Papa Has A New Bag Of Debts

Nigeria’s relatively modest external debt which was speculated to be below $17bn in 1999 became spurred by dubious flattering from international agencies that Nigeria was under-borrowed, to exceed $36bn by 2005. Ultimately, government was blamed for keeping poor accounting records and failure to also promptly service our debt obligations.

Unfortunately, despite the international junketing of our Finance minister and her team and the boisterous media blitz across Europe, with a Senate team which also spent a princely $10m in search of debt cancellation, Nigeria, inexplicably got 60% relief, whereas, other less star studded negotiating Teams from Africa received total debt reprieve for their countries.

An international pressure group, The Jubilee Debt Campaign (JDC), were so incensed with the over $14bn fleeced from Nigeria that its co-ordinator Tricia Rogers noted that “It is obscene for G7 countries to take billions of dollars from one of the poorest countries on Earth.
In particular this means that the UK alone will take from Nigeria almost exactly twice as much as it is giving in aid to the whole of Africa in 2005!”; Ms Rogers therefore urged Britain, which chairs the G7, to take the lead in refusing to accept the payments”.

However, after the celebrated ‘controversial’ debt relief, about $3.7bn remained as external debt, while domestic debt, which included obligations to local contractors, was below N1trillion.

Instructively, however, one of the Policy Support Instruments demanded by the IMF with debt relief was the adoption of the now ‘discarded’ wholesale Dutch Auction System (WDAS) in the determination of Naira’s exchange rate.

Ironically, despite the relief, there were signals that Nigeria’s debt profile had begun a rebound notwithstanding buoyant crude oil revenue with consistent budget surpluses, before the end of Obasanjo’s tenure in 2007.

Nonetheless, with the bountiful dollar revenue, the CBN, in keeping with IMF conditionalities liberally allocated billions of dollars directly to Bureau de change weekly for ‘retail transactions, while 14 commercial banks received $7bn soft loans for meeting CBN’s capitalization requirements.

Sadly, however, the promise that debt relief would instigate rapid economic growth and enhanced social welfare failed to materialize; interest rates remained nearer 20% to the real sector and continues till date to keep the industrial sector comatose, while unemployment is still rising with an untamed inflationary spiral, until, we became listed amongst the world’s poorest people.

Unfortunately, the creation of a Debt Management Office (DMO) did not bring closure to the tenure of reckless and unfavorably structured loans, as National debt steadily ballooned, even before Obasanjo left office in 2007.

Regrettably, by 2008, DMO’s fresh borrowings exceeded N1 Trillion with the attendant 10-17% interest rates, which were clearly inappropriate for risk free sovereign loans, “which were,” ironically according to the DMO “backed by the full faith and credit of the federal government of Nigeria and are charged upon the general assets of Nigeria” (see CBN’s N50bn Bond offer circular of 27/8/2008).

The usually specified purpose of DMO’s loans was “to restructure part of the outstanding 91 days NTB (Nigerian Treasury Bills: government short term borrowings) into longer tenured bonds, to provide benchmark instrument for the pricing of other securities in the capital market, and facilitate the development of the bond market in general as well as fund the budget deficit” (see offer circular of Jan 2006 for 3rd FGN Bond –with 2009- maturity).

Evidently, the loans made no reference whatsoever to purposeful development of power infrastructure, or rehabilitation of our roads, hospitals, schools etc.

The defined purpose of such borrowings, which exceeded N200bn in 2006 alone, were clearly for controversial intangibles. In any case, why would anyone borrow and incur annual interest charges in excess of about N350bn simply for the purpose of creating a market for bonds?

We should similarly, be concerned that the DMO listed the funding of budget deficits as part of the reason for government borrowing, when infact premium crude oil prices and output provided a platform for serial budget surpluses for over 4 years.

Indeed, in May 2008, in a piece titled “National Assembly fiddles while debt burden cripples” as well as in another article titled “Bleeding us to death with debt 1-3” later in October, this writer did not succeed in drawing the attention of the National Assembly to our inexplicably rising debt profile which sadly made no positive impact on our people’s welfare.

My humble observation was also that “only a fool will endorse double digit interest payment on otherwise acclaimed soft loans.

For example, pg of 112, of Guardian edition of 22/5/05, carried a report that the Director General of the D.M.O., one Abraham Nwankwo indicated that “…84% of the Nation’s $3.7billion external debt is accounted for by loans from concessionary sources like the World Bank, African Development Bank and IFAD”.

“These are loans” according to Nwankwo, “obtained at very low charges and concomitant charges of 0.5%. These loans are used for poverty alleviation programs in education, health and agricultural sectors”.

However, despite the above explanation, late President Yar’Adua’s 2008 budget had surprisingly, provided $600m (i.e. about 20% of principal) as interest for the same loan of $3.7bn! This was clearly as outrageous and out of sync as CBN’s inexplicable ‘soft deposit’ of $7bn in the same 14 Nigerian banks that government concurrently borrowed from.

Unfortunately, the National Assembly in its self-serving wisdom ignored this faux pas, and it is doubtful if the banks ever repaid this loan. Nigeria’s external debt stock has alarmingly continued its unrestrained spiral and now exceeds $10.3bn as at 30th June 2015, while the outstanding Domestic stock has also risen to N8.4 Trillion; furthermore, the debt stock of state governments has also risen above $10bn to make up a consolidated outstanding National debt of almost $64bn.

In retrospect, the alarm bell of an imminent death trap was earlier sounded but remained unheeded when Nigeria’s total debt stock rose above $40bn in 2007; similarly, despite the present falling crude oil revenue, there appears to be an inexplicable air of complacency about the current outstanding debt of $64bn!

Indeed, if the fresh unsolicited IMF loan of $2.1bn for rebuilding those North East communities ravaged by Boko Haram is added, and the debts owed local contractors are similarly captured, the National Debt Stock may well exceed $70bn, even though there is still not much on ground to show for these bloated loans.

Notwithstanding, some analysts may once again assure us that Nigeria is still under borrowed! Clearly, with the recent emasculation of the Greek nation because of its inability to meet its debt obligations, it will be foolish to believe such experts.

Save the Naira, Save Nigeria!!

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