The Nation Newspaper

Tag: borrowing

  • ‘FG hasn’t met conditions for borrowing yet’

    ‘FG hasn’t met conditions for borrowing yet’

    Prof. Jonathan Aremu, renowned economist and professor of International Economic Relations at the Covenant University, Ogun state, in this interview with Ibrahim Apekhade Yusuf has urged the federal government exercise restraints over its plans to obtain $30billion loan. Excerpts: 

    DO you think the call for $30billion loan by the federal government is justified?
    Well, normally when there is economic recession as we have now; there will be need to pump money into the economy whether through internal or external borrowing. But my only worry is that I don’t think the government has done all it needs to do before taking the loan. According to the International Monetary Fund (IMF), before you contemplate borrowing at all, you must first of all embark on a financial programme to determine the funding or financial gap in the system. You don’t just borrow money for the fun of it.
    Are you saying the government hasn’t done the proper due diligence required?
    That is the point I’m making. As stipulated by the World Bank/IMF, part of the conditionalities attached is that the IMF must carry out a financial programme for the country to determine which of the sectors require funding. You don’t just borrow money and then start dolling out money anyhow. I don’t think the government has any policy adjustment to back up its borrowing. If the borrowing is not productive then that is delicate for the economy. The danger about borrowing when you don’t take proper precaution is that the future generations will keep paying. Such kind of borrowing is not sustainable at all. Sustainable development is a development which doesn’t affect future consumption negatively and vice versa.
    So in essence you believe the government should jettison this whole idea of borrowing?
    As I said government needs to borrow but certain conditions must be met. That is why I think the National Assembly has called for a representation of the proposal. How can you have miscellaneous in a borrowing plan/ that is absurd. Everything should be spelt out in black and white. There is need for the federal government to carry out a proper financial programme for the country and determine the funding gaps and what are the expected multiplier effects that will generate higher productivity. I’m not aware of that. They are still talking about financing constituency projects and are still discovering where there are wastages in the system. This is not right at all. A policy adjustment is necessary. This government has not told us what policy adjustment it has taken to forestall the wastages and leakages in the system otherwise we will just be substituting external funding for domestic wastages. Let them tell us which areas we have financial gaps and then we’re going to discuss because it’s not a good thing to just borrow without taking any of these things into consideration.

  • $29.9bn loan not a trap, says DMO

    $29.9bn loan not a trap, says DMO

    The federal government has denied claims that the $29.9 billion loan it plans to access is a trap.
    Director General of Debt Management Office (DMO), Dr Abraham Nwankwo dismissed the claims that the planned borrowing was an attempt to trap Nigeria in a web of indebtedness.
    ” The first thing to note is that this borrowing is normal. Normal in the sense that over the past 20 years there is no year we have not borrowed, so interpreting the proposal submitted to the National Assembly by Mr President for a three year borrowing programme to be an indirect way of trapping the country does not seem to be logical because Nigeria has always borrowed every year.”

    “Every year there is a budget and if you check the budgets many years back you will see that we have been borrowing both external and domestic so there is nothing new about this. Let me also emphasize that since we exited from the Paris and London club debt in 2005-2006 we have always borrowed almost from all these sources we want to borrow from now.”

  • As Buhari goes a-borrowing

    As Buhari goes a-borrowing

    •This seems the only option in our circumstance

    BESET by multiple afflictions of falling commodity prices, vandalism of oil infrastructure, an industrial sector hobbled by an unprecedented infrastructure gap amidst record unemployment, President Muhammadu Buhari Tuesday last week wrote to the National Assembly seeking its approval for his government’s external borrowing plan. His administration seeks to rake in $29.960 billion to execute key infrastructure projects under the 2016-18 rolling plan. The request covers projects and programmes loan of $11.274billion, Special National Infrastructure projects of $10.686billion, Eurobonds of $4.5billion and Federal Government budget support of $3.5billion.

    While highlighting “the huge infrastructure deficit currently being experienced in the country and the enormous financial resources required to fill the gap in the face of dwindling resources and the inability of our annual budgetary provisions to bridge the deficit”, the president pledged to apply the proceeds “to key infrastructure projects, namely power, railway and road projects, among others”.

