AN economist has blamed the Nigerian government’s reliance on external loans to fund infrastructural projects for problems in the country’s education and health sectors.

Nigeria’s health sector is practically grounded following the ongoing strike embarked on by the association of resident doctors while lecturers in public universities, whose unending industrial actions have marred tertiary education in the country, are threatening to once again down tools.

Chief Executive Officer of Growth Masters Consulting Wale Oluwade, while speaking on Channels Television on September 15, said the concentration of funds on infrastructure had left the government with no resources to take care of the education and health sectors  which, according to him, were more critical for human capital development.

Oluwade was reacting to Nigerian President Muhammadu Buhari’s request to the National Assembly to approve fresh external loans of $4.05 billion and €710 million for his administration.

The request was contained in a letter dated August 24, 2021, which was addressed to both chambers of the National Assembly and read on the floor at the resumption of plenary on September 14.

Minister of Finance, Budget and National Planning had in August said the Buhari’s administration was borrowing ‘sensibly’ to cater to the country’s infrastructure needs.

Nigeria’s total public debt stock which comprises the debt stock of the Federal Government, the 36 state governments and the Federal Capital Territory stood at N33.107 trillion as of March 31, according to figures released by the Debt Management Office (DMO).

Nigeria’s external loan stock, which stood at $32.86 billion as at March 31, will hit an all time high of $45 billion when the National Assembly approves Buhari’s latest loan request.

With the addition of the fresh $4.05 billion and €710 million loans, external borrowings would have hiked Nigeria’s foreign debt portfolio by 366 per cent since 2015 when the total outstanding foreign debt was $9.7 billion.

Oluwade suggested that the Nigerian government was not borrowing for the right reasons.

Speaking of what he described as ‘implications and risks’ of the external loans being taken by the Buhari administration, he observed that deploying the funds on infrastructure had undermined other key sectors.

“Another problem is we keep borrowing to fund infrastructure but starve other key sectors of human development – such as education, health and housing – of funds. It (infrastructure) also takes up funds that should be dedicated to poverty eradication.

“The Federal Government has not been able to meet agreements reached with the doctors and lecturers because the funds are not available. The funds are being used to develop so called infrastructure.

“There are risks and implications and one of the clear ones that we have seen is that Nigeria is looking for money to meet essential, critical services such as education, healthcare and housing and the list goes on,” he said.

For the economist, the Nigerian government’s concentration on infrastructure raises a question over the definition of what is an asset for a nation.

“Are assets roads, rails and bridges and all of that? Or are assets the human beings?” he asked.

The World Bank came up with the Human Development Index (HDI) after realising that Gross Domestic Product (GDP) alone does not indicate the strength of the economy of a nation, Oluwade observed, noting that the Nigerian government was neglecting human capital development.

Rather than concentrate funds on infrastructure, Oluwade said the government should ‘invest massively’ on small and medium enterprises (SMEs) and poverty alleviation.

Buhari says it wants to lift 100 million Nigerians out of poverty.

But Oluwade said there was no clear, coherent plan towards achieving that objective.

He advised the government to utilise alternative arrangements in funding infrastructural development so as to free up funds for human capital development.

“My worry is what these loans are being used for, because there are alternative financing models for infrastructure. Why don’t we concession some of these critical infrastructure that we are getting these loans for? Why can’t we get private sector investment to fund these assets? That way the private sector comes with their expertise and know-how and their funds to build these assets on long-term concession agreements and they are able to recover their investments and then transfer the assets back to the Federal Government.

“Meanwhile the Federal Government will have the revenue and resources to do what every government is in existence to do, which is tasking care of the welfare and security of the citizens. Is the government meeting the welfare and security of Nigerians? A responsible government should develop and fund SMEs.”

The economist, in the same vein, warned that with the manner the Buhari administration was taking up external loans, Nigeria risksed falling back into a debt trap.

In 2019, the Nigerian government realised a total revenue of about N3.86 trillion but out of the amount, N2.11 trillion was spent on debt servicing.

The Nigerian government’s debt servicing to revenue ratio rose from 54.66 per cent to 72 per cent between 2019 and 2020.

“The risk of what the Federal Government is doing is huge interest costs. The debt trap we got into was due to the accumulated interests on the loans that we were unable to pay.

“We are finding our way back there now because the basis of our ability to pay back these loans is purely on one economic activity which is crude oil and the prices of the crude oil keep fluctuating and we have no control over it.”

Citing the budget projections in the 2021-2024 Medium Term Economic Framework (MTEF) which stated that Nigeria was going to use 47.8 per cent of its revenue in the next four years for debt servicing, Oluwade stressed that the borrowings being undertaken by the Nigerian government was not sustainable.

However, another economist Ken Ife, a professsor, said it was not out of place that the Nigerian government would continue to borrow.

“More debts are going to come in, this is not the end of it. The borrowing is not unexpected; it was not surprising,” Ife said, while also reacting to Buhari’s fresh loan request on Channels Television on September 15.

He said donors would continue to lend to Nigeria because the Nigerian government was not defaulting on loan obligations.

“One thing you have to understand is that in 2005 Nigeria was owing about $30 billion and 30 per cent of that money was due to penalties and all kinds of infractions. But now for six years, the government has been paying, it hasn’t defaulted and, as bankers will tell you, as long as you are keeping a clean slate and not defaulting, they will keep lending to you and that is why we have so many people willing to lend to us now because they have the confidence that we will not default so they will keep lending.”

Ife said the government was right to borrow in order to meet the country’s infrastructural challenges, which he described as an ‘existential problem.’

Nigeria’s infrastructure stock is only 34 per cent of the country’s GDP,  while South Africa’s is 80 per cent, he said. Several countries have over 100 per cent of infrastructure stock, he further said.