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$30BN Loan: Interrogating the issues

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Buhari , Loan
President Buhari

The first phone call woke me up shortly  after the report that President Muhammadu Buhari had re-presented the request made in 2018 for the almost %30 billion loan the federal administration plans to take.

Expectedly, the caller wanted to know what my views are about the request.I told him I had none, ended the conversation and immediately switched off.

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Experience had taught me a long time ago that more calls would follow very soon.

I turned on the phone three hours after to wait for a call I was expecting and then more calls tumbled in – all about the indescribably mistake which the request represents.

But I was determined not to get involved in this matter once again until a close and long term friend came to ‘the club’ specifically to ask me for my views about the $30billion loan request.

I was trapped.
Good old friends are better than gold.
I owe mine everything affordable.
Then the SUNDAY EDITOR called for the same reason.
There was no more room for escape or time to waste.
“Fighting for lost causes is a sure way to destruction” – VBQ p 62.
Many readers are aware that I am not often reluctant to join controversial issues.
I explained to my friend my cardinal reason for wanting to stay out of this particular dispute.
Whatever anybody says except to endorse the loan request would amount to an exercise in futility.

The President, like a former military officer that he still is, was strategic in his approach to this matter. He had got installed as Senate President a man who will get things approved without difficulty.

Senator Ahmad Lawan’s first, second and last assignment is to get passed any bill Buhari wants.
That the request will be granted is a foregone conclusion.

That reduces any discussion on the merits or otherwise of the loan request to idle intellectual exercise, at best, or time-wasting beer parlour noise, at worst.

To be quite candid, I have no interest in any of those. It has been my belief that talking to and advising this government in particular on economic issues is akin to talking to a wall.
But the phone kept ringing.
Callers wanted to know what I think of the whole matter.
Permit me to start from the geo-political implications of the loan request which, as pronounced above, is already granted.

MONKEY WORK BABOON CHOP
As everybody knows, over 80 per cent of the nation’s revenue is collected from the southern states – South-East, South-South and South-West. The major sources of revenue – crude oil, corporate and taxes, Value Added Tax as well as duties and tariffs – are all situated in the South.
Obviously, the almost $30 billion request, even without details attached, is predicated on the current anomaly in which the South pays most of the bills while the benefits are spread more evenly across the country – with Abuja, a northern city, receiving more than some of the oil-producing states of the South.

The South will constitute the cow to be milked to pay for it irrespective of what is eventually done with the loan.
That is the situation at the moment and it will only get worse after the entire nation has been sent off on the road to the worst debt trap ever in the history of Nigeria.

Unfortunately for the South, most of its leaders in the ruling All Progressives Congress, APC, cannot oppose the President, only some of the senators elected on the platform of the Peoples Democratic Party, PDP, can be counted upon to put up a fight whenever the need arises.

But the majority will meekly surrender the people to the economic enslavement which will surely follow. They were probably not even consulted when the loan package was put together.

Remember that the deal which resulted in the $9.02 billion judgment in favour of P&ID was also sealed behind the back of most of the members of the PDP during the Yar’Adua administration.

Those who might think I am crying wolf where there is none should answer one question about the loan request.

Why were the details of the loan not made available to the 8th National Assembly when Senator Bukola Saraki and co asked for them?
Obviously there were no details to be provided.

It will appear that some individuals just want to have a bag full of $30 billion to play with while the rest of us – up to the fourth generation – sweat to repay the loan later.

HEART OF THE MATTER

“There are times when a leader must move out ahead of the flock; go off in a new direction, confident he is leading his people the right way” – Nelson Mandela, 1918-2013.

Granted, there are occasions when a leader realises that the old methods of managing the nation are no longer working; when a shock treatment is required. But such a sudden shift must first be announced to the people – especially if it is going to involve major expenditure and the transformation will require years of collective efforts and sacrifices.

In that case, one would have expected the loan request to be updated and reviewed.

The world has changed since it was first proposed in late 2017.

The Age of Oil is rapidly coming to an end.

The Economic Recovery and Growth Programme, ERGP, which the loan was supposed to support, has now become moribund.
Nothing, to the best of my knowledge, has replaced it.

