The Socio-Economic Rights and Accountability Project has urged the World Bank to suspend any disbursement of the $800m loan to the Federal Government and to request the incoming administration to provide satisfactory explanations for the loan.
The position of the human rights organisation was contained in a letter dated May 13, 2023, and signed by its Deputy Director, Kolawole Oluwadare to the World Bank, which was also made available to ThisNigeria yesterday.
SERAP urged President David Malpass and the World Bank to reopen the discussion on the reportedly approved $800m loan with the incoming administration to clarify the details on the rationale and use of the loan because the term of office of the government of President Muhammadu Buhari ends in May 2023.
The Federal Government had in April announced its plan to spend the $800m loan as part of its subsidy palliatives measures.
Just last week, President Buhari requested the Senate’s approval for the World Bank loan.
According to the organisation said, “The World Bank should comply with its Articles of Agreement in disbursing any loans. The Bank should not sacrifice international standards in the rush to disburse the $800m loan to the government.”
SERAP said, “Suspending any disbursement of the loan to the government would reduce the risks and vulnerability to corruption and mismanagement.
“SERAP is concerned that the government is seeking to spend the loan when it has barely two weeks to leave office and when the project objectives and intended purposes for which the loan is reportedly approved and will be disbursed remain unclear.
“The government has not satisfactorily explained or justified the need for the loan at this time, especially given the lack of clarity on its use and the crippling debt burden, and the disproportionately negative impact of these retrogressive measures on poor Nigerians.
“The World Bank cannot close its eyes to these important transparencies, accountability, and human rights issues. The National Economic Council (NEC) on April 27 reportedly suspended the planned removal of subsidies on petroleum products by the end of the Buhari administration.
“We would consider the option of pursuing legal action should the World Bank refuse to suspend the disbursement of the loan to the Federal Government and to implement the other recommendations contained in this letter, and we may join the government in any such suit.
“The crippling debt burden is a human rights issue because when the entire country is burdened by unsustainable debts, there will be little money left to ensure access of poor and vulnerable Nigerians to legally enforceable socio-economic rights.
“There is also a lack of transparency and accountability in the spending of the loans so far obtained. The details of the projects on which approved loans are spent are often shrouded in secrecy.
“The Bank has a responsibility to ensure that the Federal Government is transparent and accountable to Nigerians in any discussion to obtain loans, credits or grants from the bank and how it spends any approved loans, credits or grants.
“The Bank’s power to provide loans is coupled with a fiduciary responsibility to ensure that the spending of such funds by the government meets international standards of transparency and accountability, including those entrenched in article 5 of the UN Convention against Corruption.
“The World Bank should also seek transparency and accountability commitments if the incoming government decides to use the loan to implement the National Social Safety Net Programme (NASSP) because the spending on the programme has been mostly shrouded in secrecy.
“Under the programme, the government reportedly plans to transfer the sum of N5,000 per month to 10.2 million poor and low-income households for six months.
“SERAP encourages you and the World Bank to in any future engagements with the incoming government insist on accessing information on the spending by the government on the National Social Safety Net Programme (NASSP) since 2015 and the publication of the details of such spending.
“Under Article 1 of the World Bank Articles of Agreement, the stated purposes of the Bank include ‘to assist in the reconstruction and development’. The Bank is also to ‘be guided in all its decisions by the purposes.
“Under Article 3 Section 4(vii) of the World Bank Articles of Agreement, loans made or guaranteed by the Bank ‘shall be for specific projects of reconstruction or development.’ Also, under Article 3 Section 5(b), the Bank ‘shall make arrangements to ensure that the proceeds of any loan are used only for the purposes for which the loan was granted.
“According to our information, the Federal Government of Nigeria recently secured a $800 million loan from the World Bank. The government reportedly plans to spend the loan as part of its ‘subsidy palliatives measures’, and aims to target 50 million vulnerable Nigerians or 10 million households.
“According to the Debt Management Office, Nigeria’s total public debt stock, including external and domestic debts, increased to N46.25 trillion or $103.11 billion in the fourth quarter of 2022.”
*Buhari’s massive borrowing reverses Nigeria’s debt relief gains, Aja, economist
Following Buhari’s fresh request for $800m loan from the World Bank to help Nigeria expand its National Social Safety Net Programme (NASSP), an economic expert, Mr Kalu Aja believes the President’s borrowings is uninformed and a reversal of a landmark debt relief accomplishment made under former President Olusegun Obasanjo.
According to thewhistler.ng, Aja said, “All the debt relief work done by President Obasanjo and Ngozi Okonjo Iweala has been undone by President Buhari. The economic consequence of having economic illiterates in power who fail to take economic advice.
“For the economic illiterates, when OBJ became President, Nigeria owed about $44b but had borrowed less than $5bn, the increase was on interest on Interest, fines, etc.
“Thus, OBJ paid cash and bought back Nigerian debt in a deal. No other nation has been offered that ever again.
“If we had not cleared that $44bn, it would be $100bn today based on high-interest rates and negative compounding. It’s like borrowing at 21 cent a month from your credit card to fix your bus which earns five per cent a year in return.”
The loan will be used as palliatives for the people categorised as poor in Africa’s most populous nation.
Fuel subsidy costs Nigeria $850m monthly which has become unsustainable but experts believe taking a fresh loan to sustain its social investment programme for poor and vulnerable Nigerians is a double-edged sword.
“You may wish to note that the Federal Government of Nigeria under the conditional cash transfer window of the programme will transfer the sum of N5, 000 per month to 10.2 million poor and low-income households for six months with a multiplier effect on about 60 million individuals,” the President wrote to the Senate.
Nigeria’s debt stock managed by the DMO as of December 2022 was N46.25trn or $103.1bn.
Domestic debt made up N27.5trn or $61.4bn. The external debt profile accounts for $41.69bn, an increase from the $7.35bn external debt he inherited from the Goodluck Jonathan administration.
With the securitisation of the N22.7trn ($50.6bn) debt, domestic debt will balloon to N50.2trn or $112.03bn from N27.5trn ($61.4bn).
This is a significant rise of 82.5 per cent.
Historically, external debt inherited by Obasanjo was $28.04bn in 1999 which grew to $36.99bn in 2004.
In October 2005, Nigeria and the Paris Club announced a final agreement for debt relief worth $18 billion and an overall reduction of Nigeria’s debt stock by $30 billion.
Nigeria paid an initial $6bn to qualify for debt relief.
$8.2bn of the debt was bought back at a discount and paid off the final $6bn at a 60 per cent discount.
Obasanjo left a debt of $2.17bn for his successor Umaru Musa Yar’Adua. Yar’Adua left office leaving an external debt of $2.58bn in 2010. At the end of Jonathan’s tenure in 2015, the external debt was $7.35bn.
Members of Buhari’s government like the Director General of the Budget Office of the Federation, Mr Ben Akabueze had raised the alarm that the nation’s debt profile was becoming unsustainable.
