Future for Sale

In Proverbs 13:22, where it was written that “a good man leaves an inheritance for his children’s children”, a good heart and a thinking mind that looks at the future must have been the focus of that verse. Creating the kind of wealth that transcends generations is not in the purview of those the King James translation would tag “simple”. Extending this verse to the realm of countries and leadership, we can say that “a good leader creates a buoyant future for coming generations”. Unfortunately for Nigeria, its leaders have expertise in selling the future, doing what Niyi Osundare would describe as “eating tomorrow’s yam today”.

Between the 1970s and the 90s, successive Nigerian leaders did their best to borrow as much as they could, continuously tightening the hangman’s noose around the suffering citizenry. Much of the borrowed monies were diverted into private pockets, depriving Nigerians of the “projects” and “economic development” they were supposed to fund, while the country’s account balance continued to veer into the red zone, and debt-budget ratios continued an upward climb. Many of these loans were issued by international creditors who fully knew that they would be stolen (don’t ask me for proof); all they were interested in was getting some form of control over the Nigerian economy. While this may be viewed as unethical, the real blame goes not to the “aiders”, but to the unscrupulous people who used the Nigerian seal to loot more than the country could afford.

Beyond the structural adjustment programme of the Babangida regime, bulk borrowings continued until Obasanjo entered as civilian president. One highlight of his administration was the negotiation of the Paris Club loan forgiveness deal in which Nigeria paid US$12bn to get US$18bn debt forgiveness. Sane persons would have expected Nigeria to have learned from mistakes of the past, but sadly the classroom isn’t the only place history is banned in Nigeria—the mind is in the list. The Yaradua and Jonathan administrations came, production and oil price reached historic levels, yet somehow instead of saving surplus, Nigeria continued reckless borrowing at state and federal levels. Talking about the people who helped create the present chaos is like crying over spilled milk. As Shannon Thompson would say, “[We] can’t take back the past, but [we] can fight for the future.”

The Buhari administration recently submitted a request for approval to borrow about US$29bn over the next three years. To put this into context, using the 2016 budget of ₦6tn with an exchange rate of ₦400/$, the proposed sum is about twice the present budget. Using the budgeted rate of about ₦200/$, it becomes at par with the budget. To add more context, Nigeria’s Debt Management Office says the total public debt (states and federal government) as at 30 June 2016 was US$61.5bn. With these figures, one does not need a financial expert to know that Buhari’s proposed US$29bn is a lot of money in Nigerian loan terms. In line with the trend whenever a Nigerian government wants to borrow money, this administration has reeled out a list of good intentions for the loan. The problem is that the only bargaining chip it has is an assumed “trust” that this loan won’t be like its older siblings. Fortunately for the future Nigerian, Buhari’s much proclaimed sainthood wasn’t sufficient to get approval from the Nigerian Senate.

The problem with reckless borrowing is that it creates a dangerous spiral. Borrowing for clearly identified projects that would boost the economy and is accompanied by a sensible repayment plan is different from borrowing to steal or for consumption via illogical expenditures and where a “sensible” repayment plan is not tendered. The result of the later is what Nigerians would call “borrow pose”—borrowing to create an illusion of wealth, then progressively getting new loans to pay off due ones. Maybe the Nigerian state just needs to look at Greece as a contemporary example of what happens when a state borrows beyond its paygrade.

Whenever Nigerian administrations want to borrow funds, they resort to citing IMF guidelines about sustainable debt-to-GDP ratios. They may further give examples of Japan and the US, countries where public debt outstrips GDP. Those giving these citations forget that what works in Japan, may not (does not) work in Nigeria. Even in those countries, there is concern about unhealthy debt levels. How does one even compare an industrialized economy to one whose main strength is consumption? Until foreign exchange revenue is diversified, Nigeria’s main source of FX remains crude oil and natural gas, two commodities whose price is as stable as sitting on a two-legged chair. Then there’s the issue of an economy whose currency, like many others, is tied to the US dollar. Hence, a $1bn loan becomes much more difficult to pay if the prevalent exchange rate worsens after the loan is ratified. This is something the Buhari administration should consider.

Buhari should know that there is a limit to how much Nigerians can trust him. In fact, if he is not aware, his approval rating has dropped over the past months. At an official age of 74, he should not create a mess that would be suffered by babies still bathing amniotic fluid. It is quite plausible that he may have good intentions, but then, “the road to hell is paved with good intentions”. The 2016 budget set aside almost 30% for debt servicing. Getting more debt means increasing the amount of future revenues that would be spent on repaying debts. That is not a burden that Nigerians, present and future, would love to bear. May we not create a future where Nigeria slaves to pay creditors. The future Nigeria deserves better.

Image Credit: pcma.org