Former Minister of Finance, Dr. Ngozi Okonjo-Iweala
THE claim by Mohammed Bashar, Permanent Secretary of the Ministry of Transport, that $600 million out of the $1.05 billion loans secured from the Chinese Exim Bank for the renewal of our rail infrastructure was allegedly diverted and the rebuttal from the immediate past Minister of Finance, Ngozi Okonjo-Iweala, present a puzzle that needs to be resolved. Bashar had told President Muhammadu Buhari when he took his turn to brief him about the ministry’s activities that only $400 million was left in the vaults of the Finance Ministry.
Okonjo-Iweala, who said Bashar’s claim was totally bereft of truth, then gave a breakdown of how the Federal Government used the loan as follows: $500 million on four international airports; $500million on Abuja Light Rail project; $984 million spent on Zungeru hydro-electric plant and $100 million for Galaxy Backbone project. This is confounding as its total is far above the $1.05 billion loan at issue.
However, any diversion of funds is decidedly an illegality as it is fuelled by impunity, corruption and lack of accountability in governance. Financial records of the Ministries, Departments and Agencies are replete with such malfeasance, documented in the annual reports of Auditor-General for the Federation, without any action taken on them by appropriate authorities.
Foreign development loans are always tied to specific projects, and released after tightly-sealed agreements. Shocked by Bashar’s claim, Buhari worriedly quipped: “I hope that due process was followed before such diversions were carried out. Taking money for one project to another has to be done properly.”
Besides the rail facility, others obtained during Goodluck Jonathan’s Presidency included the $1.6 billion for the Turn Around Maintenance of the four refineries in Port Harcourt, Warri and Kaduna; $350 million from General Electric in February 2014 and $1 billion for arms procurement. Most of these credits came from China.
Nigeria’s foreign debt profile, says the Debt Management Office, stood at $10.316 billion (federal and states) as of June 30, 2015. But the Federal Government alone has a domestic debt overhang of $42.633 billion.
While public officials have not expressed qualms about the steady hike in our foreign indebtedness because of the belief that Nigeria’s debt-to-Gross Domestic Product ratio is not yet outside the international threshold, Nigerians are deeply concerned about the profile we already have, especially their utilisation and the long-term consequences of debt repayment.
A foreign loan abused is a millstone around the neck of the nation. This was a trap the country fell into in the past, which climaxed in its payment of $12.4 billion to Paris Club of international creditors in 2005-6, to exit from the burden. Ultimately, $18 billion was written off. The Bashar/Okonjo-Iweala janus-like case, therefore, makes it imperative for the Buhari government to evaluate how the loans were used.
Consider this: After the original builders of the four refineries declined their TAM contract in 2013, the NNPC mobilised its engineers and local contractors for the job. A contract sum of $475 million tendered by SAIPEM, later reviewed downwards to $297 million, was considered too high by the NNPC. Its Coordinator, Corporate Planning and Strategy, Tim Okon, had told the Seventh Senate’s Committee on Petroleum Resources (Downstream) that “going forward, we have been able to reduce the cost of doing the TAM from $550 million to $152 million.” This leaves a balance of more than $1.4 billion out of the $1.6 billion borrowed under Diezani Alison-Madueke as Petroleum Minister to fix the refineries. But do the NNPC books show this balance?
In all the back-and-forth, it is easy to lose sight of how foreign loans were misapplied in the past. Since 2006 when the country freed itself from the debt yoke, public officials have unwittingly and gradually been returning it to that discredited past in our quest for funds to effect infrastructure turnaround in road, electricity, schools, refineries, aviation and health facilities, amid the huge revenue earned from crude oil sales.
As a result, every fund borrowed must be properly accounted for. Therefore, we advise the Buhari government to audit the expenditure of post-2006 loans purportedly procured to provide basic facilities. According to Russell Cheetham, a consultant to the African Development Bank, Nigeria needs $350 billion over the next 10 years to bridge its infrastructure deficit. Such prognosis is economically daunting.
The DMO might have been influenced by this alarming picture to argue in “The National Debt Sustainability Analysis 2014 Report” that Nigeria’s maximum borrowing in 2015 should be $12.3 billion, in the ratio of 60: 40 from external and domestic sources. However, this stance is not convincing given the prevailing dire local and global economic outlook. Oil prices at the international market have continued to cascade since mid-2014. As the annexure in the NDSA stressed, “…a drastic and persistent fall in public assets, caused by a fall in revenue, would, in the long run, increase the risk of debt distress.”
Consequently, restraint should be Buhari’s watchword. Developing countries fall for multilateral and bilateral facilities because of their so-called “soft” or friendly repayment terms. It was this kind of bait that landed Nigeria in the $36 billion debt quagmire. The journey began with the $13.1 million it borrowed from Italy in 1964.
Recently, the World Bank offered a $2.1 billion loan to Nigeria for the rebuilding of North-East ruined by six years of Islamist insurgency, which spikes the present figure. We need to break this vicious circle of falling for any foreign facility on offer now; and look inwards for redemption with the ongoing aggressive plugging of leakages.
Punch NG
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