Nigeria: Rising Debt Profile and Dangers of Unpaid Salaries
By EBERE NDUKWU
Nigerian Mirror
June 25, 2015
The level of indebtedness of the Nigerian federal and state governments is very worrisome and alarming. However, EBERE NDUKWU reports that as the new administrations bemoan empty treasury handed over to them, the patience of unpaid workers may soon run out.
President Muhammadu Buhari on Monday said what the people in the immediate past Goodluck Jonathan government knew all along, but shied away from telling Nigerians the truth. “The country is broke,” Buhari revealed. From the centre to the 36 states of the country and the Federal Capital Territory (FCT), there are tales and cries of indebtedness.
While the Federal Government and states where there are changes of power appear to cry more, states with subsisting leaders give different reasons why they are broke and have to borrow. The newly elected leaders rather than hit the ground running with their electoral promises are now more worried on how to offset the loads of wages and salary areas in their states.
Worst of all, even President Buhari and the new governors are crying that they inherited empty treasury. Among those in serious distress is Benue State Governor, Samuel Ortom; Plateau State Governor, Simon Lalong; Bauchi State Governor ,Mohammed Abubakar among others. Ortom who has accused his predecessor, Gabriel Suswam, of handing over an empty treasury, said the monthly allocation of the state has dwindled and the internally generated revenue completely zero.
Speaking at the Government House Makurdi during the inauguration of the Secretary to the State Government (SSG), Targema Takema; the Chief of Staff, Terwase Orbunde; Head of Service, Iwanta Adaikwu and Special Adviser on Media and Information Technology, Mr. Tahav Agerzua; Ortom, said, “I met an empty treasury which if it is qualified, it can be put at 10 times minus zero. Now, the state needs over N350million to offset the April salary.
The internally generated revenue is zero. This is because of backlog of debts, bond, salary, pension and gratuity arrears, as well as obligation to contractors.” Governor Lalong also said his predecessor in Plateau State, Jonah Jang, handed over to him an empty treasury, saying the former governor left a debt profile of N104billion, excluding more than five months salary arrears. Addressing judiciary workers led by the Chief Judge, Justice Pius Damulak, at the Presidential Lodge, Old Government House, Rayfield, Jos, Lalong said, “I found no kobo in the treasury.
I only inherited a debt of N104bn, including the non-payment of seven months workers’ salaries and pension arrears as handover note.” It is the same story in Bauchi where the new governor, Abubakar, said former governor Isa Yuguda, left an empty treasury in the state, adding that the state civil servants have not been paid March, April and May salaries, while state and local government pensioners are being owed about N12bn pension arrears by the Yuguda-led government.
The All Progressives Congress (APC) National Chairman, Chief John Odigie- Oyegun, in a statement before the presidential inauguration on May 29 said, “Upon assumption of office, our government will be expected to raise about N4.1trillion to pay accumulated arrears of salaries at federal and state levels, oil subsidy debts, costs of debt servicing and other sundry indebtedness incurred by the outgoing administration.
“When this is weighed against the massive depletion of national savings like the Excess Crude Account (ECA), additional huge debt of about $60billion USD and the sharp fall in crude oil prices in the international market, one can begin to contextualise the magnitude of problems that confront the incoming administration. “This has not taken into account huge amount of funds lost to crude oil theft on an ongoing basis through negligence and in some cases officially sanctioned corruption.
Yet our people expect massive investment in infrastructure, public works to create jobs and cash transfer reliefs to ameliorate the harsh economic environment.” Not long ago, Vice President Yemi Osinbanjo while speaking at a two-day Policy Dialogue on the implementation of the Agenda for Change organised by the Policy, Research and Strategy Directorate of the APC Presidential Campaign Council in Abuja, said that currently, Nigeria’s local and international debts stand at US$60 billion.
He said, “Our debt servicing bill for 2015 is N953.6bn, 21 per cent of our budget. On account of severely dwindled resources, over two-thirds of the states in Nigeria owe salaries. Federal institutions are not in much better shape. Today, the nation borrows to fund recurrent expenditure.” But, the Peoples Democratic Party (PDP), denying Osinbajo’s claim accused him of misrepresenting facts regarding Nigeria’s economy, particularly, the correct status of the country’s debt stock.
