The Senate is already debating President Muhammadu Buhari’s $29.96 billion request to finance sundry projects. The upper legislative chamber Tuesday referred the President’s 2016 – 2018 External Borrowing Plan under which the request falls to the Committee on Local and Foreign Debts.
Buhari, in a letter dated November 26, 2019, said the Eighth National Assembly approved only a part of the foreign bank loan he had asked for in September 2016. He said his failure to get the whole loan stalled his government’s implementation of “critical projects” in the mining, power, health, agriculture, water and education sectors. His letter read, in part, “Pursuant to Section 21 and 27 of the Debt Management Office (Establishment) Act, I hereby request for Resolutions of the Senate to approve the Federal Government’s 2016 – 2018 External Borrowing plan, as well as relevant projects under this plan.
“Specifically, the Senate is invited to note that: While I had transmitted the 2016-2018 External Borrowing Plan to the Eighth National Assembly in September, 2016, this plan was not approved in its entirety by the Legislature, only the Federal Government’s Emergency projects for the North East (Four (4) States’ projects and one (1) China Exim Bank Assisted Railway Modernisation Projects for Lagos – Ibadan Segment) were approved, out of a total of thirty-nine (39) projects. The outstanding projects in the plan that were not approved by the Legislature are, nevertheless, critical to the delivery of the Government’s policies and programmes relating to power, mining, roads, agriculture, health, water and education sectors.
“These outstanding projects are well advanced in terms of their preparation, consistent with the 2016 Debt Sustainability Analysis undertaken by the Debt Management Office and were approved by the Federal Executive Council in August 2016 under the 2016 – 2018 External Borrowing Plan. Accordingly, I have attached for your kind consideration relevant information from the Honourable Minister of Finance, Budget and National Planning, the specific outstanding projects under the 2016 – 2018 External Borrowing plan for which legislative approval is currently sought. I have also directed the Minister to make herself available to provide any additional information or clarification which you may require to facilitate prompt approval of the outstanding projects under this plan”.
The President’s request has come at the same time as the International Monetary Fund (IMF) is warning of the “rising vulnerabilities” of many countries, including Nigeria and China, to debt overhang, “suggesting that many countries may be ill-prepared for the next downturn.” This is a disturbing warning from the IMF.
Nigeria’s total public debt which stood at N21.73tn as of December 31, 2017, rose to N24.39tn at the end of 2018, according to data from the Debt Management Office. It increased to N25.7tn as of June 30, 2019. It said last week that the country’s debt service/revenue ratios for 2017 and 2018 were 57 per cent and 51 per cent respectively, adding that the debt service figures had grown as a result of the increase in the debt stock and relatively high domestic interest rates. However, on Nigeria’s debt sustainability, compared to a number of countries, “Nigeria’s debt/GDP is relatively low but the debt service/revenue ratio is relatively high.”
The DMO prognosis is a little more assuring than the IMF’s. And given Buhari’s personal integrity which, we hope, will rub off on all officials of his government, regarding management of public finances, there should be no fear that the loan, if obtained, would be used for the purposes outlined in the 2016 borrowing plan. This said, the government must not fail to note the DMO’s veiled warning in “but the debt service/ revenue ratio is relatively high.”
