Interrogating The $3.4 Billion IMF Loan
Rather go to bed supperless, than rise in debt.” — Benjamin Franklin
First I must confess that there is absolutely nothing wrong or untoward with borrowing from responsible creditor(s) with transparent repayment terms provided that the borrowed sum of money would be reinvested into profitable ventures and projects that will yield back the borrowed sum and yield greater profit for the debtor and the citizens.
Also, Nigerians of all affiliations whether they are schooled in economics or not ought to be aware that since the 1980s, Nigeria has had a chequered history with international creditors such as the World Bank, the International Monetary Fund(IMF) and such multilateral creditors such as the London and the Paris Clubs.
There were classical debates that took the frontburners of public discourse during the then military administration of the self styled President, Four Star General Ibrahim Badamasi Babangida(rtd) on the necessity or otherwise of the STRUCTURAL ADJUSTMENT PROGRAMMES which were attached as conditions precedent to collecting the IMF loan package then.
As School boys newly interested in following the current affairs through the pages of some of the reputable newspapers then like Concord Newspapers; Champion Newspapers; Punch; Guardian; Tribune and Vanguard Newspapers, the debate on the desirability or otherwise of the IMF loan occupied the front pages.
Also in our early days at the high school just before Babangida kicked out the then military ruler Major General Muhammadu Buhari and set up his Armed Forces Ruling Council, General Buhari’s administration also brought about the AUSTERITY PROGRAMME during which it was tough getting the basic necessities of life from the super markets due to inflationary trends and unplanned national economic development.
So we as a People and a nation have had to battle with the ugly scenarios associated with borrowings from these multilateral funding institutions.
On August 1st 2005 there was a fascinating report that captured these various ramifications of the economic downturn that was occasioned by Nigerian rulers’ insatiable appetite for foreign loans which ended up basically been siphoned by federal and state government officials.
The Executive Summary of that elucidating and illuminating report stated that: “Intense domestic pressure has convinced Nigerian President Olusegun Obasanjo to seek a deal that would eliminate the country’s $31 billion of debt owed to the governments of the U.K., France, and other aid-giving countries that use the Paris Club process to restructure debt that countries cannot repay.”
“The Paris Club creditors have proposed an unprecedented operation—its first-ever buyback at a discount—that would cancel all of Nigeria’s debt to them in exchange for a cash payment of roughly $12 billion.”
“The deal is not yet closed, however. Nigeria must first obtain IMF approval of its economic reform program under a facility to be created by September; then it must hammer out the remaining details of the Paris Club deal. Passing these hurdles without stumbling will not be easy and will require exceptional patience and understanding on both sides.”
For the sake of objectivity, it will be nice to state that the then President Olusegun Obasanjo era exited Nigeria from the infamous club of the heavily indebted nation’s through the dexterity and expertise of the World’s renowned Financial authority in the person of Professor Mrs. Ngozi Okonjo Iweala who negotiated the friendly terms for the repayment of those PARIS/LONDON club’s loans therefore restoring Nigeria to a pride of place as a nation with a clean tabula rasa or a clean bill of health.
Nigeria maintained a healthy record as a Country that was somehow prosperous and not encumbered by foreign loans up until the emergence of the Muhammadu Buhari-led administration in 2015.
The prolific writer Mr. Reno Omokri who was a Special media Aide of President Dr Goodluck Jonathan made the same point which stands incontestable when he wrote as follows: “Ex President Jonathan left General Buhari $2.07 billion in the Excess Crude Account on May 29, 2015. Today, only $71 million remains. He left almost $3 billion in the Sovereign Wealth Fund. TodayBuhari has drained it. Buhari increases our foreign debt from $7 billion to $27.3 billion. What did he use the money for? And now oil has crashed, General Buhari wants to borrow an additional $3.4 billion? What will Nigeria do? Buhari has plunged us into a debt that will be almost impossible to repay. This man is a locust. A perpetual beggar. An economic almajiri. He consumes what other men have produced without adding value”.
Well, let us even detach ourselves from the political undertones and unpalatable/uncharitable name calling behind the claims made by Reno Omokiri but what is however solid and as constant as the Northern Stars is that these figures he listed are factually accurate and were contained in the handing over notes passed over to the President Muhammadu Buhari-led administration.
