N23tn loan approval caps NASS’ fiscal errors

HEADED by Ahmad Lawan (Senate President) and Femi Gbajabiamila (Speaker, House of Representatives), the Ninth National Assembly, with just weeks away from its exit date, has again demonstrated its complicity in Nigeria’s reckless accumulation of debt. Weak, lacking in rigour despite its obscenely generous remuneration in a land of widespread poverty, the Senatetouched raw nerves on Wednesday by approving the securitisation of a controversial domestic loan of N22.7 trillion for the outgoing regime of the President, Major General Muhammadu Buhari (retd.). This is another distasteful parting gift from the parliament.

The quisling approval is typical under the duo. A day later, the House not only concurred with the Senate, but it also increased the approval to N23.7 trillion. This reinforces the odious reputation of the Ninth NASS as a ‘rubber stamp parliament.’ In the past four years, both chambers of the assembly have compromised its independence, and responsibility in fiscal oversight, and have routinely approved the unprecedented borrowings of the Buhari regime. On their watch, Nigeria’s debt has risen to over N69 trillion and is projected to hit N77 trillion as Buhari leaves office when other borrowings are added.

Undoubtedly, the parliament under Lawan and Gbajabiamila has performed poorly. But perhaps most damaging is its blanket approval of loan requests by the President since 2019. The latest, under the ‘Ways and Means’ channel; where the government takes short-term facility from the central bank to cover revenue shortages (often by printing money), expands Nigeria’s debt burden. That worsens the country’s messy fiscal position.

Already, the government spent 96 per cent of its revenue on debt servicing in 2022. The IMF fears that this could soon rise to 113 percent of all revenue. With a 40-year tenor at 9.0 per cent interest on the facility, the approval is poisonous. Previously, the government had admitted that it is borrowing to service debts.

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Initially, the NASS had declined to accede to Buhari’s request when he sent it in December. But the lawmakers, four months later, dashed hopes that finally, they would apply some rigour in their constitutional oversight responsibility, jealously guard the country’s fiscal health and prevent unsustainable indebtedness. In contrast, the Fifth NASS 2003-2007 collaborated with the Olusegun Obasanjo administration to secure the landmark debt buy-back programme 2005/06 that wiped out the country’s three decades-old debt burden.

When Buhari’s tenure began in 2015, overall national debt was N12.12 trillion, and exposure to the Central Bank of Nigeria through W&M was N789 billion. But following its missteps, the regime’s borrowing from the apex bank jumped to N8.52 trillion by December 2019. With the advent of the Ninth NASS six months earlier, that debt component has also increased exponentially as it hardly queries borrowing requests, demands accountability for past credit, or takes the country’s precarious finances into consideration.

Indeed, both the NASS and Buhari have not looked back since 2019. By 2022, W&M exposure had soared to N22.7 trillion, well above statutory thresholds and growing. It not only breaks the law but is also bad economics. It has helped fuel inflation and the naira’s further depreciation. The naira officially exchanged for N460.84 to $1 on May 3 and N745 in the parallel market.

The parliament has compromised its primary duty to look after public finances and act as a check on the executive. Inflation trended up to a 17-year high in September at 20.77 per cent; in March, it posted 22.04 per cent, says the National Bureau of Statistics. Signs point to these numbers being likely to get worse.

Moreover, the NASS is aiding illegality. Section 38 of the CBN Act 2007 prescribes that such borrowing must not exceed 5.0 per cent of the previous year’s revenue. The just securitised borrowing is way beyond that. In the first half of 2022, the CBN gave an overdraft of N2.5trillion to the government or 46 per cent of the government’s N5.4 trillion income in 2021.

The lawmakers sought to justify their approval partly on the need to avoid government shutting down. That is a weak argument. Staying true to prudent legislative practices would have knocked some sense into the executive and saved Nigeria from excessive debt.

Economists say the NASS should instead have insisted on full remittance of public revenues by MDAs and some companies, variously assessed at between N14 trillion and N30 trillion, drastic cost-cutting and immediate sale of loss-making commercial assets such as the moribund refineries, Ajaokuta Steel, and concessions of the airports and seaports to raise funds and stop waste.

Economists do not discourage borrowing wholesale but advise that the loans acquired must be mainly for infrastructure renewal instead of consumption. NASS should imbibe this wisdom. Egypt’s President Abdel-Fattah al-Sisi in 2014 raised 80 per cent of the $8 billion funding for rebuilding the Suez Canal from state bonds. In 2022, the canal generated an income of $7.9 billion from the $6.3 billion it raked in the previous year, the Suez Canal Authority said.

In 2021, al-Sisi took another loan of €83 million for the second phase of Egypt’s Electricity and Green Growth Support Programme. The result is that Egypt tripled its electricity output to 60,000 megawatts and became a net exporter of electricity. Nigeria’s indulgent parliamentarians should insist on this sensible template in loan acquisition and stop approving consumptive borrowing.

With the NASS’ abject acquiescence, Nigeria is mired in debt. As revenue from oil is unpredictable, and non-oil sources, including taxes, depressed, the humongous debt poses an uncertain economic future for the country. Despite its own glaring shortcomings, the Eighth NASS resisted some of Buhari’s loan requests. In the little time it has left, the Ninth NASS should not approve any more loan requests and saddle the incoming government with a crippling debt burden.