By: Sir Henry Olujimi Boyo (Les Leba), first published in September 2008
INTROBy Nemi Boyo:

The “Rational Perspectives” column which was pioneered by the late Sir Henry Olujimi Boyo- November, 2019- presents its 7th republication this year titled “Bleeding Us to Death with Debt!”. Last week’s publication titled “Still on that $7bn Deposit with the Banks!”was also initially published in the year 2008. These articles although published about 13 years ago, continue to remain relevant due to the unchanging economic landscape of our nation. 
Last Monday, the 15th of February 2021, the article by Bamidele Ogunwusi titled “At N11trn, Deficit Monetisation Fuels Inflation, Weakens Naira”was published. The article reinforces the economic gospel which the Late Sir Henry Boyo preached for decades. It cites that “Between 2018 and 2021,Nigeria’s total budget deficit stood at N13.18 trillion, a development which puts a strainon the CBN leading them to increase lending to the Federal Government to enable it plug its budget deficit.” This system termed as ‘ways and means’is expected to continue in the 2020/2021 fiscal years.
Today’s article which was initially published in 2008, cites that “In the year 2007 the debt instruments held by the banking sector accounts for N1.300BN or 64.28% of total domestic debt!”It also goes on to discuss concerns that the DMO listed funding budget deficit as part of the reason for government borrowing! My fellow Nigerians, why do we keep borrowing in the face of increasing idle reserves?One can clearly see that if an article published in 2008, presents similar issues as an article published just last week, then our nation is indeed in trouble because we are not moving forward! Let us read on in order to understand how these practices affect the everyday Nigerian and why we should care.

(These articles are also available on the Late Sir Henry’s web portal,

This column has often maintained that the advice of an innocent pupil in any of the disadvantaged public primary schools in the country would be more credible than that of an eminently qualified Professor or public servant trained in any of the best tertiary institutions anywhere in the world, if self-interest predicates the vision of our educated elite.

The specter of the destructive and oppressive effects of the obtuse decisions of such learned public servants becomes more alarming in our culture of pervasive ignorance and gullibility.  The tragedy of the abuse of our people’s trust is made more painful by the deluge of a well-oiled and orchestrated propaganda machinery which convinces us to be grateful to these public buccaneers for robbing our treasury and plunging an increasing number of Nigerians into abject poverty!

Our nation’s current debt accumulation profile is a fine example of such a scenario.  We recall also the public accolades on a former Finance Minister, who succeeded in giving away a sizeable chunk of our foreign reserves to her principals, but failed woefully on the critical universal criteria for evaluating performance for such a position.  As I recall, interest rates remained unfavourably high to the real sector and kept the industrial sector comatose, while unemployment continued to gallop and inflation remained unrestrained during her tenure.  In the end, our international poverty ratings fell to an abysmal low; yet, as I write, even the victims of her stewardship would swear to her excellent performance in office!

The emerging scenario with regard to our current unbridled debt accumulation is in accord with what has now become a tradition of praise and worship for even those who rob our treasury with impunity and defecate on us!  It was never clear how our debt portfolio to the Paris Club ballooned or for what purpose the loans were initially taken.  It is also not clear why the loans remained unserviced in spite of regular inflow of dollar revenue from crude oil exports.  What is clear is that no one can point a finger to any real infrastructural gain from any of the loans which attracted unusually high interest and penalty clauses.  Thus, the government’s creation of a Debt Management Office (DMO) about four years ago was a welcome development as analysts reckoned that the days of reckless, unfavourably structured and lopsided loans would be over.

However, the joy of such analysts has been short-lived, as it soon became obvious that the real objective of the DMO was to create fresh unfavourable debts that would sooner than later drag us back cap-in-hand to the courts of Western creditors without anything to show for billions of dollars that would once again be computed as our debts.   Soon after its inauguration, the DMO embarked on a fresh borrowing spree!  In the last four years, the DMO borrowed over N1000bn in fresh loans at an average of about N250bn every year at usually high interest rates of between 10-17%, notwithstanding that such sovereign debt which are inherently risk-free, generally attract much lower rates as they “are backed by the full faith and credit of the federal government of Nigeria and are charged upon the general assets of Nigeria” – check CBN offer circular for N50bn bonds issued August 27, 2008!

The offer circulars for the initial government borrowings by DMO specified the purpose of these loans as “To restructure part of the outstanding 91 days NTB (Nigerian Treasury Bills: government short term borrowings) into longer tenured bonds, provide benchmark instrument for the pricing of other securities in the capital market, facilitate the development of the bond market in general as well as fund the budget deficit”. (CBN offer circular of Jan 2006 for 3rd FGN bond – 2009-(maturity)).

We observe that there is no reference whatsoever to any concrete purpose, such as development of power infrastructure, or rehabilitation of our roads, hospitals and schools or the provision of potable water or enhancement of the capacity of our security agencies.  The defined purpose of such borrowings which exceeded N200bn in 2006 alone were for questionable intangibles; for example, what was the need to restructure outstanding treasury bills when the CBN readily admits that these short-term borrowings are never actually spent, but simply sequestered in their vaults just to reduce money supply in the money market and forestall inflation?  In any case, why would anyone borrow and incur annual interest charges in excess of about N350bn last year alone just for the purpose of creating a market for bonds?  The 2007 annual report and statement of accounts of DMO indicated that “The banking sector held majority of the debt instruments issued by the government, accounting for N1.300bn or 64.28% of total domestic debt!”  Every rational Nigerian should also be concerned that DMO listed the funding of budget deficit as part of the reason for government borrowing! 

Interestingly, the 3rd FGN Bond 2009 indicated above was issued in January 2006, so it is not clear if the budget deficit in question was incurred in the preceding year 2005 or was an anticipatory provision for 2006 budget, which had only seen barely three weeks by 17th January, when the offer was published.  In any case, why does the DMO consider the costly option of borrowing as a better choice when we have rising idle surplus reserves?  In the last year or so, DMO has since stopped indicating the purpose for such government borrowing, but it still has not explained the blatant anomaly of borrowing in the midst of idle funds!   Meanwhile, the banks continue to smile broadly to their shareholders and applaud government’s ‘excellent’ monetary policy!  Such unmerited adulation is understandable, as the banks are major beneficiaries of government funds which they subsequently round-trip as loans to government with ‘shylock’ returns.

Our irrational debt accumulation strategy has lately been further amplified by the September 11, 2008 endorsement of a Federal Executive Council Strategy to raise $500m from the International Capital Market via a naira denominated bond with ten-year tenor, in spite of our idle deposit of $7bn with some Nigerian banks!  The Minister of Information informed newsmen that the decision followed several requests from international banks to loan Nigeria money!  We must recall here, that we have over $60bn as external reserves which are warehoused at minimum premium and attendant management cost with some of the same international bankers who want to loan us money at a cost higher than what they pay for our funds!  

In other words, as is currently the practice in the domestic market where government borrows back its own funds from the banks, we are now poised for the same recklessness and absurdity on the international capital market!

In the event that this $500m would become part of our foreign debt, it would increase our current external debt to over $4bn and in the event that part of our domestic debt of about N23000bn (about $19bn) is funded by capital inflows from foreign speculators, further depreciation in naira exchange rates will once again create an uphill burden for the next generation, and before  you know it, the Paris and London Clubs of creditors would be ready for their pound of flesh at the expense of a nation of impoverished peasants.