Foreign Loans As Recipe For Economic Disaster

BY AKIN MAKANJUOLA

There was this adage that was made popular by the Nigerian traders in the 1970s that, “He that goes aborrowing go asorrowing.” This aphorism best describe Nigeria’s incursion into the international market in the 1970s when it was forced to sort for foreign loans to execute its 3Rs programme of Reconstruction, Rehabilitation and Reconciliation; that was shortly after the Nigeria/Biafran civil war that ended in 1970.

Nigeria has ever since remained glued to this culture of seeking foreign loans to power its mono-economy based on a wasting asset; petrol (petro-dollar).

Experts are of the opinion that taking loans in itself is not a bad idea, but the use into which you put it is what is important. This is very true of Nigeria’s economic trajectory; for example the power sector alone from the first Republic, led by Alhaji Abubakar Tafawa Balewa, till the current government of Muhammadu Buhari, trillions of sourced loans have been sunk in the sector alone, with less than a little over 4,000 megawatts generated; which is never enough to run or power any serious manufacturing-based economy. Whereas South-Africa that was under a repressive apartheid system till the late 90s was able to generate well over 50,000 megawatts of power and it is still expanding its power base.

Another example will suffice to explain the paradox of loan as alternative route to national development, with almost zero success rate. The Leviathan Ajaokuta Iron and Steel project started almost the same time as the Brazilian and other Asian tigers Malaysia, et al built their steel plants, but the Ajaokuta steel plant remains an international embarrassment that has defied all the logic of loan taking and application.

The reason for loan failure in Nigeria, is not just a budgetary issue; but per force a moral failure embedded in a deep culture of corruption, lack of transparency, official bottlenecks and financial recklessness. Where there is no proper auditing, transparency and accountability, the abuse of the system and process becomes inevitable. The issue of budget padding by National Assembly members, inflated contracts, dubious procurement processes and other criminalities attract no penalties or punishment. That explains why loans sourced from Wall Street financial institutions end up in private coded Swiss banks. A case in example is the late maximum ruler Gen Sani Abacha, who almost two decades after his demise, continues to send billions of dollars to Nigeria’s coffers from the grave. What a country!

The latest in the endless and prodigal loans by past and current governments is the approval of $22.7 billion loan to President Muhammadu Buhari only last week. The irony of the whole loan saga is that the same National Assembly is lamenting that with the recent approval, Nigeria’s debt profile would stand at N33 trillion. The National Assembly, like the proverbial Ostrich playing to the gallery of public opinion, further noted that about 65 per cent of the N27 trillion owned as at September 2019 were domestic debts, while foreign debts accounted for the rest. They forgot to ask: Who is going to pay back the accumulated loans? It becomes a case of “the fathers ate the sour grape and the children’s teeth is set at edge.”

Even a Motor park economist will advise that it is a wrong approach to building the economy of a nation by mortgaging its future and the future of the unborn generation in a debt trap. Unfortunately for us, there is no Obasanjo or an Okonjo-Iwella to bail us from IMF debt traps and its conditionalities.

The current situation in some East African countries whereby the Chinese government has taken over some strategic national assets to offset some of the loans being owed it by those countries may serve as a stern warning to the Nigerian government that loans is a trap set up by Western economic hit men of Europe and recently China to under develop Africa.

The only way to justify loan taking in Nigeria is to ensure it is judiciously applied to the project it was tied to. We should move away from making anti-corrupt war a mere sloganeering, a rattling sambre and mere rhetoric by empowering the anti-corruption agencies: the EFCC, ICPC et al and the newly created Financial Intelligent Unit(FIU) to carry out their constitutional mandates without interference from any quarters.

Evidentially speaking, no nation has ever succeeded in the task of nation building and creating its national assets through reckless loan taking. There must be an alternative route to national development through diversification of the economy.

The advice given by Ghana’s late Kwame Nkrumah on the eve of Ghana’s independence remain an invaluable and historic lesson: “That there can be no political independence without economic independence.”

Makanjuola, a public commentator, wrote in from Abuja