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.”
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