    To start with, we must acknowledge that the grim realities facing the economy leave the Federal Government with limited choice in terms of what options to take in the short term, particularly for an economy already in the throes of recession. Aside the fact that the global outlook for oil continues to leave very little to cheer, particularly at this time, militancy and community issues in the Niger Delta are such that render any immediate prospects of a ramp up in production impossible.

    All of these in the unfortunate circumstance that the infrastructure situation – after a little more than decade-long boom in oil prices – has remained at levels that can neither sustain serious manufacturing activities nor engender competitiveness. So, while it seems settled that Nigeria would not only have to spend its way out of the current pall but also to invest in those critical enablers that would support manufacturing and the real sector for a sustainable future, seeking such relatively cheaper funds with longer gestation periods to finance unprecedented infrastructure gaps is one quest that Nigeria can no longer shy away from.

    In this, we must admit that Nigerians’ apprehensions about the Buhari administration’s foray into foreign loans are not without justification. Like other facets of the nation’s public life, our experience with jumbo loans supposedly contracted to execute vital projects have been far from pleasant. While the projects for which some of those loans were sourced were poorly packaged and hence not realisable in several instances, there were those which by deliberate design were actually no more than conduits to fatten the foreign bank accounts of officials.

    Presently, there are scores of abandoned projects littering different parts of the country to show for this, as if  we are fated to suffer the twin jeopardy of denial of the benefits of the projects, and hefty penalties after succeeding administrations’ refused to service the loans as at when due.

    For the Buhari administration, the challenge is to demonstrate that things will be different this time. Aside the requirement for full transparency, nothing must be assumed; every choice made by the administration in this regard must, as far as possible, be tailored to satisfy the anxieties of the sceptical citizenry. Nigerians deserve to know who is giving what and on what terms. And where, as in some cases, the loans are tied to projects, it should reflect international comparability and competitiveness. In other words, availing Nigerians of the list of projects and their gestation periods will undoubtedly chime with the posture of an administration that swears it has nothing to hide. Indeed, it will enable citizens and other stakeholder groups monitor the progress, if any, and draw attention to the authorities where remedial actions are needed.

    Given our experience in which such loans were used to pay salaries and other items of recurrent expenditure, the irreducible minimum is that every kobo of the current loans will be channelled exclusively towards renewing the nation’s moribund infrastructure.

     

  • FG releases details of $29.9bn borrowing plan

    FG releases details of $29.9bn borrowing plan

    The Federal Government has released details of the $29.9 external borrowing.
    A statement from the federal ministry of finance signed by Festus Akanbi, the minister’s Special Assistant on media.
    According of Festus Akanbi, the $29.960 billion foreign loans is designed to address infrastructure deficit in the country.
    The details states that the external borrowing plan is a 3 year-plan covering proposed projects for 2016 – 2018. As such, the borrowings will be phased over the three year-period.
    The borrowings the ministry said “are highly concessional (non-commercial), with low interest rates and long tenors. The funding is being sought from multilateral institutions including the World Bank, Africa Development Bank (AfDB), Islamic Development Bank (IDB), Japan International Co-operation Agency (JICA) and China EximBank.”
     Also, the planned Eurobond issuance in the international capital markets is the only commercial source of funding.
  • Fed Govt okays three-year external borrowing plan

    Fed Govt okays three-year external borrowing plan

    The Minister of Finance, Kemi Adeosun, yesterday announced the approval of a three-year external borrowing plan.

    She spoke with reporters at the end of the Federal Executive Council (FEC) meeting presided over by President Muhammadu Buhari.

    With Mrs Adeosun at the briefing were Ministers of Agriculture Audu Ogbeh; Mines and Steel Development Kayode Fayemi; Information, Lai Mohammed and Education Adamu Adamu.

    According to her, the FEC yesterday approved external three-year rolling borrowing plan.

    The plan, she said, will be transmitted to the National Assembly for approval.

    She said: “Recall when we came in we said our external borrowings strategy will be focused on confessional debts, low cost loans particularly from the multi-lateral agencies.”

    The conditions of the borrowing, she said, included concessional loans average interest rates of 1.25 per cent, four to seven year moratorium, and 20 years to pay.

