One of the promises made by President Bola Tinubu on assumption of office was that his administration would cut down on the over-reliance on borrowing for public expenditure.
In fact, Tinubu said he was going to curtail government’s borrowing so as to reduce debt service burden on the country.
Besides, Tinubu told Nigerians that his “fuel subsidy is gone” pronouncement on May 29 would lead to significant savings and resource re-allocation for the country.
“We shall instead re-channel the funds into better investment in public infrastructure, education, healthcare and jobs that will materially improve the lives of millions,” he had said.
But many Nigerians were taken aback when last week the president sought the approval of the National Assembly for his government to access fresh external loans of $7.8 billion and €100 million as contained in the 2022 – 2024 borrowing plan of the federal government, despite having full knowledge of the country’s debt challenge.
The request for the fresh loans was contained in a letter the president sent to both chambers of the National Assembly, which was read at plenary by Senate President, Godswill Akpabio.
Tinubu explained that the Federal Executive Council (FEC) under former President Muhammad Buhari had approved the loan facility on May 15, 2023, to finance infrastructure, health, education, agriculture, security and other sectors. He said African Development Bank (AfDB) and World Bank Group (WBG) had indicated interest to assist the country in mitigating the economic shocks and effects of recent reforms with a sum of $1 billion and $2 billion, respectively.
Tinubu said the foreign loans became necessary in order to bridge the financial gap and return the economic activities of the country to normalcy. He noted that if the loan request was granted, the funds would be used to develop infrastructure, agriculture, health, education, water supply, security and employment, as well as financial management reforms.
He said, “The project cuts across all sectors with specific emphasis on infrastructure, agriculture, health, education, water supply, security and employment as well as financial management reforms, among others.”
However, the move has elicited reactions from Nigerians, considering that the country appears to be approaching a debt trap.
More so, since the president had informed Nigerians that about N1 trillion was saved from petrol subsidy removal, less than two months after the policy was scrapped, the expectation was that the savings would have increased significantly, with the funds deployed to address the issues he was seeking to borrow for.
With the country’s total public debt at N87.38 trillion at the end of the second quarter of 2023, the fresh loans the Tinubu administration seeks to raise would definitely elevate the number further.
The items listed on the N2.17 trillion supplementary budget, which was passed by the National Assembly last week, are also not encouraging, as they seem to show that the present administration has decided to continue on same path as the Buhari government, by getting into debts and ambitious recurrent expenditure. Indeed, considering the state of the country’s finances, many believe no government that means well for its citizens would be talking about spending N7.20 billion for electrical/mechanical installations, buildings and infrastructure at the president’s and vice president’s residences, offices, State House Auditorium, Presidential and Ministerial Airport Chalets.
And no serious government would plan to spend N1.96 billion on vehicle purchase for the Presidency and the First Lady’s office, and N59 million for maintenance of State House Lagos Complex and Guest Houses, among others, at a time when the administration is asking Nigerians to tighten their belts.
In place of vehicle importation that further depletes the country’s scarce forex, the federal government can take a leaf out of the Lagos State government’s book.
Lagos State Governor Babajide Sanwo-Olu, recently, inaugurated a new vehicle assembly plant through a joint venture between the state government and CIG Motors – a Chinese automobile company. The facility will be jointly-run by the state government and its partner for the production of different classes of brand-new cars and already, 2,000 units of brand new GAC vehicles had been successfully assembled in the state, ahead of the formal opening of the facility.
Why didn’t Tinubu just for once show leadership by personal example and embrace made in Nigerian SUVs or cars?
Sure, this would have put our lawmakers in a difficult situation, and rather than opt for imported SUVs, they would have had no choice but to embrace locally assembled cars or SUVs. As a matter of government policy, it should be made mandatory for all public office holders patronise made in Nigeria products as an initial first stop to turning the economy away from import-dependent to home-grown.
This is an initiative that ought to be embraced by all levels of government in the country in order to reset Nigeria, create jobs and strengthen the naira.
Imagine how much foreign exchange would have been saved from this singular move. But we missed the opportunity yet again.
It is important to note that by securitising the country’s NLNG dividends, as reported a few days ago, the government is also mortgaging the future income streams of Nigerians.
Currently, the country is feeling the challenge of high debt service cost, with only a small fraction of its financial receipts always available for the much-needed investment in infrastructure.
The implication of the fresh borrowing is the potential of an imminent debt trap in which the country would neither be able to meet its debt service obligations nor meet its obligation to its over 200 million citizens through funding of capital and recurrent expenditure.
This comes with numerous other socio-economic consequences impacting on some of the key Sustainable Development Goals (SDGs) of poverty, hunger, health, education, as well as issues of social unrest, crime.
Clearly, if debt service cost continues to claim an increasingly large proportion of government revenue, fewer resources would be available to the government to meet its other obligations and fund infrastructure, a situation which could see the government deploying more of its borrowed funds to meet recurrent expenditure.
That is why, just like President of the Trade Union Congress (TUC), Festus Osifo, recently demanded, the Tinubu administration should come clean on the amount it has saved through the removal of petrol subsidy.
Since the president made the announcement that N1 trillion was saved from petrol subsidy removal in July, nothing else has been said about the amount that had accrued so far, thereby fuelling speculation that petrol subsidy payment has returned.
Osifo, while speaking during a programme on Arise News Channel, demanded to know where the money saved since the removal of petrol subsidy had gone into. He explained that since the government announced that N1 trillion had been saved, there was no reason to continue to borrow.
Osifo said, “The President and Commander-in-Chief on his own came and said the country had saved N1 trillion. The federal government went everywhere to announce that if subsidy is removed, it’s going to save substantial money.”
He added, “We don’t expect them to go everywhere and start borrowing money. They told us they are going to save money. So where is the money that you have saved and how have they deployed this money?”
The Tinubu government must tell Nigerians about the savings from petrol subsidy removal. In addition, it has to work towards improving domestic revenue mobilisation, block leakages, improve tax efficiency, and unlock opportunities, especially, at the sub-national level. It also has to tackle crude oil theft.
There is also an urgent need for leadership at the federal and state levels to embark on fundamental and structural changes that would make them look more inward and save the country from a debt crisis.
Each of the 36 states has massive natural resources that remain relatively docile. Government at all levels must fast-track initiatives that would unlock the private sector-driven potential so as to stimulate the country’s Gross Domestic Product (GDP).