As the country groans under a rising debt profile, financial analysts, budget experts and macro economists, all blamed the development on the poor utilization of the loans facilities warning that if the situations that led to the alarming development are not checked,the Vision 2020 of the Federal Government for the country would become mere mirage. Chairman, Senate Committee on Local and Foreign Debts, Senator Ehigie Edoboh Uzamere, while speaking at the inauguration of the committee by the Deputy Senate President, Senator Ike Ekweremadu recently, put the national total debt at N6.02trillion and queried the capacity of the nation to repay the debt in the face of her annual revenue and flabouyant spending.'Currently, our external debt stands at $5.398 billion which translates to 2.76 per cent of our GDP. Our domestic debt is N5.210 trillion (17.53 per cent). The total debt stands at $39.72 billion (N6.02 trillion) which is 20.29 per cent of our GDP. Compared to the global limit of 40 per cent, the country is on a safe ground. 'The situation does not call for a party, but more hard work and a serious approach to translate our debt into asset to accelerate our infrastructural development and boost the economy. The current debt is more than the Federal Government's annual budget. This amount is unsettling and calls for serious concern'. He said.Uzamere, who also asked what value the debt would have attained in the next ten years, advised that the executive arm of government should focus more on borrowing to finance project that have repaying capacity and job generation rather borrowing to finance budget deficits.'What is the future value of the total debt in 10 years time'' he queried further, calling on the executive and the Debt Management Bureau to broaden its Debt Sustainability Analysis (DSA), noting that there are other Debt Sustainability Indices (DSI) that are more realistic and revealing than the DebtGDP ratio.He said: 'There is dire need for the executive to focus more on borrowing for projects with self-repaying capacity and job generation, rather than borrowing to finance gap in budgets that are largely recurrent.Howeer financial experts who also shared the concern expressed by the distinguished senator, all agreed that there is nothing bad in a nation owing when such facility is pit into judicious use, they however, expressed their concerns over diminishing capacity of the country to repay the rising debts profile without neccessarily transfering it to their next generation .They said the poor utilisation of the loan is what brought about the alarming situation. They also observed that the conditionalities attached to the loans by the creditors would continue to make the nation to be at their mercies even on the long run because the loan and the interest accruable to it must be fully serviced no matter how long it takes. A former director in the Federal Ministry of Budget, High Chief Omowale Kuye, who decried the rate at which Nigeria's foreign debt profile continued to rise, blamed it on foreign loans which were not proficiently utilized to better the economy and improve the infrastructural facilities, which were always put forward as reasons for obtaining it.Nigeria's foreign debt has risen above N6 trillion, which is even more than the annual budget of the country.Though the Otun Olubadan of Ibadanland believes that the size of loan obtained is not what makes it bad, but what it is going to be used for, is what really matters.Kuye, who said he refused to allow Nigeria take a loan from the International Monetary Fund (IMF) during his time, because many conditionalities attached to it were never in favour of the country, said that people in position of authority now should be made to state the reasons they resorted to the loans which have increased the debt profile of the country.He reasoned that many Nigerian leaders love to seek foreign loans to copy whatever they see is obtainable in those foreign countries, but would always forget that infrastructural conditions in the western countries were different from Nigeria's.To him, 'what can be manufactured in Britain might not be so here in Nigeria where electricity is not stable unlike in Britain. To that extent, it will be unwise for Nigeria to obtain foreign loan to manufacture a product which was manufactured in Britain, thinking that manufacturing cost will be the same'.On the astronomical debt profile, the budget expert said, 'To me, we should ask the people there now why things have gone so bad. Many factors are considered before seeking loan. The county will have to consider the ability to pay back the loan and determine the project to spend it on. There are lots of assumptions to make in determining this because you don't just obtain loan for the mere reason of wanting to spend it. Incoming generating ability for reserve must be considered, as well future taxes to be paid.'It is not the magnitude of the loan that is important but what it is going to be used for. Some may be for generating profit that might accrue in many years to come; like about six years. If the projection is wholesome, it may be good to obtain it. So, it is not the size of loan that makes it bad.'There are many advantages to be derived from taking loan. It might be to improve on electricity supply, maintenance of roads, and improvement on infrastructure that are already dilapidated.'I read it in a newspaper where somebody said the nation's foreign debt is more than its annual budget, and I said, what has that got to do with it' It has nothing to do with loan. It was the comment of an illiterate. What to be considered rather is whether the loan is reasonable or not; affordable or not; whether the debt will be defrayed or left for future generation to inherit.'When I was in the Budget office, I refused publicly to allow Nigeria take the loan sought from the International Monetary Funds (IMF). The scenario was on the television then. The Minister agreed with my position and the loan was not taken. That was because I knew obtaining foreign loan was not an easy thing to go into, because of the repayment conditionalities which