    According to her, the loans will come from agencies such as the World Bank, African Development Bank (AfDB), China Exim Bank, and other development agencies such as Japanese International Cooperation Agency (JICA)

    She added: “The sectors in particular that these concessional loans will go to are the strategic sectors of the economy that will help to revive the economy. There is power. Significant amount of money are located to power projects particularly transmission. This is long term money that will enable us solve some of the problems in that sector.

    “There are projects around polio. There are some money that have been allocated to us to help us do some massive immunisation, in order to control this recent outbreak. This is being provided by the World Bank.

    “There is provision for solid minerals and of course I’m very excited about the discovery of nickel. World Bank is supporting the project by the Ministry of Mines and Steel with $150 million to enable them strengthen their capacity in that area.

    “The largest beneficiary of our borrowing is agriculture because its equally strategic and we have programmes by the minister some of which he inherited and is going to restructure and reform and some are new to the ministry.

    “The balance will come from the Eurobond we had indicated.”

    According to her, the FEC sent a strong signal on the need to reach out to the National Assembly to get the borrowing plan approved as soon as possible.

    “Because a lot of this money is for developmental projects. We need this money to be made available for us. Remember these are foreign exchange coming to our country that will help our economy,” he said.

    Fayemi said the Council approved a new roadmap for mining to boost the growth and development of the industry.

    He said: “What the roapmap seeks to do is to grow the contribution of minning to the GDP on the back of the President’s vision to diversify the economy.  It is to build on the old roadmap of 2012.

    “What distinguishes this roadmap is its determination to build a regulatory agency – an independent regulatory agency in the minning sector. Stakeholders have been insisting that the ministry should not also be the regulator of the industry.

    “We will now have Mining cadastral zonal offices which issues the licenses together with the mining inspecting directorate, mining environment compliance unit as well as the nautical mining units. These are directorate within the ministry but will form part of the independent regulatory agency.

  • Borrowing to fund power

    Borrowing to fund power

    Taking domestic or foreign loans to build infrastructure for power, experts say, could resolve Nigeria’s energy crisis. Feedback on projects executed by the Niger Delta Power Holding Company (NDPHC) has shown that borrowing to build power infrastructure could be self-liquidating and profitable. The execution of Phase II of the National Integrated Power Projects (NIPP) and the diversification of power generation, transmission and distribution capacities, they say, could end Nigeria’s energy woes, COLLINS NWEZE writes.

    Plans to boost power supplies to 10,000 megawatts (MW) or more have always excited stakeholders. But it would entail building power infrastructure that is not only expensive, but requires sophisticated technology.

    The Africa Infrastructure Country Diagnostic (AICD) report estimates that Nigeria requires sustained spending of at least $14.2 billion yearly over the next decade to address the infrastructure challenge, key of which is power. But funding power would require borrowing from local and international markets, given that government revenues are not sufficient to solely fund the projects.

    Still, the country has in the last 10 years of the inauguration of the National Integrated Power Projects (NIPP) and its implementation by the Niger Delta Power Holding Company (NDPHC) achieved some progress in power.

    Stakeholders are calling on President Muhammadu Buhari‘s administration to execute Phase II of the NIPP, which covers the construction of 11 hydro dams in Northern Nigeria to add to and diversify the country’s power generation, transmission and distribution capacities. This will also stem the looming face-off between the government and organised labour over electricity-related matters.

    Former Executive Director, Keystone Bank, Richard Obire, said borrowing from local or international markets by the power companies would be required to achieve the desired results. He explained that sophisticated technology is required to drive power as most of the equipment needed  are imported. “Borrowing abroad gives operators the opportunity to import equipment and other assets. They can also borrow locally to settle naira-based obligations,” he said.

    Director-General, Debt Management Office (DMO) Dr. Abraham Nwankwo, said Nigeria’s low debt to Gross Domestic Product (GDP) ratio means the country can borrow more to fund budget, infrastructure and other essential projects that will stimulate the economy and create jobs for the citizenry.

    The Director-General of West African Institute for Financial and Economic Management (WAIFEM), Prof. Akpan Ekpo agreed with Dr. Nwankwo. He explained that with the declining government revenues from oil, budgetary allocations alone may not be enough to finance the infrastructure deficit in the country.

