Nigeria's total debt hits $16.5bn

Prompting fear of economic collapse

THE country's debt profile has again become a serious cause for concern despite promises by the Federal Government to check it. Figures from the Debt Management Office (DMO) showed that the country's external debt rose by $143million in the first quarter of 2013 to $6.67billion from $6.527billion at the end of last year.

It rose consistently throughout 2012. For instance, as of March 31, 2012, it stood at $5.91 billion; by June 31, 2012, it rose to $6.03 billion, edging higher to $6.3 billion by September 31 before closing the year at $6.527 billion.

In spite of the calls from economists for caution, data obtained from the DMO showed that in one year, March 31, 2012 to March 31, 2013, the country's external debt rose by $758.32million.

As of December 31, 2012, the Federal Government's domestic debt stock was N6.537trillion with FGN bonds accounting for 62.41 per cent (N4.08trillion) of the figure, while Treasury Bills and Treasury Bonds accounted for 32.47 per cent (N2.12trillion) and 5.12 per cent (N334.56 billion), respectively.

Latest data from the DMO, however, showed that as of March 31, 2013, the government's domestic debt stock was N6.493trillion translating to accumulative debt burden of $16.5billion.

A breakdown of the data indicates that FGN Bonds at N3.82trillion now accounts for 58.84 per cent of the debt, while Treasury Bills (N2.34trillion) and Treasury Bonds (N334 billion) accounts for 36.01 per cent and 5.15 per cent of the amount, respectively.

While there has been no success in reducing the external debt, the DMO data for the first quarter of 2013 showed that the government, however, reduced its domestic stock by N44.2 billion during the period.

More debts
Ongoing body language showed that the Federal Government and the 36 states are not ready to apply the brakes.

Late last month, the National Economic Council's (NEC's) gave the green light to both tiers to borrow about $9 billion in 2013-2014. The cash will go into infrastructure development, the Council said.

NEC, which comprises the 36 states' governors, ministers of National Planning, Finance, Federal Capital Territory (FCT) and Central Bank of Nigeria (CBN) governor, took the decision at its monthly meeting chaired by Vice President Namadi Sambo at the State House, Abuja.

In his briefing at the end of the meeting, Anambra State Governor Peter Obi disclosed that the loans would be sourced from various international funding agencies and would be strictly used for developmental projects.

Stressing that the total portfolio cuts across both federal and state governments, he said that about $450 million of the total loan package would be sourced for the eastern states, including Edo and Cross River, to fund erosion projects.

He said: “The Coordinating Minister for the Economy (CME) briefed the Council on the current facilities made available by different international funding organizations, including Islamic Development Bank (IDA), African Development Bank (ADB), French Development Agency as well as Chinese and Indian Exim Banks, totalling about $9 billion for projects development.”

“The facilities, which have up to 10 years moratorium and 40 years repayment periods, are available to both the Federal and state governments to fund high impact projects towards improving infrastructure, agriculture and employment generation.”

Maintaining that the National Assembly has already approved the loan portfolio, he said that states are now expected to “meet the requirements for the loans and to ensure that the facilities are meant to fund meaningful projects in their states”.

Analysts worry
For sometime now, economists have been calling for the country to reduce its external debt profile. The unwholesome development caused analysts, including the Governor of the Central Bank of Nigeria, Mallam Lamido Sanusi, to warn that it was not in the nation's best interest.

In December 2012, at the Honorary International Investment Council Conference in London, Sanusi argued that if the existing level of borrowing from big nations continued, the huge debt profile would place “undue burden on posterity.”

“We are borrowing more money today at a higher interest rate, while leaving the heavy debt burden for our children and grandchildren,” he had said.

Speaking in Lagos, recently, the Minister of State for Finance, Dr. Yerima Ngama, said Nigeria would slash its domestic debt, which had been a source of concern for economists.

Ngama, who disclosed that it cost the government N699billion to service the debt in 2012, attributed the planned slashing to the move to reduce the debt to double-digit interest rates.

High interest rate
But with the unbridled craving for borrowing, the country is likely to pay more for the money it is borrowing for instance from the World Bank. As Nigeria has been removed from the list of countries that enjoy the International Development Agency's (IDA) concessionary window, the World Bank Country Director for Nigeria, Ms. Marie Francoise Marie-Nelly, has said.

She said Nigeria was delisted because the country is no more regarded as a poor nation.

This implies that Nigeria will not benefit from the 40-year moratorium and 10-year repayment period on loans taken for developments from the World Bank.

Ms. Marie-Nelly explained that Nigeria's delisting from the beneficiary countries was based on the figures released by the National Bureau of Statistic, which indicated that the poverty rate per capita in the country has gone down to 62.6 per cent from 64.2 per cent.

She explained that Nigeria will henceforth access funds from the International Bank for Reconstruction and Development (IBRD) window under different moratorium and interest payments terms.

The new funding arrangement for Nigeria's projects in the years ahead was occasioned by what the World Bank described as the “re-classification of the country's status from poor country by per capita to a lower-middle income country by per capita.

Lower-middle income countries are those whose per capita are $1,026 to $4,035 based on estimates of gross national income (GNI).

Poor management
Last week in Abuja where the Coordinating Minister for the Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala hosted British investors led by the Lord Mayor of the city of London, Mr. Roger Gifford, she boasted that Nigeria's foreign reserve has hit about $50 billion, revealed and declared Nigeria as Africa's current best investment destination.

 “With a foreign reserve of nearly 50 billion dollars, a stable exchange rate, strong banking sector, massive human and natural resources, Nigeria has indeed become one of the most attractive investment destinations in the world”, she enthused.

However sincere enough to confess that, “there are other challenges staring at the nation which include unemployment, poor infrastructure, corruption, governance challenge and power.”

On the question of Nigeria debt management, the Minister informed the investors that due to past experiences, Nigeria is now allergic to borrowing and has also reduced its domestic debt to 19 per cent and external debt to 2 per cent.

Source: National Daily