Friday, May 22, 2009

World Bank loan for budget deficit?

A CONCESSIONARY World Bank loan for Nigeria aimed at tiding over financing gaps in the 2009 budget featured in the discussions held at this year's World Bank/IMF Spring Congress in Washington, D.C., USA. Finance Minister Mansur Muhtar, who is accountable to the Nigerian people, merely glossed over the talks as exploratory. But World Bank Country Representative Onno Ruhl, assuming the responsibility that ordinarily devolves primarily on the leader of the country team, duly addressed a press conference in Abuja and revealed that negotiations for four projects were successfully completed.

The conclusions are astounding. The first project is an overarch. Having fleeced the country while acting as agents of the Paris and London clubs of creditor countries, the World Bank/IMF seek to perform similar exploits as agents of private international oil companies operating under Nigerian jurisdiction in "getting more enforceable commercial framework about the supply of gas" for local generation of electricity. The multinational oil companies (MOCs) neither relate to their home governments via the auspices of the World Bank/IMF nor have the latter been involved in the supply of gas and crude oil by various oil and gas producers to the world market.

Instructively the same MOCs have been unconventionally lobbying the National Assembly to delay interminably the passing of a number of oil sector reform bills that are meant to spell out the ground rules and the necessary framework for oil sector operations in the country. Plans by World Bank/IMF to accord Nigeria-based MOCs the status of sovereign states subvert and contravene provisions of the 1999 Constitution. Our national interest will be best served by passing the raft of oil sector bills into law to allow any dissatisfied oil company to opt out of the country.

The second negotiated project involves funding to have the way for every Nigerian household to own at least two insecticide-treated mosquito bed nets. The World Bank/IMF even drafted the leader of the Christian Association of Nigeria and the Sultan to Washington, D.C. to prepare them to help popularise the bed nets among the faithful. But it is not the place of World Bank/IMF and least of all Nigerian faith leaders to foist mosquito nets produced by private companies in developed countries upon impoverished Nigerians. Government should instead create the right investment climate to enable Nigerian entrepreneurs to manufacture impregnated bed nets locally so as to boost employment and arrest pervasive poverty.

The third project concerned the control of HIV/AIDS, attempts to implement the Gleneagles G-8 summit directive that developing countries commit in advance to purchase products of Western medical research into the various pandemics. However, it is not beneficial for Nigeria to obtain a World Bank loan in order to support Western medical research and drug exports. Any government action in this regard should be geared to fund local research into those diseases.

Apart from not being the priority items in the 2009 budget, both the second and third projects promote current consumption and import-dependency whereas what the country needs are development-enhancing projects that generate self-liquidating streams of income.

The fourth negotiated project curiously relates to funding for secondary school education. A few years after articulate stakeholders offered cogent reasons for rejecting World Bank funding for the universities, government preference for this project leaves much to be desired. Nigeria should independently fund secondary school education.

Further obnoxious implications of the so-called concessionary World Bank loans include the fact that over 50 per cent of their value is routinely expended on technical and consultancy fees (that incorporate kickbacks for recipient country government top shots) paid to foreign experts. The balance is tied to imports of overpriced items from particular developed countries while such projects are so poorly executed that additional WB loans are recommended. Worse still, loan recipient countries lose their independence of action to the World Bank/IMF, which proceed to pursue policies that are injurious to the countries' interests but favour developed nations. Government should shun subtle Western ploys to recolonise Nigeria.

Notwithstanding the country's present low debt service ratio, it is clear from the foregoing that a World Bank loan is a poisonous remedy for the treatment of budget deficit. It is therefore imperative for the country to operate within her means by scaling down the 2009 budget. We had noted last December 16 that the budget was not right, a fact that Mr. President has now confirmed by terming the 2009 budget faulty. Constituency projects and similar extraneous insertions in the budget should be expunged. There is need to plug all areas of wastage such as inflated salaries and duplicated perks for the governing political elite while the MDAs should discountenance any demand by legislators for under-the-table payments in return for less than diligent supervision.

Government should show Nigerians evidence of faithful implementation of the budget by rendering quarterly reports. It is not enough to give the amounts released; there should be detailed statements of expenditure on each project and the completion level attained. There should also be regular and detailed information on current government revenue receipts and other available financial resources.

To finance the revenue gap, government has at its disposal, one, the excess crude account. How much resides in this account and how is it being deployed? Two, the foreign reserves become quite handy as their size in January was thrice the total federal budget initially presented to the National Assembly. Three, there are staggering proceeds of bonds (without requisite legislative backing contrary to financial and accounting best practice) arising from restructured treasury bills or mopped excess liquidity, which average some N1 trillion annually and which today have pushed the domestic national debt above N3.3 trillion.

Unfortunately, unlike inflation and deficit-combating conventional bonds that are made up of the spare resources of subscribers, these byproducts of faulty monetary policy management, on which the country is made to pay 10-17 per cent interest per annum, are hyper-inflationary and are therefore neither reflected in the federal budgets nor ploughed into any tangible investments. Latest CBN data indicate that repatriated proceeds on money market securities such as restructured bonds and treasury bills alone exceed $200 million monthly, a veritable dash to foreign interests while the administration goes a searching for entrapping World Bank bridging loan. To stem this leakage, the CBN should end the illegal practice of printing naira equivalents of dollar receipts in the Federation Account for sharing among the three tiers of government.

As regard loss of revenue occasioned by what the administration has euphemistically termed the situation in the Niger Delta, we hold that urgent reversal of the trend is vital to the national interest and therefore implore government to respect the legitimate demand of the people of that part of the country for a just federation. In general through good management of the available but largely wasting resources, this administration is in a position in 2009 to run the economy at full speed. There is absolutely no need for any rueful budget supplementation from abroad.