Mkpoikana Udoma
Port Harcourt — The Petroleum Products Retail Outlets Owners Association of Nigeria, PETROAN, has berated President Bola Tinubu for seeking a fresh $500 million loan from the World Bank to bolster basic education, while failing to clarify the savings from fuel subsidy removal.
PETROAN expressed concerns about Nigeria’s rising debt profile, which has surged to N121.67 trillion ($91.46 billion) in Q1 2024, from N97.34 trillion ($108.23 billion) in Q4 2023, as Tinubu’s administration had already secured $4.95bn loans from the World Bank amid the country’s rising external debt servicing costs.
Publicity Secretary of PETROAN, Dr Joseph Obele, pointed to a troubling trend of borrowing for operational costs rather than investments that could stimulate economic growth and job creation.
Obele lamented that despite Tinubu’s assurances of reducing borrowing and reallocating funds saved from petrol subsidy removal to crucial sectors, the government continues to seek external loans.
These, he said, raise questions about the effectiveness of Tinubu’s fiscal strategy and the promise of financial relief for ordinary Nigerians.
He said,”More worrisome about the consistent loan request by the federal government is the rising debt profile of NIgeria even after the removal of fuel subsidy. Therefore, the big question NIgerians are asking is; where are the savings from subsidy removal?
“One of the promises made by Nigeria’s President Bola Tinubu on assumption of office was that his administration would cut down on the over-reliance on borrowing for public expenditure.
“In fact, Tinubu said he was going to curtail government’s borrowing so as to reduce the debt service burden on the country. Besides, Tinubu told Nigerians that his “fuel subsidy is gone” pronouncement on May 29 would lead to significant savings and resource re-allocation for the country.
“Mr President promised to re-channel the funds saved from fuel subsidy removal into better investment in public infrastructure, education, healthcare and jobs that will materially improve the lives of Nigerians
“But many Nigerians were taken aback following the consistent request for external loans running into billions of dollars.”
PETROAN advised the federal government of Nigeria to urgently cut down on expenses and frequent borrowing, lamenting that increasing burden of external debt would make the country go bankrupt in few years.
“Borrowing by a nation is not really a bad thing, but if the motive is for consumption instead of production, then it is bad and harmful to the economy. In Nigeria, we borrow from foreign creditors mainly to finance our own excess expenditures, which is disastrous to the economy.
“Ideally, a nation should borrow to boost production and increase output and income levels. Borrow to invest in agriculture that will eventually lead to job creation and food security. But the contrary is the case in Nigeria.
“Basically in Nigeria, we borrow to pay salaries and we borrow for debt repayment like a cycle. If large amounts of external debt need to be repaid, then there is less money left for investment purposes. It hampers future economic growth.
“If the currency of the borrowing country depreciates with respect to that of the lending country, then the real value of interest (as denominated in the domestic currency) will rise.
“When a government’s expenditure exceeds how much it earns in a year, it faces a fiscal deficit. In order to finance the adverse gap, the government borrows money from another country. In the next year, with the additional expense of interest payment and loan repayment, the government might face a deficit again and be forced to take another external loan.
“In subsequent years, there might be a situation where it borrows money in order to repay its previous loans. This is exactly the scenario in Nigeria and it is detrimental to economic growth and job creation, hence the inflation of Nigeria keep rising and bitting hard,” PETROAN said.