The cruel truth is that the Muhammadu Buhari-led administration has done badly in the area of building up of national wealth and prosperity but has concentrated on borrowings from all sorts of places to be used in servicing the huge salaries of the multiple officials and politicians parading about as members of the Federal Government. Buhari’s minister of Funance who lacks the requisite authoritative pedigree like most other reputable ministers of Finance, has signposted her tenure with the notoriety as the ‘borrowing finance minister’.
The hard fact about the current ministry of funance and budget is that the main source of revenue generation which is the Crude oil sector has been badly managed so much so that it has recorded yearly deficits and losses since 2015.
The Nigerian Customs and the Federal Inland Revenue Services generated so much tons of money on the pages of propaganda infested news pages but substantially unaccounted for going by the reality that the government has continued to borrow.
It has only just borrowed from the dreaded International Monetary fund(IMF) and the proceeds may not be transparently accounted for going by the antecedent of the government since 2015.
The government is set to borrow more.
Worst still is that the rubber-stamped National Assembly headed by Ahmed Lawan, a political boy of President Muhammadu Buhari, has already rushed up the approval of the plan by the government to borrow as much as $27 billion from all kinds of creditors.
Nigeria’s Finance Minister, Zainab Ahmed, had indicated that the government is in talks with the World Bank, the International Monetary Fund and the African Development Bank to raise $6.9bn through external borrowing.
She said the amount is in the form of concessional funding to support the implementation of the 2020 budget.
In a breakdown of the $6.9billion, Mrs Ahmed said they would source $3.4billion from the IMF, $2.5bn from the World Bank and $1bn from the AfDB.
The IMF board of governors has unanimously approved this loan application. A media confirmation is on the website of the Multilateral lenders.
The IMF approved US$3.4 billion in emergency financial assistance under the Rapid Financing Instrument to support the authorities’ efforts in addressing the severe economic impact of the COVID-19 shock and the sharp fall in oil prices.
Following the Executive Board’s discussion of Nigeria, Mr. Mitsuhiro Furusawa, Deputy Managing Director and Acting Chair, issued the following: “The authorities’ immediate actions to respond to the crisis are welcome. The short-term focus on fiscal accommodation would allow for higher health spending and help alleviate the impact of the crisis on households and businesses. Steps taken toward a more unified and flexible exchange rate are also important and unification of the exchange rate should be expedited.”
The truth is that the Federal Government of President Muhammadu Buhari has failed to be properly accountable and transparent in the deployment of public finances even as public procurement are shrouded in secrecy and official bureaucratic red tapism which is marred by official corruption on a very grand scale.
So when we look at the future of Nigeria going forward with these accumulated loans by the current President Muhammadu Buhari led government what steers us in the face is a blink future.
Recall my affirmation that Nigeria is hobbled by huge loans repayment issues for years.
There is this fascinating documentation on the debts servicing quagmire I encountered.
That report states thus:” Nigeria’s debt servicing problems began around 1985, when the Nigerian government’s total external debt to all creditors amounted to $19 billion. Since then, the government has paid creditors more than $35 billion while borrowing less than $15 billion. Nevertheless, its outstanding external debt at the end of 2004 grew to almost $36 billion.”
A researcher at the Michael okpara University of Agriculture authored a beautiful work titled; “Management Dynamics in the Knowledge Economy, Vol.7 (2019) no.3, pp.291-306; DOI10.25019/MDKE/7.3.01, ISSN 2392-8042(online)”.
Interestingly, this scholar observed that foreign debt has remained one of the major challenges facing low-income nations like Nigeria due to the constant budget deficit, unfavourable balance of payment and most importantly the inevitable need for industrialization.
Citing the work of Professor Charles Soludo (2003) who affirms that the adverse balance of payment and budget deficit are the two major issues that lead to the acquisition of foreign loans, the author then affirmed thus:. “When low-income nations are confronted with this dilemma, they have no option than to turn to International Financial Institutions and Bilateral leaders for loans.
