The Senate, on Wednesday, approved $1.5bn and €995m external borrowings for the Federal Government for economic stimulus and importation of knocked down farm machines from Brazil.
The action followed the consideration and adoption of the report of the Senate Committee on Local and Foreign Debts, chaired by Senator Clifford Ordia (Edo Central).
The loans were parts of the external borrowings the President, Major-General Muhammadu Buhari (retd,) had, in May 2020, asked the red chamber to approve to finance various priority projects of the Federal Government and to support the state governments facing fiscal challenges.
But economic experts, including a former President of the Association of National Accountants of Nigeria, Dr Sam Nzekewe and a professor of Economics at the Olabisi Onabanjo University, Ago Iwoye, Ogun State, cautioned government against excessive borrowing.
Ordia, while presenting the report, said $1.5bn would be sourced from the World Bank to finance projects of state governments facing fiscal challenges arising from the COVID-19 pandemic.
The projects, according to Ordia, are States Fiscal Transparency, Accountability and Sustainability programme to provide fiscal support to states and COVID-19 Action recovery and economic stimulus programme to support state-level efforts to protect livelihoods, ensure food security and stimulate economic activity.
He said the €995m to be sourced from the Export-Import Bank of Brazil would finance the Federal Government’s Green Imperative Project to enhance mechanisation of agriculture and agro-processing in Nigeria to improve food security.
Ordia noted that the borrowings were largely concessional loans with low interest rates and a reasonable moratorium and payback period.
He explained that six indigenous assembly plants, one in each geo-political zone, had been identified and would be rehabilitated to assemble completely knocked down farm machinery and equipment to be imported from Brazil.
According to the lawmaker, the CKD machines to be imported would specifically be adapted for local conditions with job creation opportunities for citizens.
He emphasised that the loan was intended to be used to deliver technological package to small holder farmers for a fee through the establishment of service centres in each of the 774 local government areas of the federation to be owned and run by private business entities.
On providing fiscal support to states across the federation, Ordia disclosed that $750m from the World Bank would be used to finance States Fiscal Transparency, Accountability and Sustainability Programme in all states of the federation and the Federal Capital Territory.
He added, “The committee found that the federal objective of the restructuring is to support states to introduce measures to further mitigate fiscal shocks by introducing COVID-19 responsive disbursement linked indicators at state level, to match the fiscal measures at the federal level.”
“The committee notes that it is based on the above restructuring, that additional financing of $750m is now required for the COVID-19 response of Nigeria.”
Reacting to the loan request, a member of the committee, who is also the Senator representing Osun West, Adelere Oriolowo, an agricultural expert, said the essence of the loan to buy tractors from Brazil would be a waste of funds without experts that would handle the equipment.
He said, “Right now in the country, we don’t have the expertise. We don’t have those who can effectively handle the equipment. “We don’t have enough people who were trained in the art of handling tractors, service and field application. As a farmer, I have four tractors on my farm but only one operator who got himself trained out of his own initiative and inquisitiveness.
“I have a lot of farm equipment that the man cannot handle on the field. The manpower to handle the huge number of tractors that we are trying to import is not there.
“The government should ensure that the issue of manpower is part of the memorandum of understanding so that we would not waste money at the end of the day.” The House of Representatives on its part received the report on the external borrowings on Wednesday
He said, “The loan must be targeted at something. Even the fund to finance the budget is not there. The problem I have with them is when they borrow and you don’t see it.”
The Chairman of Foundation for Economic Research and Training, Prof Akpan Ekpo, however, said the loans for the provision of infrastructure were acceptable as the country had a large infrastructural deficit.
Reacting to the loans approved by the Senate, the Abuja Chamber of Commerce and Industry, said the collection of excess loans would pose a serious threat to Nigeria’s sustainability indices.
President, ACCI, Abubakar Almujtaba, said although government’s borrowing was meant to bring about more development projects if well-utilised, there was need to reduce the country’s recurrent expenditure.