Debt trap: Nigeria at risk, caution must be applied to borrowings
Nigeria’s debt profile has continuously put fears of risk of sliding into debt trap. Again, President Bola Tinubu has written to the Senate seeking the approval of a fresh sum of $8.7billion and £100 million approved under former President Muhammadu Buhari.
According to the President, the past administration approved a 2022-2024 borrowing plan by the Federal Executive Council held on May 15, 2023. The letter which was read by the Senate President, GodsWill Akpabio, at the plenary recently stated that the money would be used to fund projects across all sectors, with specific emphasis on infrastructure, agriculture, health, water supply, roads, security, and employment generation as well as financial management reforms.
The letter read: “I write in respect of the above subject and to submit the attached Federal Government 2022-2024 external borrowing plan for consideration and early approval of the National Assembly to ensure prompt implementation of the projects. The Senate may wish to note that the past administration approved a 2022-2024 borrowing plan by the Federal Executive Council held on May 15, 2023.
“The project cuts across all sectors, with specific emphasis on infrastructure, agriculture, health, water supply, roads, security, and employment generation as well as financial management reforms.
”Consequently, the required approval is in the sum of $8,699,168,559 and £100 million. I would like to underscore the fact that the projects and programmes in the borrowing plan were selected based on economic evaluations as well as the expected contribution to the social economic development of the country, including employment generation, and skills acquisition.
“Given the nature of these facilities, and the need to return the country to normalcy it has become necessary for the senate to consider and approve the 2022-2024 external abridged borrowing plan to enable the government deliver its responsibility to Nigerians.”
Earlier, Tinubu had asked the National Assembly to approve $7.8billion, £100 million in the borrowing plan of the Federal Government.
While it has been justified that borrowing is rational when channelled profitably into capital projects of far reaching impacts, the question of whether the loans acquired over time by the government at different levels are channelled judiciously into profitable capital projects has been a subject of concern.
Recently, as record of Nigeria’s pubic debt continue to generate concerns, hitting N46.25trillion in 2022 fourth quarter, frontline civil right group, the Socio-Economic Rights and Accountability Project (SERAP), had urged the World Bank to promptly, transparently and effectively conduct an investigation into the spending of over $8.5 billion loans and other facilities by 36 state governors in Nigeria.
SERAP had also urged the Bank to “suspend further applications for loans and any other funding to the 36 states until those states are able to satisfactorily explain details of spending of loans and other facilities obtained from the Bank and its partners.”
In the letter dated November 25, 2023, by SERAP Deputy Director, Kolawole Oluwadare, SERAP wrote the President of World Bank, Mr Ajay Banga, saying: “The World Bank and its partners cannot continue to give loans and other funding to these states where there are credible allegations of mismanagement or diversion of public funds. We are concerned that there is a significant risk of mismanagement or diversion of funds linked to the Bank’s investments in many of the country’s 36 states. It is neither appropriate nor responsible lending to give loans to these states only for the loans to be misspent.”
The letter had read in part: “The World Bank’s lending, and support for these states may create the impression of complicity in the allegations of mismanagement or diversion of public funds by the states which may include loans from the Bank and its partners, and federal allocations.
“We would consider the option of pursuing legal action should the World Bank fail or fail to implement the recommendations contained in this letter, and we may join the country’s 36 states in any such suit.
“According to Nigeria’s Debt Management Office, total public debt portfolio for the country’s 36 states and the Federal Capital Territory is N9.17 trillion. The Federal Government’s total public debt portfolio is N78.2 trillion.
“We also urge you to demand expressed commitment from Nigeria’s 36 governors to address credible allegations of mismanagement or diversion of public funds in their states and provide guarantees that loans and funding from the Bank and its partners would not be used to fund the luxurious lifestyles of politicians.
“We urge the Bank to send independent monitors to the 36 states to monitor the spending of the loans and other funding obtained from the Bank and its partners to remove the risks of mismanagement or diversion of public funds by these states.
“The World Bank currently has a portfolio of about $8.5 billion spread across the country. The Bank has also approved several loans and other funding facilities to the country’s 36 states including the recent $750 million credit line meant to the states carry out reforms to attract investment and create jobs.
“The accounts of Nigeria’s 36 states are generally not open to public scrutiny as many of them continue to refuse freedom of information requests seeking transparency and accountability in the spending of public funds.
“The World Bank and its partners need to make clear to Nigeria’s state governors that it would not tolerate any mismanagement or diversion of public funds by immediately suspending any pending loans and other funding to them until the allegations of mismanagement or diversion of public funds are investigated.
“The Bank has a legal responsibility to ensure that suspected perpetrators are brought to justice, and that any mismanaged or diverted public funds are returned to the treasuries of the states. The World Bank has the legal obligations to observe and promote compliance with the Nigerian Constitution 1999 [as amended] and domestic laws including the Fiscal Responsibility Act of 2007.
