THE Federal Government has no apologies for borrowing at home and abroad to finance the 2012 budget which it calls “the Budget of Fiscal Consolidation”. Only those who coined the phrase can explain it. The level of borrowing to fund the budget and the fact that 72 per cent of the budget would be spent on recurrent expenditure qualifies it for the tag of “Budget of Consumption”.
Nigeria is attaining a new level of borrowing to fund the budget. Sadly, most of the money would be spent on the bloated civil service, political appointees, and the bludgeoning budgets of the National Assembly and other government agencies that have become pipes for draining the nation’s resources.
Other areas of interest for the budget are maintenance of existing bureaucracies, creation of new ones and fanciful schemes that bear little relevance to the sustenance of the economy. Electricity remains elusive. Roads and rails are designed and built on those glossy publications that are reserved for road shows. The reality shows in an economy that grows on receipts from crude oil, but unemployment and inflation remain high.
Nigeria would borrow $1.712 billion (about N265.36 billion) from India, China and France. Another N1.394 trillion to be borrowed from the domestic market, will make up the N1.659 trillion loan required in the budget of N4.74 trillion which has been condemned for having provisions of only N1.327 trillion for critical infrastructure the economy needs. How many roads can that amount maintain in a year? Where would government get money for electricity?
The domestic components of the loans include N600 billion to be used in re-financing loans that are due. Borrowing would constitute about 35 per cent of the financing for the budget. It is higher if some foreign loans that would be drawn in 2012 are added.
New borrowings should worry those who care about the total national debt of $40 billion, according to the Debt Management Office, DMO. Experts say that the current borrowing levels which are below 20 per cent of GDP are in order. Their position is based on the internationally accepted borrowing level of 40 per cent of GDP. Is that all?
Where Nigeria is the borrower, the considerations should widen. It would be wrong to judge Nigeria by standards that do not follow through in the operations of its economy. A key question is how the borrowed money is used. Why does government borrow to pay salaries and cannot finance infrastructure with the same zest? Nigerians are concerned about the expanding appetite of government for more loans mainly for its daily operations.
The danger in foreign borrowing, whether through governments, international agencies or commercial banks, is that the lenders would want them attached to projects that they want to support, not necessarily projects that Nigerians need. Those are projects they would rate viable, but they would get back their money with interest, no matter what happens in the end.
Government borrowing, as heavily as it is doing in the domestic market, soaks up funds private sector concerns would have borrowed to improve their businesses. These borrowings constitute another way government hurts the pace of the economy similar to the waste government creates from its systems that maintain unverifiable pay rolls.
In the midst of government’s unquenchable hunger for more loans, Nigerians are being asked to curtail their expectations. Government does not have the resources to provide infrastructure. It is simply managing to harness resources from all possible sources to remain in office.
Government lives above its means and makes no effort to check the profligacy. It uses borrowed money for non-productive ventures, investing in a gloomy future that even increasing price of petrol cannot reverse.