    Prof. Ekpo admitted that the debt option is still the most viable at this time. He said Nigeria’s rebased $510 billion Gross Domestic Product (GDP) economy gives it more room to borrow more to bridge infrastructure gap.

     

    Niger Delta Power Holding Company (NDPHC)

     Progress has been made in the power sector since 2005 when the NIPP was conceived and later implemented by the federal, state and local governments through the NDPHC, a government agency owned by the three tiers of government, but which operates strictly on the private sector business model.

    The NDPHC’s equity structure shows that the Federal Government has 47 per cent; the 36 States, 35 per cent while the 774 Local Governments have 18 per cent. Also, the NIPP was initiated in response to the deplorable state of power infrastructure and the inappropriate framework for private sector investment in the Nigerian electricity industry pre-2005.

    A report from NIPP said its scope covers the entire value chain in the power sector, namely generation, transmission and distribution, including building from the scratch a national gas infrastructure to power 10 gas-powered plants across the country.

    The NDPHC was incorporated in 2005 as the Special Project Vehicle (SPV) for the NIPP. The Nigerian National Petroleum Corporation (NNPC), the Nigeria Gas Company (NGC) and the defunct Power Holding Company of Nigeria (PHCN), among others, are integral part of the NIPP project development.

    The NIPP is being funded via the Excess Crude Savings Accounts (ECSA) and its  capital funding till date is $8.46 billion. The disbursement of the fund to the NDPHC is ratified by the Federal Government and the Houses of Assembly of the 36 states of the Federation.

    The NDPHC, domiciled in the Presidency, is chaired by the Vice President; it has as members on its Board, six governors and four ministers.

    Before the NIPP/NDPHC’s inauguration in 2005, Nigeria had transmission capacity of 4,495 Kilometre (km) on its 330 Kilovolt  (Kv) lines. The country’s transformer capacity on the 132/33Kv band was 5,700 (Mega-volt ampere) MVA. For distribution projects, Nigeria had 33/11KV sub-stations of 8,148 MVA and 33KV and 11/0.41KV substation with 32,000 MVA capacity.

    “The country could barely generate 2,000 MW of electricity. There was neither gas-fired power station nor gas infrastructure to generate electricity. The NDPHC has built 10 gas-fired power stations, an average of one power station per year, with a combined installed capacity of 4,528.5 MW. These are Alaoji, Benin, Calabar, Egbema, Gbarain, Geregu II, Ogorode, Olorunsogo II, Omoku II and Omotosho II power plants, which get their natural gas from gas metering and regulating stations grouped into seven lots,” it said.

    The NDPHC, whose Managing Director is Mr. James Abiodun Olotu, has also expanded the country’s power transmission capacity through 25 lots. They are: 5,590MVA of 330/132Kv transformer capacity; 3,313MVA of 132/33Kv transformer capacity; 2,194km of 330Kv lines; 809km of 132kv lines; 10 new 330Kv substations; seven new 132Kv substations and the expansion of 36 existing 330Kv and 132KV substations. In the third leg of the power chain–distribution the NDPHC under Olotu has executed 296 distribution projects in 43 lots spread over every state of the Federation.

    The NIPP/NDPHC has also delivered on the provision and integration of grid-wide telecommunication and Tele-protection infrastructure. Eight of the 10 power plants are fully completed with installed capacity of 3,696 MW and the last two – Egbema and Omoku, 563MW – are on course for completion and inauguration by the fourth quarter of this year.

     

    Divestment and reinvestment plan

     As a result of the country’s harrowing experience of inefficiency under the government-owned National Electricity Power Authority (NEPA, now defunct), initiators of the NIPP thought it wise to include a divestment plan in the power sector reform framework.

    However, rather than pulling out completely and leaving Nigerians at the mercy of private sector operations in this critical sector, the three tiers of government have divested 80 per cent of their equity in one leg of the tripod, the NIPP Generation Assets,  to private investors.

    The three tiers of government have sold their assets to distribution companies (DISCOs), with $1.5 billion historical cost recoverable from them in 10 years.  The three tiers of government still have transmission assets worth $2 billion as at December 2015 and gas assets with historical cost of $500 million. These investments would, in the future, be divested to the private sector to enable them recoup $8.46 billion initial commitment in NIPP Phase I.

