Foreign Loans Have Not Abridged Poverty, Unemployment

RingRrue  BY Yemi Adebowale   Email: yemi.adebowale@thisdaylive.com      Phone 08054699539

One area requiring critical analysis in President Muhammadu Buhari’s recent note to the Senate requesting for the approval of $4.054 billion, €710 million and $125 million external borrowings, is the assertion that the projects to be funded with the new loans, spread across the six geo-political zones of the country, would bring about employment generation and poverty reduction, as well as protection of the most vulnerable and very poor segments of the Nigerian society.

But the big question is: The previous loans, have they impacted positively on unemployment and poverty across the country? The answer is definitely No! We have to be honest with ourselves. Maybe few new jobs here and there; but if we are talking about creating huge number of jobs for our youths with these loans, there is nothing like this. The facts and figures are there.

Let’s even use government statistics to analyse the job crisis issue. The last time the National Bureau of Statistics (NBS), picked up courage to release figures on unemployment was Q4 of 2020 and it reported that Nigeria’s unemployment rate rose from 27.1 per cent in the second quarter of 2020 to 33.3 per cent in the fourth quarter of 2020, translating to 23.19 million unemployed people.
These NBS figures aside, in practical terms, let’s all look around us; in our homes and those of our neighbours. Of course, we will see an army of unemployed youths. Things have deteriorated in the last six years of the Buhari government, the huge foreign loans notwithstanding.

Promising that poverty will be reduced in this country with foreign loans is preposterous. Can Buhari, in all honesty, say that poverty and unemployment have reduced in Nigeria following the huge foreign loans obtained in the last six years? Can he say that these loans have positively impacted on the lives of the masses of this country in the last six years? The frank answers would be negative. There is nothing to show in this direction in the last six years.

Despite the huge loans amassed, this country’s economy is still in shreds and continues to suffer, with no hope in sight. At a point, inflation was almost at an unparalleled 18.72%. Note that Buhari, in 2015, inherited an inflation rate that oscillated between 7.7 per cent and 8.7 per cent. Daily, the waning economy pushes thousands of Nigerians below the poverty line. The gloomy news is that under Buhari, and with all the foreign loans, Nigeria surpassed India as the country with the largest number of people living in life-threatening poverty in the world. This is an insignia of disgrace that should task Buhari. Regrettably, he is untroubled and still talking about “capturing” more foreign loans.

I can safely say that Buhari’s letter to the Senate this week, promising employment generation and poverty reduction with new foreign loans is pure deceit. The federal and state governments have been reckless with borrowings for over six years, without result. It is painful that Nigeria’s total public debt, comprising states and federal government debt obligations, rose by 7.75 per cent, from N32.916 trillion in December 31, 2020, to N35.465 trillion by June 30, 2021. The FG is responsible for 83.07 per cent of the debt burden while the states and Abuja account for 16.93 per cent.

Domestic debt increased from N20.210 trillion as at December 2020, to N21.754 trillion by June 30, 2021. The FG accumulated N17.632 trillion of this, while N4.122 trillion is for the states and the FCT.
Nigeria’s total external debt which stood at N12.706 trillion as at December 31, 2020, rose to N13.711 trillion by June 30, 2021. Of the N13.711 trillion external debt, the FG alone accounts for N11.828 trillion while the states and the FCT make up the balance of N1.883 trillion.
The Central Bank of Nigeria has also extended over N10 trillion overdrafts to the FG. When added to the current debt profile of the FG, it would increase its debt to almost N40 trillion. The Buhari government is clearly in a mess with debt with little to show for it.

Even the Chairman of Buhari’s Economic Advisory Council, Dr. Doyin Salami, agrees that the borrowings of the Buhari government is not sustainable. Salami, in a presentation on “The State of the Economy,” pointed out that the federal government’s expenditure had been on the increase, and at a faster pace than its revenue. He added that public debt had continued to expand on the back of growing fiscal deficit.
The sad fact is that most of this country’s debts were incurred by the federal government within the last six years. When Nigeria’s debt portfolio was N32.92 trillion in December, 2020, the federal government’s share was a total of N26.91 trillion, leaving a balance of N6.01 trillion to our sub-national governments. The implication of this is that 83.78 per cent of the nation’s debt stock, as at December, 2020, belongs to the federal government, with the sub-national governments accounting for 16.22 per cent. This comes with huge repayment commitments for the federal government and our sub-national governments.

That was why the federal government expended N3.10 trillion on debt servicing within 11 months (January-November) 2020, out of its N3.48 trillion retained revenue for the same period. Meaning that for every N100 generated during the period, N89 was expended on debt servicing. This puts Nigeria’s debt-to-revenue ratio, a key measure of debt sustainability, at 89 per cent for those 11 months; a far cry from the World Bank’s suggested 22.5 per cent for low-income countries like Nigeria.
The Buhari government spent N1.8 trillion on debt servicing from its N1.84 trillion revenues in the first five months of 2021 – January to May. This puts the federal government’s debt-to-revenue ratio at 97.8 per cent for this reviewed period. Is this not scandalous? In 2016, the federal government’s debt service to revenue was only 44.6 per cent. But by 2020, debt service to revenue had grown to around 84.8 per cent. This is why 33 per cent of this current budget 2021 is set aside for debt servicing.