Then Minister of Finance/Coordinating Minister of the Economy, Dr. Ngozi Okonjo-Iweala, later said the total debt was $63billion, but explained that it represented state and federal debts, the bulk of it predating the Jonathan administration. According to the Debt Management Office (DMO), the Federal Government has an external debt stock of $6.445billion and another N7.9trillion domestic debt totalling N9.19trillion, as of December 31, 2014.
The debts are currently being serviced with N700 billion every year. Standard & Poor’s Ratings Services (S& P), said the sovereign commercial and concessional debts of Nigeria and 17 other Sub-Saharan African (SSA) countries under its rating services will reach about $393billion by the end of this year.
The global rating agency indicated that Nigeria, Ghana, South Africa and 15 other Sub-Saharan Africa countries will borrow an equivalent of $56billion from long-term commercial sources in 2015. About $44 billion of the total commercial borrowings is expected to be raised in local currency, while about 29 per cent, equivalent to $17bn of the sovereigns gross borrowing is expected to be used to refinance maturing tong-term debts. The new borrowings are expected to push sovereign commercial debts by the SSA countries to $298bn by the end of this year.
With this, the total commercial and concessional debt stocks are expected to rise to $393bn by the end of 2015, a year-onyear increase of seven per cent or $24bn. In this year’s budget, about N954billion or 21 per cent of the budget is allocated to debt servicing.
About 94 per cent of the allocation or N894.6bn will be used to service domestic debts while N59bn will be used to service foreign debts. DMO indicated that Nigeria’s public debt stock stood at N12.06 trillion by March 31 this year while the sovereign domestic debts have risen consistently over the years to peak at N8.51trillion by the end of first quarter this year.
Sovereign domestic debts rose from N5.623tn in 2011 to N6.538tn in 2012 and subsequently to N7.12tn and N7.90tn in 2013 and 2014 respectively. DMO’s external debt figures (without adding domestic debts) show Lagos as Nigeria’s most indebted state with $1.17 billion debt. It is distantly followed by Kaduna with $234 million debt, Cross River $142 m; Edo $123m; Ogun $109m; Bauchi $88m; Katsina $79m; Osun $74m; Oyo $72m and Enugu $69m.
Least indebted states are: Taraba N4.56billion; Borno N4.61bn; Delta N4.85bn; Plateau N6.19bn; Yobe N6.25bn; Benue N6.62bn; Abia N6.76bn; Zamfara N7.11bn and Kogi N7.16bn.
Investigation by National Mirror shows that most of the highly indebted states have accumulated debts through issuance of bonds. Osun State, one of Nigeria’s poorest states, which is ranked 9th in the list of the most indebted states in the country accumulated its debts with the N11.4billion Sukuk which made headlines in 2013.
Many indigenes of the state today argue that the Islamic bond like several other debts, have not translated to development in the state, with several projects abandoned and workers’ salaries left unpaid for months. The Federal Government has also expressed concern over the rate at which states are borrowing. Last year, the FG directed Deposit Money Banks not to grant fresh loans to state governments unless they got approval and clearance from the Federal Ministry of Finance.
Then Minister of State for Finance, Bashir Yuguda, said the decision was not aimed at stalling the development efforts of the state governments, as alleged, but to protect them from excessive accumulation of debts. “The domestic debt profile of some states is scary.
The states are so much in debt that only a small amount of their allocations get to them at the end of the day because most times money for debt servicing is removed from source,” he said while addressing participants in Course 23 for security agents at the National War College, Abuja. Yuguda said most of the states had been experiencing difficulties in servicing their existing debts and it would not be advisable to allow them take fresh loans.
Rather, he stressed the need for the states to continue to look inwards for other sources of revenue to pursue their development programmes. Members of the National Assembly Joint Committee were also taken aback by the rate at which the country’s debt profile was rising, just like other Nigerians are shocked at the development.
Then Chairman of the House Committee on Legislative Budget and Research, Hon. Opeyemi Bamidele, lamented the continued shut out of private sector borrowers by government. “We are now aggressively borrowing in such a manner that the private sector is now being stifled as the government is now the only big spender in the economy.
The private sector cannot access funds domestically and that means they cannot create jobs that is expected of them,” Bamidele said. In the September 17, 2014 Edition of “Bond Watch”, analysts at Dunn Loren Merrifield, an independent full-service investment house based in Lagos, which provide asset management services in addition to cutting-edge research to clients, stated that at N7.1trillion in June 2012, Nigeria’s total debt was about 1.7 times its level in 2005, before the nation got debt forgiveness from its creditors, which include Paris Club in 2006.
