JUST as the Federal Government was taking a lap of honour to celebrate the news that the $3.4 billion financial support received from the International Monetary Fund (IMF) under the Rapid Financing Instrument to cushion the economic impacts of the COVID-19 pandemic, a request was sent to the National Assembly by the President seeking authorisation to obtain a mega loan of $21.7 billion.
It was an illogical development given that in repaying the IMF loan, the impression was that the administration was resetting its fiscal image to pursue a more sustainable, self-reliant development strategy. Before as the quest for the loan was made public, Nigeria had been drawn back into the debt trap less than 20 years it exited the Paris Club and other clubs of international creditors as former President Olusegun Obasanjo paid off the loans that had accumulated over the years.
Unfortunately, subsequent administrations were unable to fashion out a discernible strategy for self-development and growth leveraging on building local capacity for the growth of the real sector. Gradually but steadily, succeeding administration were lulled into the phantom belief that Nigeria still had a healthy credit rating to raise more loans. From a relatively modest N12.6 trillion in 2015, Nigeria’s public debt profile under President Muhammadu Buhari rose very significantly to N97.3 trillion in 2023 when he rounded off his eight-year tenure.
The Debt Management Office (DMO) attributed a portion of the increase to new borrowing, including domestic borrowing, securitization of irresponsible Ways and Means Advances and devaluation of the Naira during the period. Nigeria’s growing debt predicament has intensified under President Tinubu to concerning heights; with forecasts suggesting that, the nation’s overall debt could reach N187.79 trillion by the end of 2025 alone.
The projected loan has elicited anxiety within the business community and Nigerians in general due to the characteristic opaque manner previous loans were utilized. There is genuine fear that if the loan is taken, it will exacerbate the already unhealthy debt-to-GDP ratio of 50 percent.
Although, external borrowing is needed to enhance development, and we are not opposed to it, the absence of transparency in the disbursement of funds, especially in procurement process and contract awards, the absence of long-term reforms, inclusive growth strategies, and institutional accountability make the prospect scary. Buhari’s finance minister at the time, Zainab Ahmed, notable for her borrow and spend approach, drove the country back into the debt trap with very little to show for the loan funds that were appropriated.
In a bid to allay the fears of Nigerians that the loan may go the way of previous ones, the Federal Government explained that it is not “the same as actual borrowing for the period, but a structured framework for three years of external borrowing by federal, state, and local governments”, the concern lingers. As the pivotal 2027 general elections loom, the apprehension is that in a period governance has taken backstage, there is no guarantee that things will be done differently.
As the IMF had previously noted, loan disbursement should be preceded by the creation of a framework and strategy for self- development so that at the point of sourcing the loan, it will be channeled promptly and exclusively into executing the projects already marked out. The main path should be first to map out how Nigeria can improve its nightmarish electricity sector, which, despite previous and repeated efforts, has not had more than 5,000 megawatts for distribution through the national grid.
Without deploying the loan into sectors and projects that will grow critical areas that would in turn spur development, the administration will end up squandering the loan and return the country to even more severe debt overhang.
