The Government, The Debts, and Your Future.

The Government, The Debts, and Your Future. 

In the Business world – A loan is a legal agreement between a financial institution or a bank (the lender) and a borrower with a promissory note on the mode of paying the loan and for how long. The loan usually comes with interest for its use along with “terms and conditions”. In most cases, a guarantor, business plan or a collateral is required for loan approval.

Now let’s try to have this related to African Governments,  both Federal and State on a shopping spree for loans.

Despite being blessed with crude oil and with a massive Internal Generated Revenue (IGR) from all sectors. The federal government of Nigeria has been busy borrowing from Beijing to London and to Washington. From one government to the other, loan agreement is being signed with repayment plans for the next 30 to 40 years! States from all the Federation are not left out – they are all competing and chasing banks from Dubai to Johannesburg on loans in millions of USD to be paid in 40yrs!

According to these Governors, all these loans are meant for infrastructural development and to offset backlog of salaries. These same set of governors were complaining about how their predecessors were siphoning funds and putting their states in debts and most claimed to have met empty treasuries. Hence, their inability to meet up with salaries and perform their duties. They blamed and campaigned against the then politicians on how they were busy taking loans with no visible and concrete projects – they got into office and only to continue the status quo – borrow and borrow.

Now let’s analyze the borrowing – Who in their right mind goes borrowing to pay salaries? What is the plan for next month or next year salaries? In a sane society – you borrow to invest in a yielding capital project, the project usually service the loan without the government losing a penny nor putting the future of the citizens in jeopardy.

Scenario A – A state government took the decision to borrow $150m from IMF or World Bank with the agreement to pay back in 30years. The state past governors had similar loans in place with both local and international financial bodies, now without considering the implication of the loan or the plan on how to repay it – the incumbent governor is now on the market for another loan. The same state that is seeking for a loan. They sponsored pilgrims to Israel for 100million naira, bought ram for the Muslim faithfuls to celebrate Eid to the tune of 100million naira. The government is donating millions of naira from one social and political gathering to another. Government officials are traveling first class around the globe and sleeping in 5star hotels while the Governor is building his 10th mansion and preparing to change his private jet. Oh, they really needed a loan right?

Scenario 2 - IMF approved $500 million for agriculture development in Nigeria with the agreement to service the loan for 40years. Now here is the beginning of the trouble to start with - IMF does not have the best Interest of Nigeria or Africa at heart. They have been known to be responsible for all the famine and explosion of poverty in the continent of Africa and other third world countries.

According to them and the media – their intervention is to “help” African countries out of debt and support their growth economically. IMF is aware that African leaders are greedy, lack discipline and the common instability of governments in the region so they have this covered in their plan. Of course, many African Countries including Nigeria and all other states of the Nation usually fail to service their debts ( no surprise as there was no such plan initially ), which in turn accumulates arrears on the principal amount along with interest! It is not uncommon to see that all these factors are way more than the actual loan after a number of years.

All over Africa - Nearly 35% of all outstanding debts are from arrears and interests, are you still wondering why the continent is forever in debt? It is a common knowledge that you don’t borrow to pay your debts! Between 1980 and the year 2000. Sub-Saharan African Countries had paid over $250billion to service their external debts and yet no development across the continent! This amount is way above the original loan in the early 80’s.

Some government apologist will say in their paymasters defence that “all nations are in debt including the USA”, that is true but those developed nations never fail to keep their end of the bargain by servicing their loans with payment of interests as at when due without accumulating unnecessary arrears or fines – they also have a plan in place on how to make that repayment without considering additional loan until when necessary and for a cogent reason.

Scenario 3 - The Federal government approached a Chinese Bank for a billion USD loan for the construction of a railway system across the Country promising 50 years repayment plan (of course there is no plan), the Bank requested a meeting in Beijing and not in Lagos or Abuja. The Federal government sent a delegation of 20 officials and each of these officials with an average of 5 assistants arrived in Beijing with a private jet and lodged in a 5star hotel with chauffeur drivers in limousines across the City of Beijing. Now the Chinese lender is confused as all the officials showed up in their designer shoes, suits and Rolex for a loan? - Now, these Chinese needs to be protected, after all the bank is in business to make a profit.