In an area report following the announcement of the second Eurobond, Dunn Loren contended that the development could take the nation back to the era of bloated international debt.
The bond is part of efforts to significantly reduce the country’s high debt service payments in view of the prevailing high interest rates in Nigeria and in line with the Federal Government resolve to reduce domestic borrowing from the current N744bn to about N500bn in the medium term. Already, the 2012 debt level was reduced from N852bn, just as there are efforts to bring it further down to N500bn “in the medium term”.
Rather than seeking to refinance domestic debt at about 12 per cent interest with the Eurobond, the Dunn Loren analysts advocated for a concerted approach to Nigeria’s economic management by both fiscal and monetary authorities. In similar vein, Central Bank of Nigeria (CBN), in its published, “Development in the External Sector”, noted that the nation’s external debt profile rose by 5.64 per cent from $5.67 billion in the fourth quarter of 2011, to $5.99 billion at the end of March 2012.
The report published by the CBN’s Economic Policy Directorate reported that the private sector external debt stood at $0.27 billion, down from $0.39 billion in the corresponding period of last year, and $0.44 billion in the 2011 fourth quarter. The growth in external debt in the period under review was blamed on additional loans incurred within the period, following which the CBN warned that “the continued increase in the public sector external debt may constitute a threat to the existing debt sustainability position of the country if future loans are not project-tied and self sustaining.”
Trade Union Congress of Nigeria (TUC), in a statement by its President, Mr. Bobboi Bala Kaigama, lamented that while Nigeria celebrated with fanfare the external debt exit in 2005 under the regime of President Olusegun Obasanjo, by December 2010, the external debt portfolio rose to $4.78 billion.
According to the statement, “So, if the foreign debt regime now stands at $9.38 billion, it follows that external debt profile has risen by about 100 per cent in less than four years. This is very unfortunate more so when the impact of the foreign loans are not being positively felt by the generality of the citizens. Nobody should be carried away by the argument that the country’s debt stock is still less than 26 per cent of GDP, the so-called international standard.
“The fact of the matter is that the country went through hell when its debt stock was about $35bn. We should therefore be concerned that we are going back to where we were before.”
Merrifield, an independent full-service investment house based in Lagos, which provide asset management services in addition to cutting-edge research to clients, stated that at N7.1trillion in June 2012, Nigeria’s total debt was about 1.7 times its level in 2005, before the nation got debt forgiveness from its creditors, which include Paris Club in 2006. In an area report following the announcement of the second Eurobond, Dunn Loren contended that the development could take the nation back to the era of bloated international debt.
The bond is part of efforts to significantly reduce the country’s high debt service payments in view of the prevailing high interest rates in Nigeria and in line with the Federal Government resolve to reduce domestic borrowing from the current N744bn to about N500bn in the medium term. Already, the 2012 debt level was reduced from N852bn, just as there are efforts to bring it further down to N500bn “in the medium term”.
Rather than seeking to refinance domestic debt at about 12 per cent interest with the Eurobond, the Dunn Loren analysts advocated for a concerted approach to Nigeria’s economic management by both fiscal and monetary authorities. In similar vein, Central Bank of Nigeria (CBN), in its published, “Development in the External Sector”, noted that the nation’s external debt profile rose by 5.64 per cent from $5.67 billion in the fourth quarter of 2011, to $5.99 billion at the end of March 2012.
The report published by the CBN’s Economic Policy Directorate reported that the private sector external debt stood at $0.27 billion, down from $0.39 billion in the corresponding period of last year, and $0.44 billion in the 2011 fourth quarter. The growth in external debt in the period under review was blamed on additional loans incurred within the period, following which the CBN warned that “the continued increase in the public sector external debt may constitute a threat to the existing debt sustainability position of the country if future loans are not project-tied and self sustaining.”
Trade Union Congress of Nigeria (TUC), in a statement by its President, Mr. Bobboi Bala Kaigama, lamented that while Nigeria celebrated with fanfare the external debt exit in 2005 under the regime of President Olusegun Obasanjo, by December 2010, the external debt portfolio rose to $4.78 billion. According to the statement, “So, if the foreign debt regime now stands at $9.38 billion, it follows that external debt profile has risen by about 100 per cent in less than four years.
This is very unfortunate more so when the impact of the foreign loans are not being positively felt by the generality of the citizens. Nobody should be carried away by the argument that the country’s debt stock is still less than 26 per cent of GDP, the so-called international standard. “The fact of the matter is that the country went through hell when its debt stock was about $35bn. We should therefore be concerned that we are going back to where we were before.”
