The journey of a thousand miles begins with one step, they say. Now that the Federal Government has announced plans to borrow almost $8billion, (about N1.3trillion), the question on the lips of many Nigerians is: "Is this the beginning, of the nation sliding back to the old dreadful days of unsustainable indebtedness to the club of wealthy nations?"
It will be recalled that, because of the huge indebtedness, reasonable chunk of the budget was yearly set aside for debt servicing. Perhaps, the real ugly part of it was the fact that the creditors dictate economic policy for the country.
The fear of some Nigerians is that what led to the accumulation of the old debt which nearly crippled the economy is still very much the order of the day. According to them, the monster -corruption has even grown larger than it was, and so the Federal Government should steer clear of any of such loans.
Their fears are heightened with the revelations emanating from the fuel subsidy probe at the House of Representatives. The daily exposure has so raised their antennas, that even the labour unions are advising the Federal Government against such a move.
Part of the reasons why they are against the foreign loan is that, the loans the Federal Government took in the past, supposedly meant for laudable projects were not used for the purpose. Instead, they were diverted.
Some may argue that, after all, the country’s external debt remains marginal, at $5.7 billion or 2.6 per cent to Gross Domestic Product (GDP) in late 2011, which analysts say, is also one of the lowest ratios of external indebtedness in Africa.
For these persons, it means the new loans would not endanger external debt sustainability assuming they are approved, especially because of the concessional form of the financing.
But the worry is that the $7.9 billion amount which the government is seeking is far more than it currently owes, about 138.6 per cent higher than what has so far been borrowed externally before this new proposed loan.
“ ... so the planned borrowing will probably be controversial in some circles. There has been some reluctance to borrow externally at the sovereign level after the deals reached with the Paris Club in 2005 and London Club in 2006, and such a qualitative shift, even from a low base, will only be justified if there are tangible projects in the pipeline whose implementation can be properly monitored and tracked”, said Samir Gadio, Emerging Markets Strategist, Standard Bank Plc., London.
Samir believes that Nigeria should not even be talking of issuing FGN bonds to fund its domestic needs. This he said, is because if the country were serious about fiscal savings, it would not need to borrow.
“Please let’s also keep in mind that Nigeria should be running a massive fiscal surplus if oil proceeds were effectively accumulated”, he said.
Political economist, Professor Pat Utomi also said that it was not advisable for Nigeria to take any loan at this point in the nation’s history.
Utomi said last week that “With the corruption level in Nigeria, such a loan may not be properly utilised, despite the good intentions of the President.
“In principle, such a loan is not bad, ability to repay and proper utilisation must be considered in obtaining such a loan.
“It is either that commercially, such a loan creates a major source of wealth to enable the government pay back or it improves infrastructure that will in turn enable opportunities that can bring in tax that will guarantee payment.
“With what is on ground in the petroleum sector, action must be stayed on such a loan until all issues of corruption in the sector and generally in other sectors, are effectively brought under control’’, Utomi said.
Acting General Secretary of NLC, Mr. Owei Lakemfa, said that there was no need for the foreign loans.
Lakemfa said that the Senate Committee on Appropriation had discovered that the 2012 budget was inflated by over N1 trillion-- which showed a high level of corruption.
He said that except corruption was curbed, it would be difficult for the country to move forward.
Also speaking, the General Secretary of TUC, Chief John Kolawole, said that the country did not need to borrow money before it could create jobs or executive major projects.
“We must think and scrutinise well before taking such a loan. Do we need to take a loan to execute the project the President talked about? We must be careful about how we borrow’’, Kolawole advised.
According to NAN, The Nigeria Labour Congress (NLC) and the Trade Union Congress of Nigeria (TUC) on Thursday advised the Federal Government not to take any foreign loan to avoid crisis in the country.