When such loans are acquired by a nation, debt servicing becomes the order of the day and if it is not well handled, economic growth originally intended will be far-reaching in the process, the author suggested.
The researcher also affirmed that: “Nigeria’s external debt had its origin in 1958 when a loan of USD28 Million was obtained from the World Bank to construct a railway and other developmental projects (Ndekwe, 2008). In 1985, the problem of debt servicing began as the total foreign debt of Nigeria rose to USD19 billion, but the government was able to repay the foreign creditors (Paris Club) more than USD35 billion while the borrowed money was then less than USD15 billion (Rieffel, 2005).”
Knowing the above, it is easy to hazard a guess that President Muhammadu Buhari has again dragged Nigeria back to the infamous club of heavily indebted nations.
Can we interrogate this government to tell us what has happened to the revenues generated since 2015 by the various revenue generating agencies?
Can we interrogate this government on why it has grossly mismanaged the Nigerian National Petroleum corporation to become a basket case since 2015?
As reported by The Guardian, the Nigerian National Petroleum Corporation (NNPC) recorded loses in the region of N551.46b from January 2015 to December 2018.
As reported the details of financial records published on the company’s website revealed that the national oil company repeatedly failed to meet projected profits as its subsidiaries, particularly refineries, running cost at the headquarters and other arms left whopping deficits.
The corporation recorded N267.14b loss in 2015. The figure stood at N197b in 2016. In 2017, data from its financial statements showed N82b in operational losses, while a deficit of N5.46b was posted for January and August in 2018.
While the company has excluded key details such as taxes and figures from the Nigeria Liquefied Natural Gas (NLNG) Ltd, it has continually failed to perform when compared to other national oil companies in Africa and other parts of the world.
Though the firm recorded a trade surplus of N80.57b last year, operating deficit recorded by the nation’s refineries alone rose sharply by 39 per cent to N132.5b in 2018.
When compared to the previous year, the data showed that the refineries posted a loss of N95.09b.
While the corporation earned N2.046t in revenue in 2015, it spent N2.313t leaving a loss of N267.138b. Its corporate headquarters recorded the highest loss of N162.736b, while its product supply and distribution arm, the Pipelines and Products Marketing Company (PPMC) came second with N162.06b loss, followed by a combined loss of N82.09b from its three refineries.
In 2016, the financial and operational report showed that the corporation earned N1.726t, but recorded an expenditure of N1.923t. Losses from its refineries alone totalled N78.95b.
The larger part of the losses made by the company in the past four years came from its corporate headquarters, refineries, and mounting under-recovery from import of petroleum products.
However, while the country is struggling to declare profits, Saudi Arabia’s Arambo posted a net income of $33.8b in the first six months of 2017 alone. Angola’s Sonangol posted a profit of $68m in 2016. Despite the payment of $853m in damages in the third quarter, Brazil’s Petrobras made $7b in 2018.
Readers will agree with me that this is not a salutary story about how to run a business. The NNPC has become the cash COW for politicians to spend during elections to bribe voters and the Independent National Electoral commission (INEC).
Putting all these statistical facts together, my take therefore is that the board of governors of the International Monetary Fund (IMF) by approving the $3.4 billion loan to be released to the politicians in Government that lack transparency and accountability in the deployment of public finances, it has done irrevocable harm on Nigeria because these huge cash won’t be invested in the building of well equipped hospitals equitably distributed amongst the 36 states of the Federation and Abuja but the money will inevitably be stolen or used for politics.
Can we ask where is the Scheme drawn up by this government on the transparent deployment of this IMF dollars that will drop at the Central bank of Nigeria that has already allowed the value of the national currency to have a free fall when exchanged with the Dollars?
Mind you, the CBN lacks operational and governance independence like most other central banks in the advanced economies. There is therefore no guarantee that the CBN can stop politicians from dipping their filthy hands into our national treasury to satisfy their insatiable appetite for filthy lucre of political offices. This is the sad reality but the IMF will be happy that Nigeria remains dependant of loans.
Dear Nigerians, now our economic nightmares have only just started.
Emmanuel Onwubiko is the Head of the Human Rights Writers Association of Nigeria.