According to TUC, although the DMO stated that part of the loan was injected into the power sector, there was nothing on ground to show that electricity supply had improved because as at May 2014, then Minister of Power, Prof. Chinedu Nebo, stated that Nigeria was generating 3,800mw for about 170 million population whereas experts estimated that Lagos State alone needed about 15,000mw.
The TUC president faulted claims by Dr. Abraham Nwankwo that part of the loan was also used to finance roads including Abuja International Airport Road that had not been completed for years and organised labour, the civil society groups, and called other well-meaning Nigerians to rise up and ensure that the Federal Government stopped further foreign borrowing forthwith.
He said, “We also demand that the Federal Government should curtail unnecessary expenditure, prune down the obscene emoluments of political office holders, and block other leakages through which billions of naira are looted from the treasuries leaving virtually nothing for capital development.”
“We believe that if the enormous resources of the country are properly harnessed and prudently managed, there is more than enough wealth in Nigeria to go round and also build the type of societies we have in Europe, America and Asia.”
Nigerians are concerned about how the federal and state governments will manage the debt situation, with many arguing that the Buhari led APC government should try and put measures that will stop borrowing or at least reducing their borrowing to a serviceable level. The citizens are waiting on Buhari to cut wastages so there will not be need to go for loans.
The Federal Government need to look inward in creating more revenues by harnessing the non-oil sector, which has been neglected for long else, unemployment will continue to be on the increase since money borrowed were not effectively used for infrastructure building that could have attracted investors willing to create jobs.
According experts, except stringent measures are taken, there is the tendency that most states of the federation with new administrations may end up servicing debts for at least the first two years in office. Most painful is that Nigerians hardly see the developments both at the state and federal levels for which these debts are incurred. Therefore, the intellectual community and those that understand the challenges of economic fundamentals should respond passionately to this challenge of getting the governments to be more responsive in the way they seek external loans.
As many analysts believe, the situation is an evil trend that if not corrected may have ugly consequences both on the nation’s economy and peace of the country as workers whose salaries and wages are not being paid may get to a breaking point where they may decide to throw sense of rational reason to the wind.
Nigerian Mirror
June 25, 2015
The level of indebtedness of the Nigerian federal and state governments is very worrisome and alarming. However, EBERE NDUKWU reports that as the new administrations bemoan empty treasury handed over to them, the patience of unpaid workers may soon run out.
President Muhammadu Buhari on Monday said what the people in the immediate past Goodluck Jonathan government knew all along, but shied away from telling Nigerians the truth. “The country is broke,” Buhari revealed. From the centre to the 36 states of the country and the Federal Capital Territory (FCT), there are tales and cries of indebtedness.
While the Federal Government and states where there are changes of power appear to cry more, states with subsisting leaders give different reasons why they are broke and have to borrow. The newly elected leaders rather than hit the ground running with their electoral promises are now more worried on how to offset the loads of wages and salary areas in their states.
Worst of all, even President Buhari and the new governors are crying that they inherited empty treasury. Among those in serious distress is Benue State Governor, Samuel Ortom; Plateau State Governor, Simon Lalong; Bauchi State Governor ,Mohammed Abubakar among others. Ortom who has accused his predecessor, Gabriel Suswam, of handing over an empty treasury, said the monthly allocation of the state has dwindled and the internally generated revenue completely zero.
Speaking at the Government House Makurdi during the inauguration of the Secretary to the State Government (SSG), Targema Takema; the Chief of Staff, Terwase Orbunde; Head of Service, Iwanta Adaikwu and Special Adviser on Media and Information Technology, Mr. Tahav Agerzua; Ortom, said, “I met an empty treasury which if it is qualified, it can be put at 10 times minus zero. Now, the state needs over N350million to offset the April salary.
The internally generated revenue is zero. This is because of backlog of debts, bond, salary, pension and gratuity arrears, as well as obligation to contractors.” Governor Lalong also said his predecessor in Plateau State, Jonah Jang, handed over to him an empty treasury, saying the former governor left a debt profile of N104billion, excluding more than five months salary arrears. Addressing judiciary workers led by the Chief Judge, Justice Pius Damulak, at the Presidential Lodge, Old Government House, Rayfield, Jos, Lalong said, “I found no kobo in the treasury.