“Nigeria’s total public debt stock, including external and domestic debts, increased to N46.25 trillion or $103.11 billion in the fourth quarter of 2022.
“Many states reportedly owing civil servants’ salaries and pensions. Several states are borrowing to pay salaries. Millions of Nigerians resident in these states continue to be denied access to basic public goods and services such as quality education and healthcare.
“Several state governors are also reportedly spending public funds which may include funding obtained from the Bank and its partners and allocations from the Federal Government to fund unnecessary travels, buy exotic and bulletproof cars and generally fund the lavish lifestyles of politicians.
“The country’s 36 states have reportedly spent N1.71 trillion on recurrent expenditures, including allowances, foreign trips, office stationery, and aircraft maintenance in the first nine months of 2023.
“In Abia State, the government reportedly spent N397,520,734.84 on ‘feeding and welfare’ and N223,389,889.84 on ‘refreshments and meals.’ The Akwa Ibom State government has reportedly spent N92.54 billion on allowances and social contributions, social benefits, travel and transport, utilities such as electricity chargers, Internet access charges, and on materials and supplies such as office stationery, drugs, laboratory and medical supplies, maintenance, training in the first two quarters alone.
“The government has also reportedly spent N10m on hosting/mobilisation of political associations and interest groups, and N841.83 million on entertainment at meetings. The Adamawa State government has reportedly spent N40.90 billion on non-salary expenditure as of the end of quarter three, 2023 including on furniture allowance, travel and training, domestic and foreign, office stationery and consumables, and refreshments and meals. The Anambra State government also reportedly spent N15.17 billion frivolous items, as of the end of quarter two, 2023. While Bauchi State government reportedly spent N70.25 billion on frivolous items, Bayelsa State government spent N58.26 billion on travel, welfare packages, burial logistics, meeting expenses, ‘praise night/thanksgiving expenses’, and ‘marriage ceremony support.’
“In Lagos State, N440,750,000 was reportedly awarded to the Office of the Chief of Staff for the procurement of a brand new bullet-proof Lexus LX 600 for use in the pool of the Office of Chief of Staff. Some N2 billion was also reportedly budgeted to buy rechargeable fans, rechargeable lights and fridge in the Office of the Deputy Governor.
“The Benue State government reportedly spent N34.44 billion on ‘special day celebrations’ ‘welfare packages,’ ‘security votes,’ and materials and supplies such as office stationery, and books. According to reports, Borno, Cross Rivers, Delta, Ebonyi states also respectively spent N32.63 billion, N43.71 billion, N152.15 billion, N30.91bn, and N41.11 billion on frivolous items and the public funds may have been mismanaged or diverted.
“Ekiti State reportedly spent N31.33 billion on local and international travel and transport, miscellaneous such welfare packages, refreshments, honorarium and sitting allowances. According to reports, both Enugu and Gombe states respectively spent N33.36 billion and N24.73 billion on frivolous items and the public funds may have been mismanaged or diverted. Imo State government reportedly spent N58.21 billion on refreshments and meals, welfare packages, and other allowances. Jigawa State reportedly spent N49.64 billion on transport and travelling, materials and supplies including drugs, vaccines, medical supplies, and stationeries.
“According to reports, Kaduna, Kano, Katsina, Kebbi, Kwara and Kogi states also respectively spent N27.87 billion, N17.79 billion, N40.49 billion, N24.51 billion, N41.19 billion, and N58.02bn on frivolous items and the public funds may have been mismanaged or diverted.
“Section 41 of the Fiscal Responsibility Act provides: ‘Government at all tiers shall only borrow for capital expenditure and human development.
“The World Bank and its partners have obligations under international anticorruption and human rights law, including a responsibility to promote transparency and accountability in the management of public funds, prevent mismanagement or diversion of public funds, and redress any abuse of public trust that they may have contributed to.
“As a UN specialised agency, the World Bank also has an obligation to promote transparency and accountability in the management of public resources and effective implementation of the UN Convention against corruption to which Nigeria is a state party.
“The World Bank’s board of executive directors also has an obligation to ensure that the policies and decisions of the Bank are consistent with their own statutes and governments’ transparency and accountability obligations.” The matters raised over the fears on the risk the country is exposed to, with the cyclical resort to borrowing have become critical in the face of economic and finance misfortune which the justification of the past borrowings have not so far proven. It is important that the executive exercise caution to the cyclical culture of borrowing. Such restraints are essential as the Country appears closer to debt trap and wastages than it is to sustainability. It is important that the legislature begin to play its role effectively from the National Assembly to the State Assemblies. This is pertinent to carry out their oversight function, rather than becoming a rubber stamp to every request of the executive, at the detriment of the masses.
