Nigeria’s increasing debt worrisome, use recovered loot as alternative

THE origin of Nigeria’s external debt dates back to 1958 when a loan of US$28 million was obtained from the World Bank. The funds, which was made available to the Nigerian Railway Corporation, was for a five-year tenor to improve Nigeria’s rail system and to build a new line into the North-eastern province for the purpose of expansion in production and trade. Later in 1964, the country obtained a loan of US$13.1 million from the Paris Club of Creditor Nations for the building of the Niger Dam. Subsequently, the much talked “jumbo loan” of $1 billion was obtained from the International Capital Market (ICM) in 1978, thereby setting the slippery slope of resort to huge foreign loans in motion and consequently changing the structure of Nigeria’s debts from mainly concessional loans to loans with harsher repayments terms.  Nigeria’s recourse to foreign loans first generated public outcry in 1985 when the then-military President, Ibrahim Babangida, obtained a $2.4 billion loan from the International Monetary Fund ‘to meet a critical balance of payments deficit’.Unfortunately, this trend has, till date, not abated with the external debt profile currently standing at N33 trillion as at March, 2020.

 

How did we get here?

During its early years, Nigeria had no incidence of external indebtedness. Indeed, in comparative terms, Nigeria and, in fact, the African continent was rich – in cultural, economic, social and human resources. Consequently, there were no beggars. This truth was confirmed with compelling finality by Lord Macauley in his address to the British Parliament on 2nd February, 1835 when he said:  ‘I have travelled across the length and breadth of Africa and I have not seen one person who is a beggar, who is a thief. Such wealth I have seen in this country, such high moral values, people of such calibre, that I do not think we would ever conquer this country, unless we break the very backbone of this nation, which is her spiritual and cultural heritage and therefore, I propose that we replace her old and ancient educational system, her culture, for if the African thinks that all that is foreign and English is good and greater than their own, they will lose their self-esteem, their native culture and they will become what we want them, a truly dominated nation’.

However, Nigeria’s discovery of oil and the fall in oil prices in the late 1970s had a devastating effect on government expenses; it therefore became necessary for government to borrow for balance of payment support and project financing. This increased the nation’s debt profile to US$2.2 billion in 1980. However, in 1991 it had risen to $33.4 billion, and rather than decrease, the nation’s debt profile continued to witness an upsurge, particularly with the spate of debt servicing and the insatiable desire of political leaders to obtain loans for the execution of dubious projects.

As revenue from oil production increased, Nigeria became attracted to predatory external creditors, leading to major borrowing by successive governments with resultant huge external burden on the country. Consequently, this debt burden became an endless abyss as a substantial amount of oil revenue were expended on servicing the accumulated external debts annually, to no end. Therefore, Nigeria’s humongous debts ratio is directly linked to the decades of misrule and financial imprudence of its military and political leaders. With incessant foreign debts being accumulated by these successive governments, Nigeria became caught up on crippling foreign debt crisis which, till date, compromised its economic progress and political stability in spite of the paradox of being an oil exporting country.

In 1990, Nigeria’s external debt rose to over US$33.1 billion and by the end of 2004, the Central Bank of Nigeria noted that Nigeria’s debt stock had reached almost $36 billion out of which $31 billion was owed to the Paris Club of Creditors while the rest was owed to multilateral, commercial and other non-Paris Club of creditors.  Without a doubt, from 1958 when Nigeria obtained the World Bank’s railway development loan of US$28 million, Nigeria’s debt repayment history started on a soft, tolerable level until it became a hard bargain years later. Matters worsened in 2003 when one of Nigeria’s creditors, the Paris Club, demanded US$3 billion annually for debt service payment. By 2004, the country resorted to seek for debt relief to tackle the debt crises and the resultant economic crises when other options failed to yield the desired result. In reaction to the debt relief granted to Nigeria, former President OlusegunObasanjo reportedly noted that:‘…how did we get to the point where our debt burden became a challenge to peace, stability, growth and development? Without belabouring the point, we can identify political rascality, bad governance, abuse of office and power, criminal corruption, mismanagement and waste, misplaced priorities, fiscal indiscipline, weak control, monitoring and evaluation mechanisms, and a community that was openly tolerant of corruption and other underhand and extra-legal methods of primitive accumulation’

The New Age Editorial of November 3, 2004 succinctly captured debt crisis in Nigeria thus:

‘… a country that borrowed $11 billion and has so far paid back $32 billion is still owing $34 billion? That means every dollar borrowed has been repaid almost three times over, yet about three times the initial amount borrowed is still being owed, creditors are having their cake and eating it in a vicious arrangement designed by IMF and its allies, the effect of which stifles growth and development in developing countries.’

 

Nigeria’s recovered loots and debt crisis management

It is surprising that despite the repatriation of the Abacha loot amounting to about US$4.6 billion dollars to Nigeria, the government still has not relented in its resort to obtaining foreign loans. Out of the repatriated Abacha loot, President Muhammadu Buhari’s government recovered US$322 million from Switzerland in 2017 and US$308 million from Jersey Island, United Kingdom in February 2020, with the condition that the funds will be utilized for three major projects in Nigeria, namely:  i.Lagos-Ibadan Express Road (Western Region) ii.Abuja-Kano Road (Northern Region) iii.2nd Niger Bridge (Eastern Region). In March, 2020, the Nigerian Senate approved a US$22.7 billion loan request and later in May, another US$5.513 billion loan request was sent by the President. Interestingly, the Director-General of the Debts Management Office reportedly stated that the coronavirus pandemic might incapacitate Nigeria from servicing its debts appropriately. This is however coming in the wake of over N25 billion internal and external donations which the country has received in its fight against the pandemic.

Regardless, Nigeria’s debt profile under President MuhammaduBuhari rose from N12.1 trillion in 2015 to a whooping N33 trillion in 2020! This is worrisome. I am of the opinion that the recovered Abacha loot can be adequately managed to sustain the deficit in the budget, rather than further plunging the nation into deeper mires of indebtedness. There is no sustainable development in Nigeria to rationalise the stupendous indebtedness of the country. Rather, successive governments have continued to plummet Nigeria’s external debt portfolio to unfathomable degrees, and sadly, more funds will be borrowed in the nearest future. There is therefore the need to look inwards and adequately manage the country’s debt ratio. First, the country should place firm restriction on obtaining any other loan. Nigeria is blessed with more-than-enough human and natural resources which, if adequately managed, is capable of sustaining the nation’s infrastructural and socio-economic ideals. Second, there should be proper budgetary planning for the recovered Abacha loot repatriated to Nigeria. Without a doubt, if well managed, these funds will go a long way to patching whatever deficits inherent in the amended 2020 budget.

 

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