What the Buhari government has been doing in the last six years, with its incompetent economists, is reckless borrowing, and has evidently borrowed beyond its repayment convenience. This is why the government is in a mess with debt servicing. As more debts mature for payments, the pressure on revenue rises. In the 2019 budget, over N2.1 trillion was set aside for debt servicing. In the 2020 budget, N2.45 trillion was set aside for debt servicing. That was almost 25 per cent of the budget size. No country can attain development with this kind of humongous debt settlements.

VAT War: The Way Forward is Forward
The recent judgement of the Federal High Court, Port Harcourt, affirming the right of the Rivers State Government, and by extension, all other states, to collect Value Added Tax (VAT) within their territories is difficult to fault. I can’t see the Appeal or Supreme Court upturning it. It is obvious from the constitutional provisions that VAT is excluded from items 58 and 59 of the Exclusive Legislative List and item 7 of the Concurrent Legislative List, and therefore, does not come under federal government’s control. Simply put, VAT is a Residual matter, falling squarely under the purview of the states alone. Anything outside this is a violation of Nigeria’s 1999 Constitution.

Honestly, I believe the federal government should withdraw all appeals on VAT and let this country move forward. Those talking about a “political solution” are just wasting precious time. It’s a settled Constitutional issue; no sentiment here.
Again, this talk that 30 of Nigeria’s 36 states will suffer greatly if VAT collection moves to where it legally belongs, is not completely true. In the long run, everybody will benefit. Some argue that because the industries are largely in Lagos, Ogun, Kano and Rivers, they will get the bulk of VAT revenue and others will suffer. To some extent, this is true because these industrial states will get all the first leg VAT. But then, other states will also benefit at their consumption legs.
Let me break it down properly. Defined as a “goods and services tax,” VAT is a consumption tax levied at every stage of a transaction, but ultimately borne by the final consumer of goods and services. So, if a manufacturer in Lagos sells to its distributor from Borno State, (VAT inclusive and paid to Lagos State), the distributor returns to Borno with the goods and also adds VAT before selling in Borno State. This 2nd leg of the VAT is for Borno State Government. But clearly, it will not be as huge as what states in the first leg collect. VAT on airline tickets sold in each state will remain there.

Of course, these states lamenting will also still collect VAT from service providers in their states – hotels, parks, restaurants, event centres and the rest. Yes, it might not be big as what Lagos, Kano, Ogun and Rivers rake in, but it simply means that these 30 states, currently poorly positioned for VAT, should start working to create an enabling environment for manufacturing and other businesses. This is the challenge for governors of the affected states. Ordinarily, there should be no controversy over VAT revenues getting to the likes of Lagos, Kano, Ogun and Rivers in large amount. All other states must work very hard to expand and improve VAT collections. This is the spirit of unabridged federalism.

Isa Pantami Now a Professor?
Anything can happen in Nigeria. The more you look, the less you see. Suddenly, Isa Pantami, our comical Minister of Communications and Digital Economy, is a Professor of Cyber Security. That’s what the Federal University of Technology, Owerri (FUTO) told bewildered Nigerians last week. FUTO is no longer satisfied with selling honorary degrees. The university said Pantami was “promoted professor”, as if he is a teaching staff or on the faculty of this university. Pantami has been going around celebrating this garbage. Some even placed newspaper adverts congratulating him. The party is still on.
This university is unperturbed by the need to adhere to ethics and procedures when making such appointments. Extant due process was plainly thrown into the trash can. What a country! This illegal “promotion” of Pantami must be reversed. I’m expecting the National Universities Commission to step in.

COVID-19: Obaseki Should Stop Insulting Court
The way Edo State Government is going about this war against COVID-19 is becoming irrational. It had in August announced that by September 5, 2021, access to public places would be determined by the COVID-19 vaccination status of individuals. Governor Godwin Obaseki wants everybody in the state vaccinated. He knows this is impossible except all vaccines coming into Nigeria are diverted to his state. A Federal High Court in Port Harcourt, Rivers State had on August 30 also restrained his government from forcing people in the state to take the COVID-19 vaccine. Obaseki has decided to ignore this court Court order. Last Wednesday, he began the enforcement of his “no vaccination proof, no entry” into public places in the state.
There was chaos as civil servants and other people who could not present their proof of vaccination were refused entry into the state secretariat and other government establishments. The enforcement exercise saw the state Head of COVID-19 Enforcement Team, Yusuf Haruna, manning the main gate of the secretariat, while other members of the team took charge of other entry points.

My dear Obaseki, you cannot force people to take COVID-19 vaccine. As a product of democracy, you must respect fundamental human rights of people. You must also learn to respect court orders. This is how we can sustain our democracy. Your insistence on COVID-19 vaccination before entry into public places must end today.