By Godwin Ewulu
Nigerians need to rethink their reaction to debt and borrowing plans. In the past two years, there has been much talk on the country’s debt profile which has risen to N19.6 trillion locally and over $64 billion total debt (according to the DMO website). Many Nigerians complain that the government is borrowing too much. We are worried that the future of our children is at stake here. We do not wish to see the other side of the borrowing plan which puts the country in a better position for decades to come.
A critical look at the current debt structure and the attributes of the new borrowing plan will paint a vivid picture on why the Muhammadu Buhari-led government must be encouraged to see its borrowing plan through.
It was Warren Buffet, the Oracle of Omaha, perceived as the world’s best investor, who said “beware the investment activity that produces applause; the great moves are usually greeted by yawns.”
The new borrowing plan may not be applauded by a larger population of Nigerians, and may be greeted by gross criticisms, but the driving idea may be worth it in the long run.
Why exactly are we borrowing so much?
We must borrow “to make Nigeria better for our children”. The more granular answer will be “to fund infrastructure, to grow gross domestic product, and to redirect our debt patterns towards sustainability”. A totally grass roots answer is that we must borrow to put more Jollof rice on the table more often and at a cheaper cost.
A quick analysis of yesteryears show that between June 2013 to June 2015, the country’s debt profile rose by N4.2 trillion from N7.9 trillion to N12.1 trillion. This was at a time when oil prices were relatively high, and the economy was nowhere near a recession. As was asserted, the country was simply borrowing to pay salaries. Today, over 50 percent of government’s non-oil revenue is used in servicing those debts. Over 40 percent of our total income is used to maintain debts.
So the government of the day is once again in the throes of borrowing, and as usual, Nigerians are up in arms against what is of immense benefit to them. This borrowing is to refinance previous debts, in a bid to reduce the cost of borrowing and debt servicing. If we had to pay 16 percent interest on local debts annually, when we can pay 6-7 percent on the same debts, what should we rather choose?
According to the Debt Management Office (DMO), there is a 10 percentage-point spread between domestic and foreign borrowing cost. This is based on the fact that the restructuring debt plan will help save the government hundreds of millions dollars in financing costs.
One of the major attributes of this borrowing plan is to refinance some local debts to reduce the amount being used to service the debts. This is a sustainable pattern. In addition to this, the whole refinancing narrative also allows more room for the private sector to get access to funds in the local market, and contribute their quota to economic growth and national development.
On the other hand, the government is also taking loans to fund enormous infrastructural development, which would positively affect the country’s Present while guaranteeing a better future for generations to come. This should impress us all as human beings. We need the assurance that generations not yet seen are being provided for.
The latest N100 billion Sukuk will be funnelled into the construction and repair of 25 roads across six geopolitical zones in the nation. This will generate immediate jobs, make business networking across states easier, and drive social benefits. Previous capital expenditure in the ministry of Power, Works and Housing in 2016, is estimated to have created 193,469 jobs. The present government is spending more on capital expenditure than any previous government in the history of this nation has ever done.
Heavy investments from borrowing plans have also gone into the Federal government/ Central Bank of Nigeria Anchor Borrowers Programme, which has employed over 300,000 farmers in rice farming, yam farming and other sorts of local farming. All of these culminates in an increase in national GDP, especially at such challenging times in the history of our nation, where increase in GDP will translate into better life for the masses.
The international response to Nigeria’s borrowing plans also shows that the country is on the right path to economic stability and sustainability. Every time the country has tapped the Eurobond since the new borrowing plan was put to work, the bonds have been oversubscribed. This shows the growing confidence the international community has in Nigeria’s overall economic plan.
In the end, someone has to do the hard and dirty job of fixing Nigeria’s structural problems with Nigeria’s fiscal system, and if a short term increase in debt will solve a long term problem, then, so be it. Like popularly said, “someone’s sitting in the shade today because someone planted a tree a long time ago.” It is time to plant the trees of our economic renaissance via this sustainable Borrowing Plan.
– Ewulu wrote from Abuja. Godwinewulu@gmail.com