FG move to check external borrowing
Apprehensive of a return to the Paris Club era, where the country's external
debt profile rose to about $30 billion, the Federal Government has
declared that henceforth external borrowing would only be approved for
projects that will directly improve the economy of the country.
Therefore, the Federal Government directed the economic management
team to fast track the establishment of a committee that will design the
modalities for subsequent borrowings by the three tiers of government and all
government agencies .
Addressing the media , after the weekly Federal
Executive Council (FEC) meeting, at the Presidential Villa, Abuja, Labaran
Maku, minister of information and communications joined by Sam Ode, minister of
state Niger Delta Affairs and Yebawa Wali, minister of finance , said President
Jonathan frowned at any borrowing that has not direct impact on the economy.
'The President directed that national economic management team should
come up with updated guidelines for external borrowing. The decision was made
by the president specifically to ensure that Nigeria borrows only for sole
projects that will have immediate impact on the economy,' Maku said.
The minister said 'the president frowns at a situation where after
existing the London and Paris club of creditors, Nigeria should not again
return to the situation of the past. Therefore external borrowing must be tied
to productive activities that generate revenue, improve economic development,
increase Gross Domestic Product (GDP) and increase employment in the country'.
He stated further 'loans that are not targeted at development projects
will be frowned at. So the president directed that there is need for this
general review and that every loan that Nigeria is going to take subsequently,
whether Federal Government or individual ministries department and agencies ( MDAs ),
or state governments, there must be thorough analysis of these loans as regards
their impact on the economy'.
The President Maku said 'also directed the Debt Management Office
(DMO) to constantly update the debt status of every state government and the
Federal Government so that any state that proceeds to acquire a new loan, we
should be able to take a look at existing debt profile to ensure that it has
the capacity to pay eventually, therefore from today onwards, the question of
new debts, new external loans will be tied to the new guidelines to be
developed by the National Economic Management Team'.
The minister noted that President Jonathan 'was very emphatic about
this development because the Nigeria economy is in need of productive
activities, a situation where loans might be taken that are not directed at
development or increasing infrastructure or increasing the general volume of
goods and services in the economy will not be in the best interest of Nigeria'.
In 2006, former President Olusegun Obasanjo negotiated the country's
debt payment plan of a mix of cash and debt relief, backed by the country's
burgeoning oil revenues.
Nigeria agreed to pay the Paris Club $12.4bn
(£8.2bn) in exchange for the remainder of its $30bn official debts being
This move led to the removal of Nigeria from an international credit
blacklist, and regained its credit ratings similar to other emerging market
countries such as Turkey and Ukraine.
Meanwhile, the council also gave approval to the ministry of finance
to pay up Nigeria's new share capita that has been allocated by the African
Development Bank (ADB).
The bank at its meeting in Cote d'Ivoire, in May, 2010, decided to
increase its share capital by about 200 per cent, following the recent global
economic crisis that affected financial institutions around.
Nigeria has a total of 23,215 shares in the bank, representing 8.6 per
cent, and the new allocation to Nigeria on the basis of recent review is
'Now, if Nigeria accepts this new allocation to us, Nigeria's total
share in the ADB will be 886,021 shares. The cost of the new shares to which
Nigeria will now have to pay up in other to maintain its own percentage holding
is $246,073,000,' he said.
Maku maintained that with Nigeria's proportion of 8.6 per cent in ADB,
the country will be able to 'exercise
some influence on the general direction of the bank. The influence is not just
about who leads the bank, in fact in the last 11 years Nigeria has had over
$800 million extended for development projects from ADB. We have also had $800
million of loans extended directly to the private sector on concessionary
grounds by ADB and this is because of Nigeria's significant shareholding in