Economic and financial experts have advised President Muhammadu Buhari to exercise caution over his administration’s plan to borrow $29.96bn from external sources.
Detailed report according to correspondent satated, the opposition Peoples Democratic Party called on Nigerians to stop Buhari from borrowing the amount and moving N180bn appropriated for special intervention to fund critical recurrent and capital items.
It also asked the two chambers of the National Assembly not to approve the request by the President.
Buhari had on Tuesday asked the National Assembly to approve the external borrowing plan to enable his government to raise funds to execute key infrastructural projects across the country between now and 2018.
But experts said on Wednesday that the amount was too huge and that the Buhari-led administration needed to tell Nigerians the specific infrastructural projects in exact locations across the country that the money would be used to finance.
A professor of Economics at the Olabisi Onabanjo University, Ago Iwoye, Sheriffdeen Tella, described the external borrowing plan of the Federal Government as too bogus.
Tella also asked the government to give a detailed breakdown of the proposed projects the funds would be used for, and specific plan of how it intended to pay back.
He said, “The money is too huge. We need to know the breakdown of the projects it will be used for. If it is for project financing whereby it is tied to specific projects in certain parts of the country, then fine. We need to also specify how much will be borrowed each year over the next three years of the borrowing plan.
“To me, the money is too huge. We do not manage our debts properly. We need to specify the repayment plan and what is going to be our income over the next five years or more. We are not good managers of resources; we are going to run into serious problems with this. If all these details cannot be given, then the National Assembly should approve just $10bn from it. Already, we know that we can’t borrow to finance recurrent expenditure. ”
An economic analyst at Ernst & Young, Mr. Bisi Sanda, also said the government needed to carry out reforms of its financial management system before embarking on such a borrowing.
Otherwise, he said it would be tantamount to borrowing to finance the ostentatious living of some corrupt government officials.
Sanda said, “Borrowing, in principle, is not wrong. But if you are using it to finance the corruption or ostentatious lifestyle of public officials, then there is a problem. It has been said some time ago that Nigerians only get 45 per cent value from all government expenditure. This is unlike in the USA where the people get 100 per cent value.
“Our public financial management must be transformed first. Seventy per cent of the budget in Nigeria goes on recurrent expenditure. What about the budget padding allegation and the huge bill of the legislature? We need to address the public financial management system, otherwise, we will find ourselves in the debt trap and leave huge debts for coming generations.”
The Chief Executive Officer, Cowry Asset Management Limited, Mr. Johnson Chukwu, said there was nothing wrong with borrowing, but the government must specify the projects the money so raised would be used for.
“We need to tie this borrowing to specific infrastructural projects we know of in the country. We should say this rail line or highway will be financed with such an amount from the borrowing. This money must be tied to specific projects,” he said.
The Chief Executive Officer, Financial Derivatives Company Limited, Mr. Bismarck Rewane, said, “I agree with borrowing, but it must be tied to specific projects. The amount is a huge amount. That is about 140 per cent of our current external reserves.
“It is almost double the amount of the current external debt of the country. We need to know specific projects that the money will be used for. Until we know that, I can’t say it is a right step in the right direction.”
-Reject proposal, PDP tells NASS-
The PDP asked Buhari to explain to Nigerians what his administration had done with the recovered looted funds and how the 2016 budget was faring.
The spokesperson for the Senator Ahmed Makarfi-led faction of the party, Prince Dayo Adeyeye, stated this in a statement in Abuja on Wednesday.
Adeyeye said that the President must itemise what he intended to finance with the proposed borrowing of almost $30bn instead of lumping everything up in a coded term “and to plunge the nation’s future into a burden of debt”.
He said that the President’s approach could not be the preferred solution to the economic quagmire, which he alleged was created by the present government.
Adeyeye, a former Minister of State for Works, said, “This government budgeted N6.07tn for the 2016 fiscal year with a deficit of N2.22tn, and according to the breakdown, N1.8tn was budgeted for capital expenditure and President Buhari is now seeking to borrow over N9tn ($29.96bn) for ‘critical infrastructure’.
“This is absurd and way outside the government’s budgetary provisions for capital expenditure and must be rejected by all well-meaning Nigerians.
“Nigerians will recall that the Minister of Information and Culture, Alhaji Lai Mohammed, in June made public through a press statement an account of recovered looted funds between May 2015 and May 2016 amounting to N78.3bn, $185.1m, £3.5m and €11,250m in cash, while others were under interim forfeiture. What happened to the recovered funds?”
Adeyeye added that the Chairman of the Economic and Financial Crimes Commission, Mr. Ibrahim Magu, recently said that the commission had recovered more money in the last eight months than it did in 12 years.
He said that Nigerians needed to know how much revenue the government had been able to generate from crude oil, non-oil and independent revenue sources since assumption.
The PDP leader said that the clarification would boost the confidence of Nigerians on the management of their resources, especially in this period of recession, and was necessary before thinking of engaging in external borrowing.
“The APC-led Federal Government is again taking Nigeria prior to year 2005 when the external debt burden derailed the growth of Nigeria’s economy and weakened the GDP before the total cancellation of her debt,” he added.
Adeyeye also said that the proposed action of the Federal Government would be a great injustice to the citizens now and in the future if they were plunged back into debt.
He said, “Let us state unequivocally that history will not forgive this APC government and its collaborators if they allow this injustice and maladministration of our economy and citizens to stand.
“We, therefore, call on the two chambers of the National Assembly to reject this anti-people request by an anti-people government that has no genuine interest for the growth and development of the people of this country.
“We again call on all Nigerians to speak with one voice and stop President Buhari from further destroying of our great nation, Nigeria, and by extension, Africa.”
-DMO sets borrowing limit-
Meanwhile, the Debt Management Office has said the maximum amount that Nigeria can borrow in 2017 from both local and foreign sources without breaching the debt threshold it has set for itself is $22.08bn.
The DMO said in its debt sustainability report that Nigeria could afford to borrow $22.08bn next year, equivalent to 5.89 per cent of the projected Gross Domestic Product, if it wanted to keep the overall borrowing under the limit of 19.39 per cent of the GDP that had earlier been set.
For this year, the total public debt-to-GDP ratio is projected at 13.5 per cent, the DMO said in the report, seen by Reuters on Wednesday.
It said the total public debt stood at 28.10 per cent of revenue in 2015, slightly above the 28 per cent threshold set by the government.
As of June 2016, Nigeria’s public debt stood at N16.29tn, up from N12.60tn at the end of last year.
The DMO said, “Although the level of debt stock is still appreciably low relative to the country’s aggregate output, the debt portfolio remains mostly vulnerable to the various shocks associated with revenue, exports and substantial currency devaluation.
“This highlights a potential risk to the debt portfolio, which could be exacerbated by the developments in the international oil market, as further decline in global oil prices would exert undue pressures on the already fragile economy, including the debt position.”
It proposed that the new borrowing next year be split as $5.52bn from the domestic markets and $16.56bn from offshore, subject to local market conditions and the options available abroad, adding that foreign borrowing should have a minimum maturity of 15 years.