I only inherited a debt of N104bn, including the non-payment of seven months workers’ salaries and pension arrears as handover note.” It is the same story in Bauchi where the new governor, Abubakar, said former governor Isa Yuguda, left an empty treasury in the state, adding that the state civil servants have not been paid March, April and May salaries, while state and local government pensioners are being owed about N12bn pension arrears by the Yuguda-led government.
The All Progressives Congress (APC) National Chairman, Chief John Odigie- Oyegun, in a statement before the presidential inauguration on May 29 said, “Upon assumption of office, our government will be expected to raise about N4.1trillion to pay accumulated arrears of salaries at federal and state levels, oil subsidy debts, costs of debt servicing and other sundry indebtedness incurred by the outgoing administration.
“When this is weighed against the massive depletion of national savings like the Excess Crude Account (ECA), additional huge debt of about $60billion USD and the sharp fall in crude oil prices in the international market, one can begin to contextualise the magnitude of problems that confront the incoming administration. “This has not taken into account huge amount of funds lost to crude oil theft on an ongoing basis through negligence and in some cases officially sanctioned corruption.
Yet our people expect massive investment in infrastructure, public works to create jobs and cash transfer reliefs to ameliorate the harsh economic environment.” Not long ago, Vice President Yemi Osinbanjo while speaking at a two-day Policy Dialogue on the implementation of the Agenda for Change organised by the Policy, Research and Strategy Directorate of the APC Presidential Campaign Council in Abuja, said that currently, Nigeria’s local and international debts stand at US$60 billion.
He said, “Our debt servicing bill for 2015 is N953.6bn, 21 per cent of our budget. On account of severely dwindled resources, over two-thirds of the states in Nigeria owe salaries. Federal institutions are not in much better shape. Today, the nation borrows to fund recurrent expenditure.” But, the Peoples Democratic Party (PDP), denying Osinbajo’s claim accused him of misrepresenting facts regarding Nigeria’s economy, particularly, the correct status of the country’s debt stock.
Then Minister of Finance/Coordinating Minister of the Economy, Dr. Ngozi Okonjo-Iweala, later said the total debt was $63billion, but explained that it represented state and federal debts, the bulk of it predating the Jonathan administration. According to the Debt Management Office (DMO), the Federal Government has an external debt stock of $6.445billion and another N7.9trillion domestic debt totalling N9.19trillion, as of December 31, 2014.
The debts are currently being serviced with N700 billion every year. Standard & Poor’s Ratings Services (S& P), said the sovereign commercial and concessional debts of Nigeria and 17 other Sub-Saharan African (SSA) countries under its rating services will reach about $393billion by the end of this year.
The global rating agency indicated that Nigeria, Ghana, South Africa and 15 other Sub-Saharan Africa countries will borrow an equivalent of $56billion from long-term commercial sources in 2015. About $44 billion of the total commercial borrowings is expected to be raised in local currency, while about 29 per cent, equivalent to $17bn of the sovereigns gross borrowing is expected to be used to refinance maturing tong-term debts. The new borrowings are expected to push sovereign commercial debts by the SSA countries to $298bn by the end of this year.
With this, the total commercial and concessional debt stocks are expected to rise to $393bn by the end of 2015, a year-onyear increase of seven per cent or $24bn. In this year’s budget, about N954billion or 21 per cent of the budget is allocated to debt servicing.
About 94 per cent of the allocation or N894.6bn will be used to service domestic debts while N59bn will be used to service foreign debts. DMO indicated that Nigeria’s public debt stock stood at N12.06 trillion by March 31 this year while the sovereign domestic debts have risen consistently over the years to peak at N8.51trillion by the end of first quarter this year.
Sovereign domestic debts rose from N5.623tn in 2011 to N6.538tn in 2012 and subsequently to N7.12tn and N7.90tn in 2013 and 2014 respectively. DMO’s external debt figures (without adding domestic debts) show Lagos as Nigeria’s most indebted state with $1.17 billion debt. It is distantly followed by Kaduna with $234 million debt, Cross River $142 m; Edo $123m; Ogun $109m; Bauchi $88m; Katsina $79m; Osun $74m; Oyo $72m and Enugu $69m.
Least indebted states are: Taraba N4.56billion; Borno N4.61bn; Delta N4.85bn; Plateau N6.19bn; Yobe N6.25bn; Benue N6.62bn; Abia N6.76bn; Zamfara N7.11bn and Kogi N7.16bn.
