FG needs new $22.7bn loans to develop infrastructure in Nigeria ― DMO

The Debt Management Office (DMO) on Tuesday said President Muhammadu Buhari was renewing his quest for $22.7 billion foreign loans to develop infrastructure in the areas of roads, railways, waterways and power which will help to unleash the potentials of the Nigerian economy.

In a statement, the agency added that the request was not new as it was part of the 2016/2018 borrowing plans.

“Other loans such as those for the educational sector will contribute to the development of Nigeria’s human capital, while loans for Agriculture will be used to diversify the economy.

“There will also be funding for Development Finance Institutions to enhance access to finance for micro, small and medium scale enterprises.

“The requests in the plan are proposed borrowings from multilateral and bilateral lenders.

“The proposed loans are concessional, semi-concessional, long-tenored and are for the purpose of financing infrastructure and other developmental social projects all of which have multiplier effects in terms of job creation, business opportunities and an overall increase in Nigeria’s Gross Domestic Product.

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“It will also help to moderate short term high –interest cost domestic debt with low-interest long term external debt.

“The achievements in this regard are evidenced in the declining share of Domestic Debt in the Total Public Debt from over 83% in December 2015 to about 68% in June 2019.

“Nigeria has a ceiling of 25% on the total public debt stock (GDP) to ratio (Debt/GDP) which it has operated within.

“The ratios for December 31, 2018, and June 30, 2019, were 19.09% and 18.99% respectively.”

It noted that debt service/revenue for the years 2017 and 2018 were 57% and 51% respectively because of the increase in the debt stock and relatively high domestic interest rates.

Comparing Nigeria with other countries, the agency explained that United States of America, United Kingdom and Canada had Debt/ GDP ratios of 105%, 85% and 90% in 2017 which were much higher than that of Nigeria, but because they generate adequate revenues, their Debt Service/Revenue for the same year were 12.5%, 7.5% and 7.5% respectively.

“The case was also similar for Brazil, South Africa, Kenya and Mexico who had higher Debt/GDP than Nigeria (74%, 53%, 57% and 46% respectively), but had lower Debt Service/Revenue of 32.20%,11.4%,13.2% and 13.6% respectively.

“This is further demonstrated by Nigeria’s Tax to GDP ratio of only 6% in 2018 compared to Kenya-15.7%, Morroco-21.8%, Cameroon-12.2% and South Africa-27.5%, all for 2017.