    The NDPHC has recouped $7.1 billion by selling 80 per cent of government shares in generation only, the proceeds of which will be reinvested in NIPP Phase II.  With the total assets of the NIPP standing at $11 billion, the NDPHC has turned in at least $2.5 billion in profit and assets for the country in 10 years.

    For the Minister of Works, Power and Housing, Babatunde Fashola, the DISCOS need to treat their customers with courtesy. The minister, who spoke at a meeting with power sector players at the Ugwuaji Transmission Station in Enugu, demanded that the power companies should find a way of carrying their customers along. “If you are not getting enough power from the transmission companies, you must tell your customers so. Take the issue of review of tariff for instance, it was arrived at after consultations. Why don’t you step out and explain the issues to your customers? All of us must explain to our different customers where we operate,” he said.

     

    NIPP Phase II

     The three tiers of government have agreed under the power sector reforms programme to reinvest the recouped $7.1 billion in expanding the country’s power infrastructure under NIPP Phase II, which will take power infrastructure to other regions, especially the northern region not captured in the first phase.

    The project will involve construction of 43 critical transmission projects to resolve transmission bottlenecks; 51 transmission projects to improve wheeling capacity to 12,000 MW; 31 other transmission projects as foundation for increase of capacity to 16,000 MW plus communication and national control centre, among others. The State Grid of China, AK-AY and other interested foreign investors have shown interest in financing and partnering to fund the NIPP Phase II projects.

    The Presidency, the Senate, state and local governments, the Ministry of Power, the NDPHC and the Bureau for Public Enterprises (BPE) are all part of the NIPP success story.

    An expert in the power sector, Michael Abiodun, urged the NIPP to sustain the momentum despite the change of personnel at the federal level, the states, the ministry of power and the BPE.

    He urged the government and other stakeholders to close ranks to solve challenges facing the sector, such as inadequate gas for full commercial operations; partial payment of energy invoices, leading to the NDPHC alone being owed over N77 billion as at the end of last November; litigations in respect of bids for Alaoji, Gbarain and Omoku power plants; NNPC/NGC plans to divert gas on the western axis and the 240mmscf to Omotosho and Geregu.

    Abiodun said there are also investors’ concern in the sector bordering on credit enhancement for NBET; total divestment of NDPHC equity; review of bid to reflect delays in acquisition; the impact of regulatory risks and naira devaluation among others.

    “There are also policy inconsistencies, which have been the bane of the NESI for far too long; GenCos and the industry in general, are concerned about the capacity for transmission and distribution, whereas the investment opportunity presented on the platform of the NDPHC are good options for resolving these infrastructure deficit; and the monthly revenue gap of N20 billion needs to be closed irreversibly as a matter of urgency since efficiency and revenues drive the power industry; increasing acts of vandalism on NIPP/NDPHC facilities, especially bombing of gas pipelines and other power infrastructure in the Niger Delta,” he said.

     

    The way forward

    The NIPP plans to inaugurate the Gbarain, Egbema and Omoku power plants;  complete all distribution projects captured in the NIPP programme; complete prioritised transmission lines and substations, improve the evacuation capacity and grid stability; and close transaction for the divestment of 80 per cent equity in Omotosho and Geregu generation companies.

    Abiodun urged stakeholders to look up to the Ministry of Power for policy guidance and leadership in the sector. He also call for a “one-stop point of contact” for investors in the power sector because many investors, according to him, are frustrated by the complexity of the industry. There is also the need for support of the Senate, improved fiscal incentives and ensure that the sector is streamlined and made more accessible.

    Taking loans, domestic or foreign, to build the country’s power infrastructure, according to experts, is the way to go as the NDPHC has demonstrated that borrowing to build power infrastructure is self-liquidating and profitable for the country in both the long and short terms.

  • ‘Govt’s domestic borrowing to hit N2tr’

    AfrinvestWest AfricaPlcManaging Director  Ike Chioke, has predicted  increased domestic government borrowings of N2 trillion this year.

    In Afrinvest Research 2015 Outlook Report released last weekend, Chioke said the increased borrowing would occur against the backdrop of a significant drop in revenue (oil & non-oil) and anticipated reduction in capital expenditure.

    Chioke said the steep drop in oil prices have forced an exigent rethink of government revenues and discussions about the economy.