The Bank agreed to give this “Poor African nation with wealthy government officials” the loan but only at their own terms and conditions. The conditions are, the loan is to be given in Chinese Yuan, all the contractors are to be from China, all materials are to be imported from China, all Engineers including labourers are to be from China and a Chinese company is to be given the contract for the maintenance of the project at completion. Of course with these conditions - the money is heading back to China!

Our leaders request for a week to think over the terms, of course, they needed more days abroad as they get paid estacodes daily in USD. The more days out of the Country on official duty, the more money they are getting paid! They consulted their “Lords” at the seat of government back home who are only concerned not about the conditions but if the loan will be approved.

Eventually, after few days they made the call to the Bank officials that they are ready to discuss. The discussion = acceptance to the conditions - to the surprise of the Chinese officials, as they were willing to negotiate, they knew the conditions were too impossible and unrealistic.

Now watch the loan life cycle – the loan is now approved. The Bank paid the loan in Chinese Yuan to the appointed government account in New York, of course, the American bank only deal in USD which means the loan require conversion. The bank is now converting at their own local rate plus receiving a charge. The loan eventually gets transferred to a local bank in Nigeria (after much lobby from top high street banks with a lot of palm rubbing in the process to secure this lucrative transfer), the local bank is getting paid a percentage of this huge fund. Money arrived on the shore of the Country. There was no physical preparation or planning on what route the railway is to pass through and scheming by politicians begins. Every past President, State Governors, Senators, Oba, Emir, Obong, and Obi want their community to be considered even though their community have no economic requirement for a railway. Why would anyone consider a railway to Daura over Aba, Onitsha, Jos, Calabar, Kano or Maiduguri?

Money (loan) has arrived, imported contractors are in, imported labourers are in, and materials are being sorted from China to execute the contract. Not sure how the government misses the fact that the loan is returning back to the source with all the attached conditions. Local jobs lost in the process, no local labourers nor local contractors that circulate their income in the economy. Money is now heading back "home" while my lovely Country remains in debt for generations to come!

Nigeria is a case study for a self-inflicted bad debt. Nigeria as a Nation borrowed a whopping $5 billion in 1978 and by the year 2000, the country had paid $16billion in servicing the loan and still owed $31billion – said by the former President of Nigeria, President Olusegun Obasanjo.

As long as African leaders keep running back to IMF and the World Bank for loans at every chance despite the fact that as a continent, we are in debt for the next 3 generations – Africa’s debt crisis is tied to development. The higher the debt, the less development we as Africans will experience in our lifetime.

As we speak. Your federal government along with the state governors are still borrowing both locally and at international levels with strings of unrealistic conditions attached to all these loans. Just in case you are wondering what the collateral for these loans are – well your guess is as good as mine, there is only one logical conclusion – the people are the collateral!

If only they can run their states like a business – No business use all their income to pay salaries. There are more reoccurring expenditure than capital expenditure in most of these states. Borrowing to pay salaries is not smart neither is borrowing to build a Church making any sense to anyone beyond the builder.

Please, dear federal and state governments. Stop borrowing and look inward – generate your income locally and give us real infrastructure. Many states and local governments will go bankrupt in months without support from the central government. The same support they have been getting for decades and yet still in debt!

States borrowing for re-election and clouding their intention with white elephant projects on paper.

Loans getting approved with no infrastructure in place and money growing wings but the politicians and their cronies erecting mansions and competing with latest private jets – don’t ask for the loan, they are visible, only in the wrong hands.

The people are willing to pay to attend good standard schools.

The people will pay for well-equipped libraries.

The people will pay a toll on good roads.

The people are willing to pay for regular and stable electricity.

The people will pay for good farm products.

The people will pay for regular pipe-borne water.

Please stop mortgaging our future for peanuts whilst your grandchildren's future are fully secured.

So many debts- yet no development.