Investigation by National Mirror shows that most of the highly indebted states have accumulated debts through issuance of bonds. Osun State, one of Nigeria’s poorest states, which is ranked 9th in the list of the most indebted states in the country accumulated its debts with the N11.4billion Sukuk which made headlines in 2013.
Many indigenes of the state today argue that the Islamic bond like several other debts, have not translated to development in the state, with several projects abandoned and workers’ salaries left unpaid for months. The Federal Government has also expressed concern over the rate at which states are borrowing. Last year, the FG directed Deposit Money Banks not to grant fresh loans to state governments unless they got approval and clearance from the Federal Ministry of Finance.
Then Minister of State for Finance, Bashir Yuguda, said the decision was not aimed at stalling the development efforts of the state governments, as alleged, but to protect them from excessive accumulation of debts. “The domestic debt profile of some states is scary.
The states are so much in debt that only a small amount of their allocations get to them at the end of the day because most times money for debt servicing is removed from source,” he said while addressing participants in Course 23 for security agents at the National War College, Abuja. Yuguda said most of the states had been experiencing difficulties in servicing their existing debts and it would not be advisable to allow them take fresh loans.
Rather, he stressed the need for the states to continue to look inwards for other sources of revenue to pursue their development programmes. Members of the National Assembly Joint Committee were also taken aback by the rate at which the country’s debt profile was rising, just like other Nigerians are shocked at the development.
Then Chairman of the House Committee on Legislative Budget and Research, Hon. Opeyemi Bamidele, lamented the continued shut out of private sector borrowers by government. “We are now aggressively borrowing in such a manner that the private sector is now being stifled as the government is now the only big spender in the economy.
The private sector cannot access funds domestically and that means they cannot create jobs that is expected of them,” Bamidele said. In the September 17, 2014 Edition of “Bond Watch”, analysts at Dunn Loren Merrifield, an independent full-service investment house based in Lagos, which provide asset management services in addition to cutting-edge research to clients, stated that at N7.1trillion in June 2012, Nigeria’s total debt was about 1.7 times its level in 2005, before the nation got debt forgiveness from its creditors, which include Paris Club in 2006.
In an area report following the announcement of the second Eurobond, Dunn Loren contended that the development could take the nation back to the era of bloated international debt.
The bond is part of efforts to significantly reduce the country’s high debt service payments in view of the prevailing high interest rates in Nigeria and in line with the Federal Government resolve to reduce domestic borrowing from the current N744bn to about N500bn in the medium term. Already, the 2012 debt level was reduced from N852bn, just as there are efforts to bring it further down to N500bn “in the medium term”.
Rather than seeking to refinance domestic debt at about 12 per cent interest with the Eurobond, the Dunn Loren analysts advocated for a concerted approach to Nigeria’s economic management by both fiscal and monetary authorities. In similar vein, Central Bank of Nigeria (CBN), in its published, “Development in the External Sector”, noted that the nation’s external debt profile rose by 5.64 per cent from $5.67 billion in the fourth quarter of 2011, to $5.99 billion at the end of March 2012.
The report published by the CBN’s Economic Policy Directorate reported that the private sector external debt stood at $0.27 billion, down from $0.39 billion in the corresponding period of last year, and $0.44 billion in the 2011 fourth quarter. The growth in external debt in the period under review was blamed on additional loans incurred within the period, following which the CBN warned that “the continued increase in the public sector external debt may constitute a threat to the existing debt sustainability position of the country if future loans are not project-tied and self sustaining.”
Trade Union Congress of Nigeria (TUC), in a statement by its President, Mr. Bobboi Bala Kaigama, lamented that while Nigeria celebrated with fanfare the external debt exit in 2005 under the regime of President Olusegun Obasanjo, by December 2010, the external debt portfolio rose to $4.78 billion.
According to the statement, “So, if the foreign debt regime now stands at $9.38 billion, it follows that external debt profile has risen by about 100 per cent in less than four years. This is very unfortunate more so when the impact of the foreign loans are not being positively felt by the generality of the citizens. Nobody should be carried away by the argument that the country’s debt stock is still less than 26 per cent of GDP, the so-called international standard.
“The fact of the matter is that the country went through hell when its debt stock was about $35bn. We should therefore be concerned that we are going back to where we were before.”
