The Federal Government is pushing ahead with plans to secure $29.9billion loans in spite of scathing criticisms from ex-President Olusegun Obasanjo.
It was learnt that President Muhammadu Buhari has directed the Minister of Finance, Mrs. Kemi Adeosun, to engage the ex-President on the facts-behind-the-figures in respect of the loans.
The Finance Minister, who is said to be a “goddaughter” of the ex-President, may also get a feedback from Obasanjo to the government.
According to investigation conducted by our correspondent, the Buhari administration has discovered that Obasanjo does not have sufficient information on the loans.
Findings made by our correspondent indicated that the Federal Government has decided to ignore calls that it should shelve the loans and had resolved to engage Obasanjo and convince him on the need for the loans.
It was gathered that the government would also make all the details available to the ex-President to prove that the loans would not amount to fresh “debt traps.”
A top source said: “We are going ahead with the loans, but we will allay the fears of ex-President Obasanjo with necessary documents on the sources and plans.
“I think the ex-President needs some details. We are certainly going to engage Obasanjo. We will not take issues with him in the media.
“It is to the credit of Obasanjo that he secured debt reliefs for the nation. We want him to realize that we are not out to pile up fresh debts for the nation.
“These loans are coming from some liberal creditors including the World Bank, Africa Development Bank (AfDB), Islamic Development Bank (IDB), Japan International Co-operation Agency (JICA) and China EximBank.
“What Nigerians do not know is that we had many offers but were careful in selecting our loan facilitators.
“For instance, the Buhari administration rejected loan offers from the International Monetary Funds (IMF) because of Nigerians’ attitude to the international agency for such a bail out in 1990.
“Yet out of the $29.9 billion loans, the Federal Government’s share is $25.8 billion while the states will enjoy $4.1 billion facility.”
The source gave insights into the loans as follows:
- The external borrowing plan is a three-year plan covering proposed projects for 2016 – 2018. As such, the borrowings will be phased over the three-year period.
- The borrowings are highly concessional (non-commercial) with low interest rates and long tenors.
- The funding is being sought from multilateral institutions including the World Bank, Africa Development Bank (AfDB), Islamic Development Bank (IDB), Japan International Co-operation Agency (JICA) and China EximBank.
- The planned Eurobond issuance in the international capital markets is the only commercial source of funding.
- The source said: “There is no way we can even implement 2017 budget without the loans. We are in dire straits. We need some breather to revive the economy.
“It is not physical cash as being assumed. All the institutions will be involved in the management of the loans to ensure judicious use.
“And for a prudent government like that of Buhari, there is 100 per cent assurance that the loans will not be mismanaged unlike the case in the past.”
Responding to a question, the highly-placed source added: “The government has mandated the Minister of Finance, Mrs. Kemi Adeosun, to engage the ex-President on the indices behind obtaining the loans. Our hands are tied because of lack of funds to implement laudable projects.
“The Minister will then return with a feedback from the ex-President on how we can manage the loans better. Fortunately for Buhari, the Minister is more or less a “goddaughter” of Obasanjo.
“Whatever is the communication gap, we will use the engagement with Obasanjo to clear the air.”
The ex-President had asked Buhari to stay off the loans, saying that it would mortgage the nation’s future.
He said: “I believe that going for a huge loan under any guise is inadvisable and it will amount to going the line of soft option, which will come to haunt us in future.
“We immediately need loans to stabilise our foreign reserve and embark on some infrastructure development, but surely not $30 billion over a period of less than three years.
“That was about the magnitude of cumulative debt of Nigeria which we worked and wiped out 10 years ago. Before that debt relief, we were spending almost $3 billion to service our debt annually, and the quantum of the debt was not going down.
“Rather, if we defaulted, we paid penalty, which was added on.”
He said some of the projects to be financed by the $30 billion loans were not self-sustaining.
He added: “The projects listed for borrowing are all necessary in the medium and long run for our economy, but we have to prioritise.
“Railway is a necessary service, but it is not profit-making anywhere in the world today. We need steady and continuous but manageable funding on the railway project.
“Mambilla hydro is the same; necessary but it cannot pay itself, especially with the global energy sector of shale revolution, hydrogen fuel and increasingly cheap renewable energy such as solar.
“OPEC itself has projected that the price of oil will be hovering in the region of $50 per barrel for the next 15 years or so.
“The argument of concessional mixed with commercial does not hold water. When the concessional and the non-concessional borrowings are put together, interests alone will be in the region of 3% to 4%.
“The bunching of debt service will be a problem to confront other administrations in future. Soft option alone is not the answer; a mixture of soft and hard options is the way to go.
“Telling us that those projects will pay themselves cannot be the whole truth. We were told there was rainy day when we lavished our reserve and excess crude on frivolities. When we now have the rains beating us, there is no umbrella over our heads.
“Again, now we are being told the projects will pay themselves when we know damn well they will not.
“If we borrow some thirty billion dollars in less than three years, we would have mortgaged the future of Nigeria for well over thirty years to come.
“There may also be the problem of absorptive capacity which will surely lead to waste.”
The article first published by The Nation Newspaper