Foreign loans obtained for capital expenditure by Governments could be applied for domestic economic development.
However, this must be in tandem with a well-drawn-out program of action.
Foreign loans primarily serve the needs of the creditor economy and systematically neglect the domestic economy of the debtor country.
It is instructive to note that Japan obtained loans between 195 to 1914, externally, and was at liberty to use the funds in accordance with the dominant ideas of national economic development.
Interestingly, these foreign loans were a relatively minor and not a major source of capital for the Japanese economy as a whole.
During this period, Japan was able to direct between 12 percent and 17 percent of its national income into capital formation.
From the 1920s Japan began to receive some form of direct investments from abroad, while the government borrowing from abroad visibly ceased.
The same sequence applies to a number of other countries that have attained a substantial degree of development.
Indeed, foreign loans could be a suitable method of laying the foundation of a country's economic development in the form of public services and social overhead capital.
In the same vein, it is almost possible to substitute foreign funds for domestic saving to the extent that the country's consumption is increased and little or no addition is made to the rate of accumulation.
In Nigeria today, the absence of motorable roads, functional waterworks, and regular electricity supply across the states have all combined to hinder direct foreign investments. Political impediments coupled with induced security situations have given prominence to real estate, land grabbing, indiscriminate taxation, the importation of fairly used vehicles, and hard drugs as preferable choices for economic development.
In the middle of dwindling oil revenue, the Federal and State Governments in Nigeria have resorted to loans and bonds to promote national prosperity, efficient, dynamic, and self-reliant economy. Sadly, the details, repayment plans, terms, and conditions of the loans taken are not in the public domain, as regards accountability. The insinuation is that the government intends to trade off the assets it used to secure the loans. Of worry is the fact that the management and operation of the major sectors of the economy are in bad shape, with most states looking up to the center for their survival. In this interview, the Founder, Spiritual Head, and Grand Imam of Shafaudeen-in-Islam Worldwide, Prof. Sabitu Olagoke opines the Federal and State Governments should publish the terms and conditions of all loans to allay the Fear of Nigerians on the country's debt status. Excerpts :
Do you think the decision of the Federal and State Governments to resort to loans and bonds to promote national prosperity, efficient, dynamic, and self-reliant economy is in the best interest of Nigerians?
For Nigerians to be dynamically buoyant into prosperity, the structure on ground that is full of loopholes and leakages for corruption and self-enrichment may not be feasible if the crop of people in governance to date continues to be recycled.
Taking loans and bonds in and environment of indiscipline, impunity and corruption may not make the dream to be feasible. The socio-divine principle of transparency and accountability in transaction calls for public knowledge of government finances-domestic or foreign loans-and any aspect of government business activities. If we allow this in governance, it would create an enabling environment to criticize decisions in the offing. In the process, such as the Nigeria/Cina loan conditions, questions like the following would arise to save the next generation of government from possible future embarrassment. 1) Feasibility of the payback period. 2)Payback conditions-stringent or otherwise. 3) Respect for the Nigerian content law. 4) Due process demand on follow up questions must be examined too.
The Federal Government is, therefore, required to go through the protocol of the Debt Management Office(DMO) which represents the position of the Nigerian constitution.
Section 21(1) of the Act(2003) is clear on this: That no external loans shall be approved or obtained by any Minister unless its terms and conditions shall have been laid before the National Assembly and approved by its resolution: Anything different from the above-stated process should be regarded as been fraught with hidden agenda by the organs of process operations that are not playing their roles well. It is unfortunate that Nigerians, generally, to date are facing economic hardships amidst accumulated debts, perhaps because of corruption. For example, our debt profile rose from $12.18 Trillion in 2015 to $27.40 Trillion in 2019. In the year 2020 alone, the total debt incurred as approved by the National Assembly for the President is about a total of $28 billion, but without a commensurate improvement in the quality of lives of the people of Nigeria.
We are yet to have economic liberation and political freedom if we are to go by all the lacks and no access, even of basic needs.
The country is now divided into a democratic process with two extreme dividends-kleptocracy by the few rich and poverty by the majority of the population!
The following considerations are sacrosanct to taking the loans-1) Consider the needs of the people, seek for their consent, and carry them along on the implications of the terms and conditions attached to taking the loans. 2) Respect the local content agreement that some type of jobs that are no too technical and the aspects that do not require the transfer of technology must be handled by Nigerians to solve our unemployment challenges. The need for the Federal Government of Nigeria to publish the status and the terms and conditions of repaying outstanding loans, collected and inherited, including the China/Nigeria loan deal that is currently attracting controversial reactions with clear monitoring mechanism in place to monitor the way and manner it is to be spent on the various projects attached to the loans. Ii would be of interest to Nigerians if this template could be extended to all outstanding loans that have become the country's debts. This will allay the fears or give all Nigerians the reason to reject further borrowing by the present administration or the next, so as to have a bequeathable legacy of sustainable development rather than a game of deceit that would continue to impoverish the masses and the environment.