    “With a precipitous drop in crude prices to $48.0pb from more than $110.0pb in June last year, transition have been thrown overboard. As it stands, oil is expected to fund 52.8 per cent of government revenue implicit in the N3.6tr budget. If oil trades at its current prices or below $50pd for much of the year, the federal government would have to scale up its domestic and international borrowing programmes by at least another N1 trillion to fund its deficit,” he said.

    He noted that some states and  a member of Federal Ministries Depertments and Agencies are reported to be struggling to pay staff salaries. “We expect that more states are in financial difficulty than is apparent after the elections. Hence, if oil prices stay at this level, how will the new government of Nigeria post May 29 run the wheels of state? We expect that revenues from non-oil sources will not  materialise quickly enough to swiftly replace revenues lost to poor oil fortunes. Oddly enough, unattractive crude revenues present a great opportunity to diversify government revenues and most importantly, rein in the costs of governance and administration,” he said.

    Chioke said Nigeria famously spends an amount disproportionate to its economic importance on maintaining its elected officials in relative comfort and luxury.

    He said that 75 per cent of budget, recurrent expenditure is deterring Nigeria’s economic development.

    “What Nigeria has basically done over the last couple of years has been to use all of its oil revenues to pay the salaries of a few (less than 10.0 per cent of population). Hence, a new government may discover that to gain traction in governance, it has to bring down the cost of governance. This is inevitably linked to reducing the cost of maintaining the organs and machinery of government”.

    “Nigeria famously spends an amount disproportionate to its economic importance on maintaining its elected officials in relative comfort and luxury. Also, it would require that a new government takes the bull by the horn and address the perennial problem of a bloated civil service that is not as productive as its maintenance costs imply,” he advised.

    The proposed 2015 budget total expenditure of N4.4 trillion is 7.2 per cent lower than N4.7 trillion appropriated last year. He said the proposed reduction in expenditure will not be broad-based, as the cut will majorly be effected in the capital expenditure (N633.5 billion) component of the budget, while the Statutory Transfer (N411.8 billion), Debt Service (N943 billion) and Recurrent Expenditure (N2.6 trillion) components are all proposed to increase.

    “Capital expenditure is proposed to reduce by 43.4 per cent from the N1.1 trillion appropriated in Fiscal 2014 to N633.5 billion, while Non-Debt Recurrent Expenditure is proposed to increase six per cent over the 2014 appropriation to N2.6 trillion. In effect, the share of capital vote to total expenditure will reduce to 14.6 per cent from 23.8 per cent in Fiscal 2014,” he said.

     

  • IMF urges caution in Eurobond borrowing

    IMF urges caution in Eurobond borrowing

    The International Monetary Fund (IMF) has warned African countries against rushing to issue Eurobonds, saying they may face exchange rate risks and problems repaying debts.

    African governments facing falling levels of foreign aid are on a borrowing spree to pay for new roads, power stations and other infrastructure, prompting concern from many analysts that this could raise debt levels and undermine growth.

    “It comes with some risks,” the director of the IMF’s African Department, Antoinette Sayeh, told Reuters. “Whereas what it costs the countries to issue these bonds can often look lower than what they would pay on domestic borrowing. The real cost in the final analysis will also depend on the evolution of exchange rates in the course of the life of the bond issuance.”

    In 2007, Ghana became the first African beneficiary of debt relief to tap international capital markets, issuing a $750 million 10-year Eurobond. Since then, previously debt-burdened countries such as Senegal, Nigeria, Zambia and Rwanda have all joined in.

    “In the last two years we’ve seen new issuers – Kenya issuing the largest amount of sovereign bond this year and Cote d’Ivoire (Ivory Coast), as well also having issued this year and then Rwanda last year,” said Sayeh.

    “In 2014 alone we’ve seen some $7 billion already in sovereign bond issues, which is a record high for the region,” she added.

    Tanzania is in the process of securing credit rating and plans to issue a debut Eurobond worth up to $1 billion in fiscal year 2014/15. Ethiopia aims to make its first foray into the international bond markets by January, while Rwanda is planning another sovereign bond.

  • DMO meeting FG’s borrowing needs-DG

    The Debt Management Office (DMO) has disclosed that the domestic debt market attracted $5.112billion from foreign investors’ holdings in Federal Government securities at the end of December 2012 compared to $500million as at end of January of same year.

