Debt Servicing: Reactions trail FG’s $598.59m payment to World Bank, Exim Bank of China
By Ariemu Ogaga, Dennis Matthew and Uthman Salami
Reactions have begun trailing the payment of over $598.59 million to service debts owed by the duo of World Bank and the Exim Bank of China in 2021.
Analysis of Data from external debt service payments from the Debt Management Office showed that the Federal government spent $598.59m on servicing the debts owing these institutions.
Experts who spoke with Nigerian NewsDirect expressed worry over the spate of Nigerian borrowings.
Records showed that Nigeria paid the World Bank a total of $390.92million, which included $384.28million to the International Development Association and $6.46million to the International Bank for Reconstruction and Development.
A total of $207.67million was paid to the Exim Bank of China, for different projects for which loans were taken.
The Federal Government had sought loan facilities from Chinese lenders to implement several infrastructural projects.
In a new document titled ‘Status of Chinese loans as of September 30, 2021’ published last week, the DMO disclosed that 15 projects were funded with the acquired loans.
These projects range from the water supply, power generation, railways, airport terminals, and communication to agricultural processing.
The document also showed that there are varying interest rates, which range from 2.5 per cent to 3 per cent, and are not solely fixed on 2.5 per cent as the DMO claimed in its statement in June 2020.
As at December last year, Nigeria still owes the World Bank and China $12.38billion and $3.63billion respectively.
Speaking on the issue, the Chief Executive Officer, Center for Promotion of Private Enterprise, Dr Muda Yusuf said Nigeria’s debt profile exceeds N50 trillion when you take account of Central Bank of Nigeria and Asset Management Corporation of Nigeria’s (AMCON) debts.
According to him, “When we take account of borrowings from the CBN and the stock of AMCON debt, the debt profile would be in excess of N50 trillion.
“Although the government tends to argue that the condition was not a debt problem, but a revenue challenge. But the truth is that debt becomes a problem if the revenue base is not strong enough to service the debt sustainably. It invariably becomes a debt problem.
“Government actual revenue can hardly cover recurrent budgets. Which implies that the entire capital budget is being funded from borrowing. This is surely not sustainable.
“What is needed is the political will to cut expenditure and undertake reforms that could scale down the size of government, reduce governance cost and ease the fiscal burden on government.
“It is important to ensure that the debt is used strictly to fund capital projects, especially infrastructure projects, that would strengthen the productive capacity of the economy.
“This is the position of the Fiscal Responsibility Act.
“Additionally, emphasis should be on concessionary financing, as opposed to commercial debts which are typically very costly.
“It is imperative for the country to operate as a true federation which it claims to be. The unitary character of the country is making it difficult to unlock the economic potentials of the subnationals. It is perpetuating the culture of dependence on the federal government.
“It is necessary to scale down the size of government and cost of governance. Fiscal sustainability is driven by both cost and revenue.
“Therefore managing the major drivers of cost and revenue is imperative. As far as possible, the government should push back in sectors or activity areas where the private sector has capacity to deliver desired outcomes.
“We should see more cocessioning and privatisation at all levels of government. This would allow for the infusion of more private capital into the infrastructure space,” he said.
On his part, the Lead Strategist and Director General of Nigerian Workforce Strategy and Enlightenment Center (NIWOSEC) Dr David Kayode Ehindero while speaking with our correspondents said, “The federal government should cultivate the culture of debts servicing to reduce our over $40billion external debt to a minimum stage.”
He stressed that the government must embark on cutting down miscellaneous and unnecessary expenses to augment the debt.
Dr. Ehindero emphasised that all agencies should be given a memo to downsize their expenses to enable the Government service the huge debt without rancours.
He advised the Buhari led Administration to ensure that external debt is not crossover into the new Government in 2023.
