external loan, today they stand tall as developed countries. In the same way, Malaysia opted for external loan in the 1980’s and is now considered as heaven to some Nigerians because of its fast growing economy.
Nigeria has quite a history of borrowing by successive administrations, these include the regime of General Olusegun Obasanjo which received 22 foreign loans; the Shagari administration took a total of 59 loans (between 1979 and 1983), while the Geneneral Muhammadu Buhari administration (1983-1985) took 8 and during General Ibrahim Babangida’s regime the loan mounted rapidly due to the effects of rescheduling during the Structural Adjustment Program (SAP) between (1985-1993).
Collecting these loans was very easy for these administrations but paying back became an issue. President Olusegun Obasanjo once acknowledged that the nation had actually borrowed a total of $13 billion in 20 years, adding that about $17 billion had been refunded, that is an excess of about $4billion and yet Nigeria was still said to owe $22billion to the London and Paris club. The question now is, were there proper accounting and book keeping for a whole country to have plunged into this kind of debt trap? In April 2006, under the administration of President Olusegun Obasanjo loan incurred from the 1980’s was paid off to the London and Paris club leaving an outstanding balance of $3.7 billion which has now increased to $3.95billion at 6.2% interest rate annually.
Paying back would not have posed any challenge if the loans were channelled to appropriate projects like construction and maintenance of oil refineries, investments on revenue generating project and human capital development rather than allow swindlers make away with huge part of the money through corrupt practices and under various guises.
President Goodluck Jonathan ignored the position of former President Obasanjo who stated that Nigeria will not owe anymore and decided that it is in the best interest of Nigerians to borrow a total sum of $5.242 billion to finance some key projects but only $915 million has been approved by the National Assembly. The loan if obtained would be used for negotiated projects which stand at $1.855 billion, appraised projects at $1.073 billion as well as pipeline projects at $2.415 billion as stated in a letter passed to the House of Representatives by the president.
The country is not off-beam in seeking external loan to finance its budget shortage. However, for a country rich in crude oil it is absurd, but due to the gross mismanagement of the oil revenue following the global economic meltdown Nigeria’s oil reserves has dropped by 1.44billion barrels in one year, that is from 38.60billion barrels to 37.16billion barrels subsequently leading to a depreciation in the value of naira and a shortfall in government revenue. Another reason for the depletion in Nigeria’s oil reserve and reduction in foreign reserve is the lack of attention to field reports submitted by oil companies that are operating in the country.
However there is the need to expand the sources of foreign earnings instead of depending on the reserve built from the oil returns mainly. For instance we can develop our agricultural resources; in the northern part of Nigeria are groundnuts, cotton, hides, and skins. In the south we have rubber, palm products in the east and cocoa in the west, these formed the agricultural fibre of the Nigerian economy. Besides providing employment opportunities for the people, agriculture was a major source of income and foreign exchange before the discovery of crude oil.
Without a single doubt, Nigeria relied on resources from manufacturing and exportation of agricultural products and solid minerals to provide infrastructures and pay for the cost of administration and other growth projects. But today, the agricultural products for which Nigeria was once well known as the greatest world supplier have moved out from the list while the solid minerals sector remains untapped. Indeed, the tin mines in Jos, Plateau State and coal mines in Enugu have all been deserted not because they are drained but because oil has totally taken over.
Nevertheless if loan obtained are channelled towards productive activities that will generate revenue, improve economic development, increase Gross Domestic Product and improve standard of living in the country then taking loan would be at the best interest of the country.
Precautionary measures should be taken to avert being perpetually debt bound to both the London and Paris clubs and their Governments. Therefore the need to review and analysis loan to be collected as regards its impact on the economy by the National Economic Management (NEM) Team. NEM Team guidelines should not just be a round table discussion, it should revolve mainly around issues concerning transparent accounting of loan transactions and securing all foreign revenue income.
We need to ensure that the loans collected will not be squandered but rather invested, this we achieve by firstly scrapping unnecessary official purchases or provisions in public offices, secondly by ensuring that money earmarked for particular purposes are properly channelled, thirdly regular auditing of contract allocated to individuals, states or the government itself, fourthly by preventing money leakage via racketeers who mismanage government fund, fifthly, there should be regular and proper book keeping of federal government properties including money earned from liquefied natural gas, revenues generated from FG Parastatals and tax revenue from education. Lastly, negotiating a reduction in interest rate of loan to be collected or weighing banks/clubs to see which one offers a better and much more reduced interest rate. It is also of essence to make paying back at least $3billion annually a priority.