The fact that President Muhammadu Buhari is making the $29.6billion loan request the second time shows that we desperately need this loan. Do you agree? It is common knowledge that the President, in a way that is desperately compelling, requested that the Senate approves the loan. One’s honest answer is that desperation is not the issue. Since, as is usual for all past governments, loans are aimed at developing the country in some specific way and the guidelines for their consideration should answer the following questions:
a. What are the possibilities of the loan achieving targeted objectives?
b. How sustainable is the loan repayment?
c. What is Nigeria’s present revenue base?
d. If in the future, depending on the marketability of our major exports and the probability of their future relevance, is there a chance that we may default?
The desperation of the President, which is most expected because as the Head of State he wants to achieve some objectives, is actually irrelevant. What is important is the optimality of the loan with regards to its ‘pro bono publico’, all the above questions taken into consideration.
Poor infrastructures are everywhere across the country in spite of past loans. What does this say about Nigeria’s ability to utilize loans?
There is a saying in England that “if you want to marry a young shapely fiancée, it would be wise to take a good look at the mother. It may well be a good guide to the future”. While the present administration appears to have taken more loans than the previous ones, its non-delivery of dividends on the loans is not entirely different from the non-delivery of the past administrations. Given that those who will disburse the loan when taken are likely to be the same set of actors – what do you think?
Let’s look at the impact of the loan on debt servicing On the impact of debt servicing, it is proper to pay attention to what the President of the African Development Bank, Dr. Akinwumi Adesina, said recently. Expressing his grave concern, he stated that Nigeria is using 50% of its revenue to service debt compared to 17% in other African countries. If that does not raise anyone’s consternation, I wonder what will. One should recall that figures from Debt Management Office show that the debt profile of Nigeria rose astronomically by 12.25% from N21.75trillion in 2017 to N24.4trillion in 2018 and has been shown to increase further by 2.3% to N24.95 trillion by the first quarter of this year. My people in Oghe, Enugu State would say – Ana agwa ha ochinti n’agha esu (you do not tell the deaf that war has broken out). Even the urgent request for loan approval, in itself, is a confirmation that what remains of Nigeria’s revenue after loan servicing is not enough to cope with project requirements hence the desperate request for more loans. I am of the belief that we will soon reach a situation of Krugman debt overhang in which the expected repayment of external debt falls short of contractual value of the debt. This situation slows down investment and expected employment of labour. The increase in debt has already started to limit the country’s ability to finance vital imports – (hence the high tariff, trade barriers on imports and the draconian border closure and slowing down of development of new projects). The pressure of these can be seen in both the horrendous inflation rate as well as increase in mortality rate among the poorest as well as among investors who are anxious about the future of their investments and what to invest in.
What alternative(s) do we have?
Before we ask what alternatives we have for loans, it is necessary to find out why we ever needed loans in the first place. Is it because we lack revenue or the revenues earned have not been well utilized? What happened to all the other loans? Why did they fail to achieve that which the loans were meant to achieve? Were they targeted at luxurious structures or at structures that will aid exports and eventual repayment? Were they simply spent on political ventures? To get a good answer to these questions requires national strategic thinkers and NOT political party jobbers who need to be near the seat of power. While the questions posed need to be answered, we should, at least, look at the indefensible pay structure of our lawmakers and the size of the personnel baggage that are, at the moment, horrendous, who knows, there may not be the need for a single loan?
As an expert on international trade, what is your view on the closure of the borders?