Merrifield, an independent full-service investment house based in Lagos, which provide asset management services in addition to cutting-edge research to clients, stated that at N7.1trillion in June 2012, Nigeria’s total debt was about 1.7 times its level in 2005, before the nation got debt forgiveness from its creditors, which include Paris Club in 2006. In an area report following the announcement of the second Eurobond, Dunn Loren contended that the development could take the nation back to the era of bloated international debt.
The bond is part of efforts to significantly reduce the country’s high debt service payments in view of the prevailing high interest rates in Nigeria and in line with the Federal Government resolve to reduce domestic borrowing from the current N744bn to about N500bn in the medium term. Already, the 2012 debt level was reduced from N852bn, just as there are efforts to bring it further down to N500bn “in the medium term”.
Rather than seeking to refinance domestic debt at about 12 per cent interest with the Eurobond, the Dunn Loren analysts advocated for a concerted approach to Nigeria’s economic management by both fiscal and monetary authorities. In similar vein, Central Bank of Nigeria (CBN), in its published, “Development in the External Sector”, noted that the nation’s external debt profile rose by 5.64 per cent from $5.67 billion in the fourth quarter of 2011, to $5.99 billion at the end of March 2012.
The report published by the CBN’s Economic Policy Directorate reported that the private sector external debt stood at $0.27 billion, down from $0.39 billion in the corresponding period of last year, and $0.44 billion in the 2011 fourth quarter. The growth in external debt in the period under review was blamed on additional loans incurred within the period, following which the CBN warned that “the continued increase in the public sector external debt may constitute a threat to the existing debt sustainability position of the country if future loans are not project-tied and self sustaining.”
Trade Union Congress of Nigeria (TUC), in a statement by its President, Mr. Bobboi Bala Kaigama, lamented that while Nigeria celebrated with fanfare the external debt exit in 2005 under the regime of President Olusegun Obasanjo, by December 2010, the external debt portfolio rose to $4.78 billion. According to the statement, “So, if the foreign debt regime now stands at $9.38 billion, it follows that external debt profile has risen by about 100 per cent in less than four years.
This is very unfortunate more so when the impact of the foreign loans are not being positively felt by the generality of the citizens. Nobody should be carried away by the argument that the country’s debt stock is still less than 26 per cent of GDP, the so-called international standard. “The fact of the matter is that the country went through hell when its debt stock was about $35bn. We should therefore be concerned that we are going back to where we were before.”
According to TUC, although the DMO stated that part of the loan was injected into the power sector, there was nothing on ground to show that electricity supply had improved because as at May 2014, then Minister of Power, Prof. Chinedu Nebo, stated that Nigeria was generating 3,800mw for about 170 million population whereas experts estimated that Lagos State alone needed about 15,000mw.
The TUC president faulted claims by Dr. Abraham Nwankwo that part of the loan was also used to finance roads including Abuja International Airport Road that had not been completed for years and organised labour, the civil society groups, and called other well-meaning Nigerians to rise up and ensure that the Federal Government stopped further foreign borrowing forthwith.
He said, “We also demand that the Federal Government should curtail unnecessary expenditure, prune down the obscene emoluments of political office holders, and block other leakages through which billions of naira are looted from the treasuries leaving virtually nothing for capital development.”
“We believe that if the enormous resources of the country are properly harnessed and prudently managed, there is more than enough wealth in Nigeria to go round and also build the type of societies we have in Europe, America and Asia.”
Nigerians are concerned about how the federal and state governments will manage the debt situation, with many arguing that the Buhari led APC government should try and put measures that will stop borrowing or at least reducing their borrowing to a serviceable level. The citizens are waiting on Buhari to cut wastages so there will not be need to go for loans.
The Federal Government need to look inward in creating more revenues by harnessing the non-oil sector, which has been neglected for long else, unemployment will continue to be on the increase since money borrowed were not effectively used for infrastructure building that could have attracted investors willing to create jobs.
According experts, except stringent measures are taken, there is the tendency that most states of the federation with new administrations may end up servicing debts for at least the first two years in office. Most painful is that Nigerians hardly see the developments both at the state and federal levels for which these debts are incurred. Therefore, the intellectual community and those that understand the challenges of economic fundamentals should respond passionately to this challenge of getting the governments to be more responsive in the way they seek external loans.
As many analysts believe, the situation is an evil trend that if not corrected may have ugly consequences both on the nation’s economy and peace of the country as workers whose salaries and wages are not being paid may get to a breaking point where they may decide to throw sense of rational reason to the wind.
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