FG move to check external borrowing

Source: huhuonline.com
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  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

written off.
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

the bank'.