Increasingly loading the country with huge unproductive debts, sooner rather than later, ours will become a junk economy. The danger with the debt-trap is that as soon as a nation is inside, it becomes much easier for a camel to pass through the eye of a needle than the nation escaping the innumerable overt and covert fees filled debt-trap, including draconian servicing, repayment, interest, and surcharge fees.
How could it happen to a country that recently freed itself from more than two decades of odious economic savagely in the hands of the West? Had our rulers just forgotten how during the 1980s through 1990s until December 2005, Washington and London forced us into surrendering our economic sovereignty, while their IMF pointed its dreadful pistol at our heads? If our rulers have so easily forgotten that Western de facto imperialism under the disguise of IMF technocracy, have they too forgotten the unprecedented plundering and looting of our national wealth? Why another squeezing ours in these blades of vile scissors?
Were the ordeals of our economic enslavement not too fresh in our minds, how the imposition of embarrassing structural adjustment policy quickly crooked our $9billion debt in 1980 to suddenly rising to S$19billion by 1985, and ballooning to $36billion until we paid with our pound of flesh the unheard-of $12billion in 2005 in order to be ‘forgiveness’ $18billion by Paris Club of Western Thieves? For our rulers to be loading our nation with another monumental debt stock is to make us believe that they lacked the awareness of the disastrous consequences of another dehumanizing debt trap.
Let’s not be misunderstood. No one is against a good national debt for fixing our infrastructure, since we all know that no amount of such investment should be considered reckless. Of course it’s the inevitable evil we too have to embrace like others. Alexander Hamilton, America’s first secretary of treasury (finance minister), championing America’s industrialization appealing to US Congress in 1792 said, ”A good national debt…will be to us a national blessing. It will be powerful cement to our nation. It will also create a necessity for keeping up taxation to a degree which, without being oppressive, will be a spur to industry.” So that we should borrow wisely and invest wisely is the only way to bequeath a better Nigeria to our next generations.
Our worries are that our debt stock is occurring with reckless borrowing in maintaining bloated government officeholders’ opulence. That we’re running debt-based economy and debt-based monetary system while billions of petrodollars flood government treasury is worrisome to all Nigerians. Nigerians are perplexed that these days nothing happens without government first going borrowing. And for most Nigerians it’s frightening that those managing our economy are just dragging us join Greece and Portugal in the club of bankrupt nations.
More bothersome is how they’re taking all the measures trying to hide the facts about government’s accumulation of these unproductive debts from Nigerians. That Nigerians should be treated like children in such a serious matter like the state of our debt is dangerously undemocratic. After if these are not reckless borrowing why the confusion with the exact picture of our present debt profile? If our government thinks it has genuine case borrowing on our behalf, why is it apprehensive letting Nigerians know the truth? Because government knows that Nigerians will definitely be alarmed, it explains why government recently put our debt profile at $45.6billion — $6billion external debt and $39.6billion domestic debt, with $42.56billion foreign reserve component publicly celebrated. Meanwhile, not made eye-catching is that we continue to spend more than 12 per cent of budget money — N592billion ($3.7billion) — simply servicing our debt; money that should have gone into modernizing our infrastructure.
Even informed independent sources like CIA World Fact Book 2012 have more persuasive argument about our foreign debts, which they believe are as high as $9billion in 2012 (given that between 2007 and 2011 we borrowed $6billion externally and between December 2011 and September 2012 we also borrowed extra $3billion), and should with $9.3billion expected to be borrowed in 2013 rise to $18.3billion.
But compounding the danger ahead is the speed with which the 36 state and FCT are soaking themselves in debts alongside the country’s 774 local governments to the extent that it’ll be virtually difficult to fully ascertain their level of indebtedness, especially to contractors, suppliers, consultants, and serving and retired workforce arrears. To know that the 36 states alone have within such a twinkle of an eye recklessly accumulated over N3trillion domestic borrowings could be frightening. But to equally come to realize that unfortunately these debts are not just limited to the bond market alone but also bank facilities backed by irrevocable standing payment orders (ISPO) is what makes the whole thing more worrisome.
