LOANS are wonderful financial instruments, depending on who is borrowing, the lender, the purpose of the loans, and the sincerity of those who are proposing them.

These are lacking in Nigeria ’s loan packages, and were partially the reasons the House of Representatives is against more loans.

The House stepped down debates on the Federal Government’s request to borrow $4.4 billion from seven foreign development agencies to finance power projects and other items.

Proposals for loans arrive with trappings of the loans capacities as if loans are the financial elixir Nigeria requires. These proposals also conceal the coming debt trap. We are told of the great plans government has made and why they could not wait a day longer.

Once the loans are approved, Nigerians wait for another abandoned project, or one that is an entire waste of public resources.

Little attention is paid to how the loans would be repaid. Still less attention is paid to the details of the projects in which Nigeria invests loans that account for its current low global rating in financial circles.

Corruption, in whichever form, finds its way into these projects that achieve nothing after billions of borrowed Dollars would have been spent. Nigerians are wary of committing more funds to projects that have not been thoroughly planned. An example is the National Integrated Power Project.

The Federal Government under Olusegun Obasanjo committed billions of Dollars to improving this critical infrastructure. The investment was futile. A House of Representatives probe of the power projects ended in series of scandals. Cases are in court about the affair.

How can we plunge into borrowing again for power projects when we cannot determine the extent of the waste during the previous attempt? Are we allowing those involved in the waste to go scot free? What message are we passing to the next set of people that would manage these projects?

Nigerians can argue to the end of time about the merits or demerits of taking foreign loans, but the most important of the debates are rooted in their doubts about the intention of government over these loans.

Obviously, those in government are the only ones who do not accept that the cost of running government is not sustainable. The more it costs to maintain the comfort of government officials, the less that would be available to meet needs of the ordinary.

Since last November when it became public that the Presidency was adding new aircrafts to its fleet, the public has become more unforgiving of any explanations for more borrowing.

Part of the money government wants to borrow, it said, would be applied to projects on HIV-AIDS. Important as these projects may be, there are no details, or explanations about what happened to earlier initiatives on HIV-AIDS, and why Nigeria cannot access any of the numerous global finances that are available for combating HIV-AIDS.

Minister of Finance, Mr Olusegun Aganga, will defend the loans – it is his job to do so. What he cannot guarantee is that the loans would be put to good use. Was there a time loans were not for development programmes? What developments have been made with these loans?

There are genuine fears that as government’s resources dwindle, these loans would become a regular way of funding government business.

Nigeria’s foreign debt was $3.54 billion at the end of 2005 before its exit from the Paris Club of creditors that year. It has risen to $4.3 billion by last June.

Not much is said of domestic debts, consisting mostly of government debts to contractors, borrowing from banks and its patronage of the bond market. The latest figure of domestic debts is $25.3 billion by last June, while it was $14.7 at the close of 2009.

If government finally borrows the $4.4 billion, the combination of foreign and local debts would be about $34 billion. Aganga rates the level of debt within the internationally accepted benchmark for measuring debt sustainability. According to him, Nigeria is 40 per cent above the internationally accepted benchmark, and is not as indebted as other countries in her class.

He also warned that there must be justification for borrowing.
“We must get value for every kobo we spend on behalf of the Nigerian people,” he told a workshop in Abuja .

Within government itself, there is admission that some sectors that should enhance government’s revenue are poorly managed. The Central Bank of Nigeria complains about leakages in the Customs Service and huge amounts used in subsidising importation of petroleum products.

The CBN says these without a thought for its notorious conduct in committing trillions of public funds to prop up the banks it seized last year. Owners of the banks are ready to provide extra funds to meet the obligations of the banks, but the CBN would not consider that option.

Could the money the CBN is wasting on these have been available to meet government’s commitments? Why are foreign loans so attractive to government?

Former Finance Minister Dr. Ngozi Okonjo-Iweala, who was in the saddle when Nigeria exited the debt trap, has been raising alarms about the current borrowing frenzy. She is more concerned with the piling up of domestic debts which she said would leave little resources for the private sector.

Her other concern is that government is borrowing to finance recurrent expenditure and not for development projects. Government is ignoring Okonjo-Iweala, Managing Director of the World Bank.

Also States (even local governments) are frequenting the bond market for funds that are not dedicated to any meaningful projects. These bonds have become means of governments financing their bloated budgets which have uncontrolled expenditures as hallmarks.

The National Assembly should translate its worries about Nigeria ’s indebtedness to more concrete actions that would make the Executive account for past loans.

Some projects are urgent and crucial to government’s development efforts. Where loans are necessary for their execution, the legislature should give its approval and follow up with monitoring of execution.

The Executive is not at a stage where it is ready to explain why it is borrowing or permit a proper scrutiny of the projects for which it wants the funds. Nobody should allow it this extremely dangerous leeway.

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