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<\/figure>\n\n\n\nOne sure way to deal with the issue of resource\nshortcoming is to borrow. But others have creatively hewed water out of stone\nby shunning indebtedness and looking inward. \nThis is the story of two Koreas: North implemented Juche, a\nself-reliance economic principle and the South invested in human resources\nyielding human capital with power for innovation, which put that country on\nindustrial path. Nigeria cannot be said to be deficient of these factors. We\nare endowed with abundant natural resources and a huge population that by some\nestimate will push the country into the second most populous country in the\nworld in the not-distant-future. But the country has not been lucky with\npolitical elite capable of harnessing its resources. The country is richly\nendowed with short-sighted rulers who have treated the commonwealth as a\nprivate enterprise and have therefore continued to squander the wealth of the\ncountry.<\/p>\n\n\n\n
There is a flipside to borrowing, no matter how\njustifiable and it is as Benjamin Franklin puts it: he that goes a borrowing\ngoes a sorrowing. This is very true of most African countries many of which are\ncurrently looped in the race for bonds. For example, at independence, Nigeria\nrelied on external loans for meeting its budget deficit. They came from\nmultilateral organisations like the World Bank and International Monetary Fund\n(IMF) as well as trading partners like Britain, USA and Germany. At\nindependence, the country\u2019s debt stood at N82.4 million and by 1965, went up to\nN489 million in 1970. By 1975, the country took its first jumbo loan of $1.4\nbillion at a time its earnings from crude oil was looking good and needed more\nof investment for the rainy day. It is to be noted that the notorious \u2018\u2018cement\narmada\u2019\u2019 underlined the profligacy of the period. The country\u2019s indebtedness\nwas compounded by the civilian government of 1979-1983. The civilian political\nelite embarked on capital projects, many of them white elephant, with external\nfunding that plunged the country into debt peonage. According to a scholarly\nanalysis, \u201cover 40 per cent of the projects for which external loans were\ncontracted and fully drawn in the 1980s and 1990s were never started while many\nof them were economically unviable.\u201d The consequence was that the country\nslipped into debt trap.<\/p>\n\n\n\n Nations in debt peonage do contend with\ndebilitating interest rate whether the loans are concessionary or otherwise.\nAnd donors do seek their pound of flesh through conditionalities. As is well\nknown in financial circles, past African debt crises involved restructuring\nwith creditors under conditionalities that were adversarial to economic\ndevelopment. In practice, default could involve forfeiture of assets domestic\nor foreign to the lenders. Even in the context of the dynamics of debt\nmanagement, Nigeria does not have the capacity to cope with the discipline of\nprivate markets and the international financial institutions where the credit\nbeing sought may come from. Even where sovereign bonds are issued, the country\ncannot cope with the interest rates charged by investors. At the moment,\ndebt-serving obligation is already taking a huge toll on the national income.\nThe trouble has been that we hardly follow our money trails.<\/p>\n\n\n\n It is however curious that the debt reprieve of\n2005 has now turned to bondage in 2020. In 2005, before exit from indebtedness,\nNigeria\u2019s external debt stood at about $32 billion. Strangely, the country has\nquickly slipped back to indebtedness under the current administration rising to\nabout $27.1 billion as at June 30 last year. This new accumulation of debt has\nno grounding in economic management and financial engineering. The country is\nblessed with oil and yet the country cannot refine and has wasted billions of\nnaira importing refined petroleum product into the country. Besides, the\noperation of the Nigerian National Petroleum Company (NNPC) is opaque. A recent holistic analysis of our total\nnational indebtedness including domestic ones by scholars has revealed that by\ntoday\u2019s statistics of N25 trillion, the country has borrowed in three years\nmore than it ever did in 30 years previously.<\/p>\n\n\n\n The trite economic argument of corruptible elite\nis that the debt-GDP ratio of 30 per cent threshold is yet to be exceeded and\nalso that governments must borrow to fund policies and infrastructure in ways\nthat can address growth and development. Doubtless, borrowing is a healthy\noption as long as the government is disciplined enough to repay. But we note\nthat borrowing comes with the risk of crises. This is more so for a profligate\npolitical class. There is nothing in our history that shows that we are prudent\nand honest in the management of resources whether national wealth or credit\nfacilities. And so this newspaper is persuaded\nthat if care is not taken, the country\u2019s case will turn to be the case of\n\u201cshort-sighted financial markets, working with short-sighted governments,\nlaying the groundwork for the world\u2019s next debt crisis.\u201d In the present\nfinancial crunch, self-inflicted anyway, there are alternatives to borrowing.<\/p>\n\n\n\n Hold your breath, follow us this week on the\nalternatives and much more on why the authorities in Abuja should not be\nallowed to go on borrowing again.<\/p>\n","protected":false},"excerpt":{"rendered":" By Editorial Board Guardian Nigeria The statistics tell it all. The government is in dire financial straits. This year\u2019s budget deficit is put at $6.03 billion and will be financed by both domestic and external…<\/p>\n","protected":false},"author":1,"featured_media":345,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":false,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false},"version":2}},"categories":[4],"tags":[83,86,85,82,48],"class_list":["post-344","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-polity-politics-governance","tag-buhari","tag-debt","tag-economy","tag-loan","tag-nigeria"],"jetpack_publicize_connections":[],"yoast_head":"\n![\"\"](\"https:\/\/i0.wp.com\/towncryyers.com\/wp-content\/uploads\/2020\/02\/a2fb13e96ec74b6f9a1e4cf201c42d1c_18-1.jpg?resize=800%2C450&ssl=1\")
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