It’s understandable why most Nigerians are irately demanding why borrowing so heavily domestically, while avoiding foreign loans, even when concessionary foreign loans and international bond markets are far cheaper! In other words, everyone is questioning the economic rationale for both federal and state governments to be raising sovereign risk-free debts at as high as 16 per cent interest when the same governments could easily borrow the same amount for the same purpose at less than 1 per cent LIBOR rate? Most Nigerians are yet to come to terms with such escalation of domestic debt where with government taking about 68 per cent of the country’s total bank loans not only crowds out real sector as it makes private sector borrowing expensive but also undermines the private sector leading the creation of jobs for millions of Nigerians.
But why shouldn’t we be drowning in highly unproductive debts when we’re happy making ours the world’s dumping ground for sorts of foreign goods? Had we too followed Abraham Lincoln’s 1862 advice to the American people that ”If we buy what’s not made in America, we get the goods and lose the money and the jobs; but when we buy made in America, we get the goods, the money, as well as the jobs,” there’s no way we should have been borrowing to keep consuming foreign goods. There’s why government is compelled to be using high interest rates to keep loading us with unproductive loans while the feasting with other people’s money lasts. Funny enough, more of our jamboree borrowings now come from the same nations dumping goods in Nigeria who in order to ensure that our highly valued naira keeps us importing while displacing local production.
And with such unheard-of high interest rates, international speculative scavengers and financial coup plotters like America’s George Soros having invaded our financial turf are now exploiting the arbitrage resulting from government’s high domestic borrowings. Little wonder what we believe as domestic borrowing is actually foreign borrowing masked domestic in order to create that illusion in us that it’s domestic matter when there’s enough invisible imperial hands like octopus covering so-called domestic debts. Or are America’s swashbuckling financial raiders, speculative lenders like Soros not already financing our so-called domestic borrowings deploying our same foreign reserves kept idling in America to exploit our government’s astronomical interest rates?
If we sharpen our eyes enough, we should easily recognize who are participating in this game and how the same way a cat is cunningly encircling its prey, they’re dragging us to what would become the greatest financial crime against our children. We need only to connect the all dots to discover where they intend to land us few year from now.
Averting this tsunami would require quick actions from our country’s apex lawmaking body. Restraining the executive from taking us further down this
mine-filled imprudent and reckless borrowing route, should require our lawmakers to set in full motion Section 42 of Fiscal Responsibility Act (FRA) with all its disciplinary provisions that not only prohibits the executive from borrowing without the approval of the country’s apex legislature but also improper utilization of borrowed money to the detriment of national economic growth. Decelerating the present rate of accumulation of domestic debts, will require not just our lawmakers’ debt ceiling, pegging government’s borrowing limits, but also to prevent the country from finding its way back to the debtors club, the apex lawmaking arm of government should immediately place moratorium on all domestic borrowings until further notice; until we fully ascertain the true figures of our debts and their sustainability.
Because wars are too important to be left in the hands of generals alone, amended FRA should mandate governments at all levels to widely consult with citizens, including using several town-hall meetings to seek public opinions before embarking on any major borrowing. To reduce the level of arbitrage and speculation pressure on our financial system, which constantly crowds out private borrowings, government should be forced by the amended FRA to henceforth begin to maintain single-digit interest rate levels. As outrageous as it may sound reducing our domestic debt requires the removal fuel subsidies, while should be replaced with social carbon tax that would mandate annual auto plate renewal, with fuel-guzzling private cars paying exorbitantly, with the tax revenue be used in providing cheaper mass transit transportation.
Government should be mandated to come up with ways to bring down our dangerously hovering domestic debt. Alternatively, we should either reduce using downward refinancing or raising long-term cheap sovereign loans. But before taking that step, not only should the Debt Management Office release full information about the profile of the holders of our domestic debts, including their sources of funds and how much of the debt servicing money is repatriated overseas and by which organizations. Also our lawmakers should ensure that DMO be fully audited, not only to ascertain how much professionalism goes into its debt sustainability analysis, but also how much cooking goes into its books. The amended FRA should increase the ceiling for budget deficit from 3 per cent to not less than 6 per cent so as to give more room for deficit financing maneuvering. Also the amended FRA should non-implementation of its provisions an impeachable offense.