will surely affect the borrowing nation negatively. The result of that is what we now see. All those things which will benefit the lender will be put as conditions to be fulfilled before the loan is granted. You must open your gate to all forms of imported goods which will definitely affect your economy negatively', Kuye told Nigerian Compass on the phone.On the general belief that much of such loans taken in the past were shared among the country's leaders, resulting in the soaring foreign debt, the next in rank to the sitting Olubadan of Ibadan, said, 'I hope not; I wish not, and I don't think so that such loans can just be shared like that. This is because the lending body is monitoring.'But let us think of it. Like you have asked me, I maintain that the people in charge of budgetting and seeking of loans should be asked why they got it and why it has so much accumulated. Nigeria is in a complete mess. Unemployment is rising to a level that is quite unimaginable. And now they are saying that graduates should be self- employed. Why did they go to school in the first place if they wanted to be self employed' is that how to generate employment' 'When I graduated from the University, I had about four appointments waiting for me. Why didn't the youths go to farm initially instead of going to the universities' Thousands of unemployed graduates are roaming the streets today. Was that how those asking the young graduates to be self-employed had theirs' Why are they themselves not self-employed but get rooted to government job and political appointments' See, the whole thing is nauseating. Let those there provide answer to why the foreign debt has risen to that level', the obsessed Kuye concluded. Speaking in the same tone as High Chief Kuye, on the magnitude of the loan taken by the country, a University of Lagos don and Consultant on economic matters, Dr. Ernest Simeon Odior of the Department of Economics University of Lagos, Akoka, agreed that the magnitude of the loan does not matter but how they were utilized. The university don who believed that corruption within the government circle had caused the loan to rise to the present alarming level, said there is no functional infrastructure on ground to show for the loan taken and expended. Toeing the line of Chief Kuye, the Consultant on economic matters submitted that the creditors are always willing to give loans on the conditionalities that would put the borrowing nation at great disadvantage .He said 'One of the greatest problems of developing world is borrowing. No because they dont have the capacity to pay back but because they would not proprtly utilise the loans' ' Because the creditors knew that the only way they could keep you under their perpectual control is to make sure you remain perpetually indebted to them.'He however cautioned that if the nation does not have the capacity to pay back within the stipulated period of time, it would put a big burden on her next generation and the tax payers. Just as it would put the country on poor economic rating among fellow nations 'This would affect the external reserve of the nation which in turn would affect the value of her currency in the international market.When you remain in debt without the capacity to pay back, you continue to service the debt and the interest. This would no doubt affect your foreign investments and saving. Then your currency would be devalued. Then importation would be too expensive. The government may not be able to carry out any meaningful development programme. Even the existing infrastructure would suffer and may collapse.' Odior said this is the situation found in most corrupt nations of the world, where prices of contracts for which the loans are unnecessarily and highly inflated and the differences find their ways into private bank accounts of the leaders with the collaboration of the foreign contractors.He said government borrows to fix temporary needs and fix some existing infrastructure but noted that such infrastructure on their own don't bring financial rewards on short effects but on long effects because they act as catalysrs to the economy when they are properly utilized. Nigerian government has spent billions of Naira on power project what have vwe got nothing. that does not mean this would not yeild result but it would take longer time before suc result would come even when the facilities were properly utilised. Odior who said the domestic debt does not give financial experts concerns like the foreign debts, because government knows how to handle that internally, He however forecast that 'the nation's debt may hit (N189.4 trillion) N189.338.95 million by year 2020, if government continues to borrow. He noted that in 2009 the debt profile was N590,441.10 billion . He added that if there is no more external borrowing the Gross Domestic Product GDP would be N507,547 million on the long run it would reduce the gdp of the country. but it would lower inflation if there is debt. that means that part of the national income would be used to service debt. in the case it woul lower thegdp. so government cannot even invest outside. and when part of the national income is used to service debt then inflation, goverment spending and services would be lower . by my forecast inflation would be 14.2 per cent if government continue to borrow' 'Why do governments borrow' Government can borrow to meet temporary needs. Governments borrow to finance state infrastructures and that state infrastructures, take a longer time before they yield dividends and some may not be profitable. And in that sense the money that you are going to take is not the money would give you quick return within one year. Sometimes, and you have to service the debt every year. If you take the loan for five years, the money you have goes into servicing debts; then what have you gained, nothing. Nothing is coming in yet you are still servicing the debt. The money you supposed to use for other things, you are using to servicing debts.But Professor Ummu Ahmed Jalingo, Head, Department of Economics, Bayero University, Kano, said the country needs to re-visit the various International creditor Nations and Organizations, such as the Paris club and the London Clubs for another round of debt re-scheduling and debt re-negotiations. She noted that the implication of the country's debt profile could be felt on its policy makers, as it will put additional stress on the government, as well as its policy implementers. 