By: Sir Henry Olujimi Boyo (Les Leba), first published in October 2008

This week’s article is the third part of the series “Bleeding Us to Death With Debt”. This series has focused on the issue of debt burden on our nation in the face of increasing idle reserves. The below article continues in the same vein, and further discusses the service costs on external debts as well as the questionable use of said funds. It challenges the reader to ask the right questions so that we as a nation, do not continue down the same road we have been on for years.
Taking into account that this article was published as far back as 2008, it is appalling that the same practices are still in effect in 2021! Kindly read on, and in so doing let us indeed begin to ask the right questions to spur some positive action towards creating policies that improve the state of our beloved nation.

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

In the preceding articles in the above series in this column, we tried to draw the attention of our readers to the rapidly increasing national debt and the oppressively high cost of servicing.  Indeed, we were concerned that in spite of a debt service burden, which will certainly exceed N400bn this year, there is virtually no major infrastructural development or significant contribution to the prosperity of our people for over N2000bn (about $18bn) domestic debt.  Indeed, in earlier articles (see “National Assembly Fiddles as Debt Burden Cripples” – 26/05/2008), we had unsuccessfully attempted to draw the attention of our eminent Legislators to this debt hole!  The current series was instigated by recent media reports that the Debt Management Office (DMO) was once again preparing to raise about $500m via a naira denominated bond with a 10-year tenor from the International Capital Market (ICM).  (Punch 15/9/2008, pg 17).

The DMO Director General, Dr. Abraham Nwankwo brazenly asserted that “The reason for seeking the funds from ICM, at this point in time was not primarily to raise money for infrastructure development per se, but to have a benchmark curve margin which would place private sector operators with intentions of seeking capital from ICM at an advantage!”
 The DMO helmsman did not comment on why we needed to borrow in spite of our $60bn idle reserves; the possibility, also, that the $500m being offered through ICM could be part of our idle reserves, which are round-tripped to us as foreign direct investment was not contemplated by the D.G.!  The proposed loan offer is at variance with legitimate concerns expressed by the Finance Minister that such previous loans have not contributed meaningfully to our economy when he cautioned the state governments to ensure that borrowed funds were invested in projects that would positively affect the lives of people in the community.”  (Punch 24/9/2008, pg 20).

Ironically, the same Minister, however, assured Nigerians of the beneficent nature of the fresh loans now sought!  Dr. Shamsudeen Usman insists that “These are concessionary loans with repayment periods of 40 years and with annual service burden of 1% interest rate!” At a time that the Finance Ministry and the DMO respectively are borrowing hundreds of billions of naira at about 10% to battle self-inflicted excess liquidity and to restructure existing government debts, a 1% interest burden for 40 years seems too good to be true, especially if there is undiluted assurance that the funds will be utilized directly to alleviate the crushing poverty in the land!  Regrettably, the DMO Director General has already implied that infrastructural enhancement is not the immediate objective for this loan!  

Indeed, historical evidence suggests that the generous bait of just 1% interest must be viewed with suspicion!  The need for caution is evident from Obasanjo’s 2007 budget and Yar’Adua’s 2008 projection with regard to the incidence of service cost of external debts!  The following is an excerpt from Obasanjo’s 2007 budget. “Total external debt stock outstanding as at the end of June 2006 stood at $4.6bn (about N552bn).  This is made up of (1) London Club US$1.4bn, (2) Multilateral debts US$2.7bn, (3) Promissory notes US$0.6bn, (4) other non-Paris Club Debt US$0.1bn.  For 2007, we have earmarked the sum of N61bn for servicing our external debts” Thus, it would cost over 10% to service our existing external debt in 2007!  In contrast, the following is an excerpt from Yar’Adua’s 2008 budget projections:“Our total foreign debt stock now stands at US$3bn (about N360bn)… We therefore, have earmarked the sum of N66bn (or about 18.3%) for servicing our external debt in 2008!”

A careful evaluation of the above should be of interest to Nigerians, who are concerned about the frivolous dispersal of our foreign wealth!  It is certainly very odd that in spite of a decreasing external debt, our cost of service has jumped upwards, both in ratio and value terms!

In the light of the above, it may not be out of place to sound an alarm that “these people have started again O!”  If history is anything to go by, such loans which are touted as generously concessionary with minimal rates, may once again, mortgage sizeable chunks of our future earnings to pay so-called foreign investors who may have raised the funds loaned to us from the same keepers of our idle reserves in the first instance!  

In a table of figures recently provided by the monthly Nigeria news journal, “The Economic Confidential”, it is revealed that “Out of $3.65bn of External Debt Stock, $2.11bn or 57.86% was owed by the Federal Government, while the remaining $1.53bn or 42.12% was owed by states and FCT.  Only the FG owed the Non-Paris Club creditors amounting to $573.3m.  States and FCT were only indebted to multilateral creditors.  Lagos State has the highest indebtedness with $243mn followed by Oyo State $108mn, Cross $94mn and Kaduna $93mn.  The least Indebted states are FCT with $12mn, Bornu $13.5mn and Zamfara $13.6mn.”

In the light of above external debt classification, it behooves the National Assembly to immediately evaluate the respective interest components for the debts of both the Federal Government and the 36 States, plus FCT; Nigerians and the citizens of each state should be acquainted with the terms governing the loans that have been taken on their behalf and who was responsible for negotiating those external loans with oppressive terms!  

In the event of assurances by government and agents of the ICM (read as World Bank, IMF, Paris Club, etc) of the generosity of both previous and current loan offers, we need to know how debt service alone (outside repayment of capital sum) would attract a charge of almost 20% of $3bn in 2008!

If our National Assembly is made up of patriotic and focused Nigerians, they would take a serious look at our debt profile and the abnormal cost of service!  They must question the incessant liquidity mop up in the money market at excruciating costs for idle sovereign debt which are inherently risk-free and therefore attract very low interest!  They must question the wisdom of borrowing up to “N200bn from the domestic money market to partly finance the 2007 budget deficit, in spite of huge idle reserves;” they must examine the claim consistently made in this column, that it is not commercially wise to pay up to 10% interest for such loans to the same banks whose liquidity and cash positions are generously funded every month, when the CBN deposits huge naira allocations into the bank accounts of the three-tiers of government.  The Legislature must question why our domestic debt level has been increasing by about 25% annually for the past four years and recognize that barely a year after we were encouraged to celebrate the reduction of a controversial external debt from $36bn to about US$4.6bn, a domestic debt value of over N2000bn, plus an external debt level of US$3bn, add up to over $20bn.

Our Legislators would have sacrificed the future of all Nigerians including their own descendants who are yet unborn, if they close their eyes against these ugly realities and their failure will attract curses rather than adulation in years to come!

Save the Naira, Save Nigerians!