Minister of Finance, Okonjo-Iweala
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PRESIDENT Goodluck Jonathan and the Finance Minister, Ngozi Okonjo-Iweala, are dragging Nigeria deeper into a new debt trap. Unfazed by strident opposition to controversial foreign loans, the minister again got herself into an awful tangle at the House of Representatives last week Monday as she sought to defend the President?s request to raise the 2012-2014 borrowing plan to $9.3 billion. The National Assembly should deliver an emphatic no to this dangerous move.
The situation is rich in irony. Okonjo-Iweala, in her first coming as Finance Minister, led efforts that culminated in our escape in 2005/6 from three decades of crushing debt through a debt buy-back deal under which Nigeria paid $12 billion to secure an $18 billion debt write-off from the Paris Club group of creditors. While at the World Bank thereafter as its managing director, she frequently railed against reckless borrowing, profligate public expenditure and untidiness in the country?s public finances. ?But, it is deeply troubling that 18 months into her second coming as minister and head of Jonathan?s economic team, our public finances are as messy as ever while she enthusiastically seeks dubious foreign loans. Is the Finance Minister paying attention to the depth of public corruption in the country?
In her presentation to the House Committee on Loans/Aid/Debts, she said the projects to be funded included erosion and flood control; FADAMA agriculture projects in the North; educational projects in Edo State; power projects in Zungeru, and the $500 million China Exim Bank loan for the ongoing Abuja Light Rail Project. The minister and the Debt Management Office stridently assert that our Debt-to-Gross Domestic Product ratio at 17 per cent, is one of the lowest in the world, but fail to factor in the observations by senators that projects for which loans were obtained in the past were either abandoned or failed; that most of the items for which new loans were being sought had been captured in the 2013 budget, and that seeking foreign loans ?is a celebration of inefficiency and lack of moral credibility? at a time of higher government revenues.?
And there is much to worry about. Jonathan and Okonjo-Iweala have failed to ensure accountability and prudence in public finance. The International Monetary Fund has observed that up to 80 kobo of every N1 spent by Nigeria?s government is lost through waste and theft. Such leakages and gross misplacement of priorities account for the bulk of public funds being spent on recurrent needs with little left for capital projects. The government sustains its culture of waste and corruption by allotting money to projects that are better left to the private sector. The plans to borrow $7.9 billion for ?pipeline projects? and spend $1.6 billion on turnaround maintenance of the four loss-making state-owned refineries are totally misplaced.
Pipelines, depots, refineries and all other oil downstream activities should be left entirely in the hands of the private sector with the government as regulator. The government should speedily privatise all its commercial ventures as this will free it to fund roads, health, education, water supply, housing, erosion and ecological schemes for which it is now frantically borrowing. There is a growing convergence of opinion that high foreign aid intensity is actually associated with erosion in the quality of governance.
Legislators should not be taken in by the minister?s reasoning that the loans sought are concessionary, with long-term, low or zero-interest facilities. That is exactly where we started over 30 years ago when development partners convinced us to take loans and pay later. Loans attract penalties when payment timelines are missed and our poor debt management and fiscal indiscipline are legendary. The signs are ominous. Whereas all that we borrowed and for which we had repaid over $40 billion while still owing $35 billion by 2004, was less than $18 billion; now we owe $6.2 billion that will, according to DMO, rise to $9.02 billion by year end and $16.76 billion by 2015. Domestic debts are expected to climb to $8.44 billion by 2015.
In other countries, the impact of foreign loans is visible in infrastructure and jobs. But in Nigeria, structures built by loans such as the steel plants, fertiliser, petrochemical and paper plants have all collapsed.? A Stanford University 2009 study hit the nail on the head: ?In some of the world?s lowest-ranking countries in many areas of governance, particularly with regard to corruption, foreign aid appears simply to increase the volume of funds at the disposal of already corrupt government officials and kleptocratic elite.? While other crude oil exporting countries have been piling up robust foreign reserves and investing massively in infrastructure on persistently high oil prices, our infrastructure continues to crumble.
Okonjo-Iweala should clean up our deplorable public finances, lead efforts to restart the privatisation plan and target growth with jobs like other World Bank returnees did in Ghana, Peru, Argentina and Brazil, enabling their countries to climb out of debt and recession.? Foreign loans crowd out sorely-needed Foreign Direct Investment when ploughed into ventures and sectors that are better liberalised or privatised. As long as our government was borrowing to fund the corrupt and inefficient Nigerian Telecommunications Plc, the massive FDI, job creation and phone and internet penetration that followed the sector?s liberalisation in 2001 could not take place.
Legislators should not stop at merely criticising the borrowing plan; they should protect present and coming generations by forbidding new loans under any guise and insisting on prudent management of our resources through diligent oversight.?
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Source: http://www.punchng.com/editorial/okonjo-iweala-and-the-new-debt-trap/
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