'The implications of Nigeria's debt profile which stood at N6.03 trillion according to DMO's figures as at 30th June 2011 are many, It represents about 19.23 per cent of the Gross Domestic Product (GDP) as against the limit of 40 per cent applicable to similar emerging countries.', the Don said. According to her, other implications of the unhealthy debt profile of the country is the fact that it will have a spillover effect on the country's much needed infrastructural development. 'Both domestic and external debt will affect the country's credit rating, as well as exacerbate an already restive poor population and over heat the economy that is on its brakes. In his reaction, former President of the Chartered Institute of Bankers of Nigeria (CIBN), Mazi Okechukwu Unegbe blamed the constant rising profile of the nation's foreign and local debts on lack of clear cut policies on the management of the country's debt by the governmentAccording to him, the approach to managing the country's debt is more of hop and jump, where the leadership tries to catch up with the rest of the world, giving the impression that they are doing the right thing.Unegbu stated that those entrusted with the responsibilities to manage the nation's economy, with respect to her foreign reserves are doing everything to get their fair share of the nation's wealth, with the aims to always deplete the reserves.He noted that all the advisers to the President are always conscious of only their individual interests, stating that their inputs into policies on the management of the nation's wealth have always smack selfish interest, which portrays erstwhile managers of the economy as people lacking in abilities during their time.He blamed the current improper management of the country's foreign reserves on lack of prudence by misfits entrusted with a responsibility of national importance.In apportioning blame for the rise in the nation's debt profile, the Debt Management Office (DMO), said the increase was due to additional disbursements on existing loans and exchange rate variations. According to the agency, in its recent report, the bulk of Nigeria's external debt stock amounting to $4,380.96 billion or 95.65 per cent were owed to official creditors, while only $197.81 million or 4.35 per cent were owed to private creditors as of the end of December 2010.Nigeria's total stock of external debt outstanding had amounted to $4,578.8 million at end-2010, the bulk (95.6 per cent) of which were owed to official creditors and sourced at concessional rates. The funds were largely applied to the infrastructure, energy and transport sectors of the economy.Also, the outstanding non-concessional loans which were sourced from the commercial windows continued their downward movement in the year owing to the on-going policy to rely on facilities from the concessional windows. The stock of external debt by remaining maturity was mainly in the long-term category. Nigeria continued to enjoy overall net inflow of resources, the bulk of which was traced to disbursements from the multilateral creditors.The official creditors comprised bilateral and multilateral creditors. As of end-December, 2010, multilateral creditors constituted 96.28 per cent of total official creditors, while the balance of 3.72 per cent was from the bilateral creditors.The report further said that the bilateral creditors were the non-Paris Club group, which provide loans on concessional terms. The non-Paris Club creditors, in 2010, comprised the Exim Bank of Korea and the Chinese Exim Bank (for Nigerian Communications Satellite-NIGCOMSAT).The stock of bilateral debts from the non-Paris Club dropped from $181.60 million in 2009 to $163.20 million in 2010 following the part repayment of principal in the review year.A breakdown of the total external debt showed that the multilateral debts continued to constitute the bulk of the total external debt outstanding in 2010. Multilateral loans which are mainly concessional loans amounted to $4,217.76 million or 92.12 per cent of the total external debt stock as at end-December, 2010.The sum of $4,08l.76 million or 96.78 per cent of the multilateral debt was on concessional terms while the balance of $136.00 million or 3.22 per cent was non-concessional. The concessional creditors were International Development Association (IDA), International Fund for Agricultural Development (IFAD), African Development Fund (ADF), European Development Fund (EDF) and the Islamic Development Bank (IDB), while the non-concessional creditors consisted of International Bank for Reconstruction and Development (TBRD) and the African Development Bank (ADB).A trend analysis of the external debt stock showed that the share of multilateral debt as a proportion of total external debt has since been increasing; from 73.59 per cent in 2006 to 92.12 per cent in 2010.The currency composition of the external debt stock as at 31st December, 2010 revealed that Special Drawing Rights (SDRs) had the largest share in the portfolio, constituting 79.60 per cent of the external debt stock.This was followed by the US Dollar with 11.03 per cent of the total, the Euro with 6.86 per cent, and other currencies (Japanese Yen, Swiss Franc, IDB Units, Korean Won and Nigerian Naira) accounted for the balance of 2.51 percent.The dominance of SDR in the currency composition reduced the exchange rate vulnerability of the debt portfolio, as only 20.40 percent of the portfolio was held in other currencies at $354.42 million, the external debt service payment 2010 was lower than the $428.04 million in 2009, by $73.62 million or 17.19 per cent. This was due to a reduction in the debt service payments in respect of non-Paris Club commercial loans in 2010, the report said.
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