I spoke on the issue of high tariffs and barriers to trade about five years ago. While they may not appear to be related to an untrained mind, those in government – particularly Ministry of Trade and CBN – will see that the border closure is merely a desperate act to ensure that the high tariffs, import goods bans and other trade barriers are made more effective. Therefore, to understand the border closure, it is necessary to understand the underlying reasons before those who have no good word for President Buhari go to town with expletives of all kinds because of the closure. What Buhari did must have been in the minds of all Nigerian Heads of State – from the first coming of Obasanjo through the first civilian regime to the present administration. All the regimes who tried to deal with the issue of import substitution for local industrialization and have used high customs tariffs on some imports, complete ban for some and other barriers through rationing of foreign currency, must have seriously contemplated the closure of Nigeria’s borders during peace time because most of the goods come into Nigeria through the borders, thus softening the effect of the trade policy. In spite of the fact that I understand the patriotic reason and painful emotions behind the closure of the borders, I still vehemently oppose the closure. Not just because of the closure but more because of the unsuccessful manner the import substitution industrialization (ISI) has been carried out over the years. This policy is simply a trade and economic policy which seeks to replace foreign imports with domestic production. Most poor countries of the world, including Nigeria, tried to utilize ISI to improve their local industries through the protection of their internal market and, like most, seem to have failed and replaced by IMF, World Bank Structural Adjustment Progamme (SAP) in mid 1980s. Neither is perfect. One’s take is that salvation lies in a more liberal form of ISI where competition from outside the country is not eclipsed to help improve the internal production through some form of timed substitution. The closure of the borders is like going back beyond time to a kind of coffin economics that will eventually asphyxiate residents even though the promoted industries seem to enjoy near monopoly of price and production which, as usual, will give rise to dangerous quality complacency. Drug markets will produce drugs of very low quality and agriculturists will push out anything. The horrible rough cotton cloth produced with the lowest quality yarn during earlier ISI is still our ‘national dress’. Elevated women in government still wear them as their sign of ‘modesty’. Isolating Nigerians from other African countries reminds one of the terrible ‘Ghana must go’ days or even the present xenophobia in South Africa. I think it should be stopped immediately.
Are you saying that the policy could create a monopoly situation and discourage healthy competition with other countries?
More like internal oligopolies of exclusive but usually inefficient manufacturers protected by government. I recall when Peugeot was one of the two car manufacturers in Nigeria. You and I remember that the Nigeria-protected cars were the worst new cars ever assembled. The same model produced in France was miles better. That is the effect of government protection. Because of the protection culture of government, the printed cotton of Nigeria, till today, is the most inferior and roughest material in all developing countries. Those made in Ghana command more attention and preference. The same groups of local manufacturers are the ones with the loudest ovation for the border closure so that Nigerians are again left at their mercy. Trade closures and barriers create inefficiency, kills incentives and motivations to be better. Healthy competition always leads to improvement in products, production and price. When you block goods from other countries, through various forms of trade barriers – inequitable currency regiment, import bans, stiff import tariffs and now sealed borders, what the population will get is very high price for inferior goods and materials and complete lack of choice. Inflation, corruption and criminalization of importation will become the order of the day. Most of our children and youth, instead of wanting to be scientists, teachers, historians, etc, will prefer to be Customs officers or defense lawyers! You do not have to be an economist to know this. The point being made is that nothing is better than competition. It is something created by God to help us improve ourselves in an honest manner. That’s why we compete in schools, sports and in fact all spheres of human endeavors to ensure the best for all. Kill a just competition, all you will have is gross inefficiency, inequity, incompetence and unfathomable corruption. When we close our borders, we are telling the world that we cannot strategically compete with the outside world. NO, I reject this!
Could you shed more light on how the policy is causing inflation in the country?
The official inflation rate is about 11.6 percent. But now it is heading to about 30 – 80 percent. The inflation rate is super hyper. The situation is very frightening, especially with the way prices are going up every day. What is the point if your salary cannot take you home? This will lead to corruption. When the money of the public servant cannot feed his family, he is bound to steal and he will not realize why he started to steal in the first place. The same government that created the scenarios will now attack him and label him a thief. So, those who are caught are called thieves while those not caught leave government with stars on their shoulders.
What are your thoughts on the increase of VAT and the introduction of N50 charge for on-line transactions?
This is another funny policy. We operate policies that are meant to criminalize the average poor Nigerian. The on-line transactions are meant to save people from carrying cash that will attract armed thieves. No! The introduction of N50 at the petrol station could make those whose profit per unit is N50 to carry cash. Sometimes, I think those who sit in cozy Central Bank offices have totally lost sense of human compassion. Many people avoid watching Nigeria TV stations for fear of hearing some new draconian policies from the CBN or local government taxation zealots. The VIOs would stop you and say they want you to present your road worthiness certificate. It never occurs to them that the roads are not vehicle-worthy. We apply laws and silly policies that have nothing to do with the welfare of Nigerian people. You almost want to think that our rulers put themselves in power by themselves.