    This was made known by the Director General of the DMO, Dr. Abraham Nwankwo, at a retreat for members of Financial Correspondents Association of Nigeria (FICAN) held in Lagos, weekend, titled: “Opportunities for the Private Sector from Public Debt Management Achievements.”

    According to him, the domestic debt market moves have yielded to increase in the relative share of foreign investors’ holding in government securities.

    He added that while foreign investors accounted for near zero percent in Q1 of 2011, their share had increased to 19.52 per cent as at the end of 2012.

    He stated that with the historic Paris and London Club exit, the DMO has continued to explore the domestic debt management strategy to raise finance in meeting government’s borrowing needs at prudent degree of risks.

    He re-affirmed that the Federal Government was not crowding out the private sector, as the DMO would continue to create more borrowing space for other domestic borrowers to access funds in the local market.

     

  • A borrowing country

    A borrowing country

    •Minister Ngama’s advocacy for more loans calls for a jamboree we cannot afford

    Despite the avalanche of reproof against the country’s mounting debt profile, the Federal Government still believes that taking more loans is in the nation’s interest. The Federal Executive Council (FEC) at its recent meeting presided over by President Goodluck Jonathan declared that the nation is under-borrowed: and that the decision to go for more loans is irrevocable.

    Dr. Yerima Ngama, Minister of State for Finance and FEC spokesman, after the meeting reportedly declared: “We should borrow more, considering our economic activities. There is no problem with the level of our debt. The problem is the domestic debt. Interest rates are too high. Yes, we must continue to borrow. It is only poor people that do not borrow….you can borrow once you are credit worthy. America is the most indebted country in the world. Borrowing is good. The more money you have, the more money you need. There is nothing like satisfaction. If we are not oil rich, nobody will lend to us. We are borrowing because we have many projects.”

    We are astonished that such a high government official could publicly describe the collective decision of this administration’s highest policy formulating body on the salient debt question in such theatrical manner. It is outrageous to know that this administration thinks that the country’s domestic debt, reportedly put at N6 trillion, is not considered high despite the escalating cost of servicing it. We see nothing wrong in borrowing but we doubt if the country has the discipline and focus necessary for the deployment of borrowed money for purposes that would serve the interest of the people.

    Already, the government is making alibi to cover up its ineptitude in this regard. The FEC played the neo-colonial game when it listed as a major factor leading to increased domestic debt the 2010 wage increase to civil servants. The FEC also revealed that domestic borrowing, in order to meet government salary obligation to workers has increased to N 3.6 trillion. More appalling is the servicing of such debts with N699 billion in 2012 alone. Unfortunately, much of these debts in reality were used to service the comfort and greed of appointed and elected public officials through dubious allowances and other unwarranted payments.

    Nigeria’s reserve of above $53 billion comprises a foreign reserve of $45 billion; excess crude of $7 billion and Sovereign Wealth Fund (SWF) of $1 billion. With this huge foreign reserve, it is quite clear that the country does not need any domestic or foreign loan. A situation where the nation saves money in banks abroad at two per cent interest and borrows locally at 15 percent interest is bereft of any economic sense. Whose interests are the decision makers protecting – their parochial pursuits or that of the nation?

    In 2006, Ngozi Okonjo-Iweala, then finance minister erroneously goaded the country into paying $12.4 billion, being questionable debts owed the Paris and London Clubs by past administrations. The motive was to get the country out of her then debt trap. Surprisingly, in 2013, under a different administration, Okonjo-Iweala, current finance minister and coordinator of the economy, in a manner that contradicted her earlier position, is at the forefront of moves to obtain more loans for the country. Unfortunately, over 80 percent of projects upon which the repaid loans were expended failed.

    Another jamboree under the guise of borrowing is going on at a time when the nation’s current foreign debt profile stands at a high $5billion dollars. There is no need to further plunge the country into endemic debt trap when already collected loans have not served the essence of generating income and employment because the economy is shrinking rapidly.

    We deprecate the insatiable official urge to obtain new loans that will overburden future generations. The situation becomes detestable considering the fact that previous loans were not committed to any meaningful infrastructural development in the country.