The largest loan request in Nigeria’s history can only be justified by a comprehensive economic development initiative presented to the National Assembly, after a landmark address to the nation by the President.

While it is not unusual for leaders to embark on new programmes, the attempt to smuggle it into the nation’s economic agenda using the ill-defined ERGP as vehicle was appropriately turned back by the Senate led by Saraki because that is not the way major departures on economic policy are handled by leaders who have developed the appropriate guidelines for their nation’s economic transformation.

The request lacked all the inputs required for a new and radical departure from hopelessness and despair.

Granting Buhari’s wish would amount to throwing more good money down the drain.

And the reasons for that assertion are not too difficult to understand.

But one important variable will illustrate why the $30 billion request is questionable.

FOUR YEARS OF WORST CUMULATIVE GDP GROWTH

“Under a ‘business-as-usual’ scenario, where Nigeria maintains the current pace of growth and employment levels, by 2030, the number of Nigerians living in extreme poverty could increase by more than 30 million. 5m people entered labour market, 450,000 jobs created in 2018 – World Bank,

VANGUARD, December 3, 2019, p 41.
For four straight years, the Nigerian economy had grown by less than 2 per cent per annum – while the population kept increasing at three per cent.
Per capita income declined and more people went below the poverty line. Gross Domestic Product, GDP, growth for the current year might just reach 2 per cent.

The 2020 budget envisages 2.9 per cent growth. However, given the track record of the last four years, that is likely to be highly optimistic.
The targets for 2016 to 2019 were never achieved. There is nothing to suggest that the 2020 budget will not follow the pattern established.

Buhari administration’s management of the economy can rightly be characterised as ‘business-as-usual’.

It is mechanical and lacks the creativity needed to launch a major breakthrough which will result in 5 per cent growth for instance.
The fact that the FG settled for 2.9 per cent growth in 2020 provides sufficient proof of lack of innovation.

The allocation of funds between capital and recurrent expenditure takes the nation back to the last century when it was fashionable to spend less than 40 per cent on capital expenditure.

The Nigerian budget and Medium Term Expenditure Framework, MTEF, are still heavily loaded in favour of recurrent expenditure.

Nations growing at seven per cent or more – China, India and Ethiopia – spend close to 70 per cent of their annual budgets on capital projects which create new jobs.

Buharinomics had disregarded the age-long wisdom that a nation does not grow by going around the world with a begging bowl in hand and by spending what it receives mostly on current consumption. Nigeria had been borrowing in the last five years mainly to fund salaries.

The $30 billion loan will most likely be spent the same way.

Consequently, there will be no rapid growth to prevent the catastrophe which the World Bank, the International Monetary Fund, IMF, and others are predicting concerning rising unemployment – which everybody, except the Buhari government and the ruling party, recognises as a time-bomb.
Incidentally, some bombs are already exploding nationwide.

Nigerian youths, tired of searching for elusive jobs, are taking to internet fraud in large numbers as a means of survival.
Our brightest and best graduates have embarked on crime on a massive scale.
The World Bank report has provided us with some explanations.
It has not told us the entire truth.

Irrespective of how many hundreds of thousands we arrest and jail, millions more are already engaged in the business and many of this year’s graduates face the same dismal future – given the way the Buhari administration will spend the $30 billion.

Most likely, it will not be spent to create employment opportunities; to increase power supply to 10,000MW per day, to improve education or to achieve a monumental shift from oil-dependence.

It will most likely be spent as the over $20 billion so far borrowed had been spent without lasting capital development to show for it.

Furthermore, the beneficiaries of the $30 billion are already known and are waiting for their shares of the largesse.

The rest of us are potential victims – up to the fourth generation.

This administration’s mind-set cannot conceive of any other way to run government other than “borrow and spend” to settle today’s bills.
For instance, some of us protested when the FG decided to bail out the states by providing loans to pay salaries.

Among other reasons was the fact that the loans granted to many states were going to be handed to governors serving their second term in office.
They would exhaust the funds and leave their successors with bills to pay.

