Nigeria’s relatively modest external debt, speculated to be below $17bn in 1999 was spurred to exceed $36bn by 2005 by the dubious flattery from international agencies that our nation was under-borrowed. Ultimately, poor accounting records and government’s failure to also promptly service our debt obligations were deemed responsible for the bloated debt value.
Unfortunately, despite the international junketing of celebrated Finance experts and a Senate team which also expended a princely sum of $10m in a boisterous media blitz across Europe, in search of debt cancellation, Nigeria, inexplicably got 60% relief, whereas, other less star studded and certainly less mobile negotiating Teams from Africa received 100% debt reprieve for their countries.

An International pressure group, The Jubilee Debt Campaign (JDC), was so incensed that over $14bn was fleeced from Nigeria, that its co-ordinator, Tricia Rogers, observed that “It is obscene for G7 countries to take billions of dollars from one of the poorest countries on Earth. In particular this means that the UK alone will take from Nigeria almost exactly twice as much as it is giving in aid to the whole of Africa in 2005!”; Ms Rogers therefore urged Britain, as the incumbent chair of the G7, to take the lead in refusing to accept the payments”.

Nonetheless, about $3.7bn still remained as external debt, after the ‘controversial’ debt relief, while domestic debt, which included obligations to local contractors, was just below N1trillion. Instructively, however, one of the Policy Support Instruments demanded for debt relief, by the IMF, was Nigeria’s adoption of the now ‘discarded’ wholesale Dutch Auction System (WDAS) in the determination of Naira’s exchange rate. 

Ironically, even with ‘debt relief’, there were signals that our nation’s loan profile had begun a rebound, despite the increasingly buoyant crude oil income with consistent budget surpluses, before the end of Obasanjo’s tenure in 2007. Nonetheless, in keeping with IMF conditionalities, the CBN liberally allocated billions of dollars weekly, from its bulging reserves, directly to Bureau de change for ‘retail’ forex transactions, while 14 commercial banks also received $7bn as soft loans for meeting CBN’s capitalization requirements. 

Sadly, however, the promise that debt relief would promote rapid economic growth and enhanced social welfare failed to materialize; cost of funds to the real sector remained nearer 20% and high interest rates, continue till date to keep the industrial sector comatose, while the rising unemployment rate kept pace with an untamed inflationary spiral, until, we became listed amongst the world’s poorest people.

Unfortunately, the creation of a Debt Management Office (DMO) in 2004 did not bring closure to the tenure of highly priced, reckless and unfavorably structured loans, as the size of Nigeria’s debt steadily ballooned, even before late Yar Adua’s inauguration. Regrettably, by 2008, DMO’s fresh borrowings had exceeded N1 Trillion with 10-17% attendant interest rates, which were clearly inappropriate for risk free sovereign loans, which the DMO, ironically, also interpreted as debts which were “backed by the full faith and credit of the federal government of Nigeria and are charged upon the general assets of Nigeria” (see CBN’s N50bn Bond offer circular of 27/8/2008) as clearly recognized by the DMO.

The objectives usually specified for DMO’s loans were allegedly “to restructure part of the outstanding 91 days NTB (Nigerian Treasury Bills: government short term borrowings) into longer tenured bonds, to provide benchmark instrument for the pricing of other securities in the capital market, and facilitate the development of the bond market in general as well as fund the budget deficit” (see offer circular of Jan 2006 for 3rd FGN Bond –with 2009- maturity).

Evidently, DMO loan Prospectus usually made no reference whatsoever to the purposeful objectives of developing power infrastructure, or rehabilitation of our roads, hospitals, schools etc. The defined purposes of such borrowings, which exceeded N200bn in 2006 alone, were clearly for controversial intangibles that made no positive direct impact on social welfare. In any case, why would anyone borrow and incur annual interest charges in excess of about N350bn simply for the purpose of creating a market for bonds?  

We should similarly, be concerned that the DMO listed the funding of budget deficits as part of the reason for government borrowing, when infact, premium crude oil prices and output provided a ready platform for serial budget surpluses for over 4 years. It is unpardonable that government incurred such loans with unduly high cost and still proceeded to consume the available revenue surplus consolidated from higher than budget benchmark for crude oil prices. 

Indeed, in May 2008, in a piece titled “National Assembly fiddles while debt burden cripples” as well as in a later article in October titled “Bleeding us to death with debt 1-3”, this writer was unable to draw the attention of the National Assembly to our inexplicably rising debt profile which, sadly made no positive impact on our people’s welfare. 

My humble observation was also that “only a fool will endorse double digit interest payment on acclaimed soft loans”.  For example, pg of 112, of Guardian edition of 22/5/05, had carried a report that the Director General of the D.M.O., one Abraham Nwankwo indicated that “…84% of the Nation’s $3.7billion external debt is accounted for by loans from concessionary sources like the World Bank, African Development Bank and IFAD”.  “These are loans” according to Nwankwo, “obtained at very low charges and concomitant charges of 0.5%.  These loans are used for poverty alleviation programs in education, health and agricultural sectors”. 

However, despite the above explanation, the 2008 federal budget had surprisingly, provided $600m (i.e. about 20% of principal) as interest for the same loan of $3.7bn!  This oppressive provision for interest was clearly as outrageous and out of sync as CBN’s inexplicable ‘soft loan’ of $7bn in the same 14 Nigerian banks that government was concurrently borrowing from.  Unfortunately, the National Assembly in its self-serving wisdom ignored this faux pas, and it is doubtful if the banks ever repaid this loan. 

Nevertheless, Nigeria’s external debt stock has alarmingly continued its unrestrained spiral and now exceeds $10.3bn as at 30th June 2015, while the outstanding Domestic stock has similarly risen to N8.4 Trillion; furthermore, the debt stock of state governments has now also risen above $10bn to make up a consolidated outstanding National debt of almost $64bn, well above the $36bn burden from which we desperately sought exit less than ten years ago.

In retrospect, the alarm bell of an imminent death trap was earlier sounded but remained unheeded when Nigeria’s total debt stock rose above $40bn in 2007; similarly, despite the reduced revenue expectations from crude oil export, there appears to be an inexplicable air of complacency about the outstanding current debt of $64bn!

Indeed, if the unsolicited fresh IMF loan of $2.1bn for rebuilding those North East communities ravaged by Boko Haram is added, and the debts owed local contractors are also captured, the National Debt Stock may well exceed $70bn, even though there is still not much on ground to show for these bloated loans. The declared debt value may also be exclusive of the N400bn incurred from the negative profit from sale of PHCN properties, and the outstanding subsidy debts owed oil marketers, as well as the arrears of Joint Venture obligations to our major oil partners.

Notwithstanding, some analysts may once again assure us that Nigeria is still under borrowed! Clearly, with the recent emasculation of the Greek nation because of its inability to meet its debt obligations, it will not be wise to believe such experts.