Loan-dependent budget, which is a budget that depends on borrowing (either internally or externally) to be financed, is no more a strange phenomenon under the Muhammadu Buhari-led federal government. In fact it has become the norm, though regrettably.
We condemn this system of budget financing and urge the national assembly to reject the fresh application for loan made to it by the executive. We cannot mortgage the fortunes of the present and future generations of Nigerians. Any nation that adopts this kind of system of budget financing, no doubt, will continue to grapple with debt and other economic crises as is the case in Nigeria today. The 2021 budget has a deficit provision of N5trilion while the country spends over 90% of her total revenue servicing debts. At the same time, foreign remittances, which should have helped the economy have dropped drastically in the last few years. Same with the Excess crude account (ECA).
At the last count, Nigeria’s external debt now stands at about USD90 billion (₦33.574 trillion). With the huge resources God blessed this country she is not supposed to be indebted to the international community as it is currently. This astronomical rise in the debt profile is largely due to borrowing to finance the nation’s budget. But for how long will Nigeria continue to operate a loan-dependent budget?
On May 18, 2021, President Muhammadu Buhari wrote to the two chambers of the national assembly requesting for approval to borrow additional loan of $6.183 billion (about N2.343 trillion), provided in the new external borrowing in the 2021 Appropriation Act, to part-finance the budget deficit of N5.602 trillion.
Earlier in the year, Buhari made a similar request and got approval to borrow $1.5 billion loan and another €990 million, respectively.
According to the Debt Management Office, as of December 2020, Nigeria’s public debt was N32.9 trillion, or $86.3 billion, of which N12.7 trillion ($33.3 billion) is external debt. Adding the existing N33.574 trillion debt to the new N2.343trillion loan would amount to a debt of N36.243trillion. Of this amount, N20.2 trillion ($53 billion) represents domestic debt, including loans by banks. The federal government owes N16 trillion ($42 billion), while the balance was loans by State governments and the Federal Capital Territory. Of the external debt, 9.7 percent or N1.2 trillion ($3.3 billion) is owed to the Export-Import Bank of China, a state-owned and funded bank that supports China’s foreign trade and investment.
In the May 18, 2021, letter addressed to the Senate president and Speaker House of Representatives respectively, Buhari requested for a resolution of the National Assembly (NASS) to raise N2,343,387,942,848.00 (about USD 6,183,081,643.40 at the Budget Exchange Rate of USD1.00/N379). He said the request was in line with the provisions of Sections 21(1) and 27(1) of the Debt Management Office (Establishment, Etc.) Act, 2003 (DMO Act).
Section 21(1) of the DMO states that “no external loan shall be approved or obtained by the minister, unless its terms and conditions shall have been laid before the National Assembly and approved by its resolution.
Section 27(1) states that “the National Assembly may, by a resolution, approve, from time to time, standard terms and conditions for the negotiation and acceptance of external loans and issuance of guarantees.”
While the president, in the letter to the Speaker Femi Gbajabiamila, said the new external borrowing is to part-finance the N5.602 trillion deficit in the 2021 budget, in the letter to the Senate president he said the “N2.343 trillion New External Borrowing in the 2021 Appropriation Act will be used to fund specific Capital Projects in the budget.
“This includes projects from priority sectors of the economy, namely: Power, Transportation, Agriculture and Rural Development, Education, Health, provision of Counterpart Funding for Multilateral and Bilateral Projects, Defence and Water Resources.”
Saying the fresh loan is for development of infrastructure is being economical with the truth. It is the same reason given for previous loans taken with nothing concrete to show for them since the administration came to office six years ago.
In 2015, this government promised to diversify the economy. Till date, we are yet to see that accomplished. Garri which is regarded by many as the common man’s food is currently very expensive and out of reach of the average income earner.
Without adequate security and without securing Nigeria, even if government borrows trillions of dollars, nothing will be achieved.
Take the case of the newly renovated railway tracks, some of which have been vandalized and stolen by criminals.
Without mincing words, loan-dependent budgetary system is dangerous and detrimental to the economic prosperity, well-being and survival of any nation. The reason for this is not hard to find: it brings a heavy debt burden upon the nation, just as it has currently done to the Federal Republic of Nigeria.
In addition, large amount of resources that should be used for infrastructural developments and to improve the general well-being of the country are channelled or used for debt servicing on yearly basis. This is the cause of the debt crisis Nigeria suffers at the moment, as well as the widespread poverty and hunger. In view of these, we advise the Buhari-led administration to reduce borrowing to save this economy from collapsing.