Based on political sentiments and selfishness, the FG proceeded to grant the loans.
Now, the deductions have started and the successors are bearing the burden of funds already wasted or looted nationwide.

ADVICE FROM LEE KUAN YEW
Many Nigerian scholars and readers have written about a former Prime Minister of Singapore and his best-selling book FROM THIRD TO FIRST WORLD IN ONE GENERATION. I doubt if many of them read the entire book.

It is massive.
But let me share some of the ideas in that book which can help the Federal Government spend the $30 billion wisely instead of wasting it with its ‘business-as-usual’ approach to governance.

1. Yew: “The world does not owe us a living. We cannot live by the begging bowl.”…p 53
2. RUGGEDNESS: “We had one simple guiding principle for survival: That Singapore had to be more rugged, better organized, and more efficient than others in the region”. ….p 58

3.  “The government played a key role in attracting foreign investments; we built infrastructure and provided well-planned industrial estates, equity participation in industries, fiscal incentives, and export promotion”. …p 61

4.  TRADERS: “Had we waited for our traders to learn to be industrialists, we would have starved”. …p 66
5.  “We had to put our faith in our young officers who had integrity, intellect, energy, drive, and application but no record of business acumen…The key to success was the quality of the people in charge”. …p 67

6.  PRESSURE: “I should have known that it does not pay to yield to popular pressure beyond our capacity to deliver. Yet I was party to a similar mistake in the early 1990s”. …p 99

7.  WELFARE STATE: “Watching the increasing costs of the welfare state in Britain and Sweden, we decided to avoid this debilitating system. We noted by the 1970s that when governments undertook primary responsibility for the basic duties of the head of the family, the drive in people weakened. Welfare undermined self-reliance. …The handout became a way of life”. …p 104

8.  COST RECOVERY: “Our aim is to have partial or total cost recovery for goods and services provided by the state…we have established a virtuous cycle – low expenditure, high savings, low welfare, high investments”. …p 107

9. “It is easy to start off with high moral standards, strong convictions, and determination to beat down corruption. But it is difficult to live up to those good intentions unless the leaders are strong and determined enough to deal with all transgressors and without exceptions”. …p 163

10.  GOVERNMENTS: “A precondition for an honest government is that candidates must not need large sums to be elected, or it must trigger off the cycle of corruption.  The bane of most countries…has been the high cost of elections…..winners must recover their costs.” …p 164

11.  “There was no need for the party to replenish its coffers after elections…there were no gifts for voters”. …p 165
12. CONFUCIAN VALUES: “Corruption and nepotism are a debasement of Confucian values. A Confucian gentleman’s duty to family and friends presumes that he helps them from his personal and not official resources. Too often, officials use public office to do favours for family and friends, undermining the integrity of government”. …p 348

13.  “Another person I remember from the Ottawa meeting was Prime Minister Sheik Mujibur Rahman, the hero who had opposed Pakistan and led East Pakistan to independence as Bangladesh. He arrived in style at Ottawa in his own aircraft. …I saw a parked Boeing 707 with ‘Bangladesh’ emblazoned on it….standing on the same spot for eight days, getting obsolescent without earning anything….At the conference …Rahman had made a pitch for aid to his country”. …p 363

14. “…we need good people to have good government. However good the system of government, bad leaders will bring harm to their people…I have also seen so many of the over 80 constitutions drafted by Britain and France for their former colonies come to grief, not because of flaws in the constitutions. It was simply that the preconditions for a democratic system of government did not exist”. …p 663

LAST LINE:
Granted Buhari is not Yew. Yew was a lawyer before becoming a politician and Prime Minister. Good education counts for modern leaders.
There is, however, a substitute for personal possession of good education by a leader today. He should hire the best people and not just those known to him and his relatives or those whose fathers brought him up.

Intelligence, integrity and passion for excellence should be the attributes of those appointed to high office.
How many of Buhari’s Ministers rate high on all three attributes?
Yet, these are the people who will spend the $30 billion on our behalf.

Will they opt for investment or dissipation? Take a look at the last four years and you have the answer.
Only one thing is clear. Irrespective of the outcome, the South will pay for it.

Follow me on www.delesobowale.com

Vanguard

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