Going by the explanations of the Debt Management Office (DMO), there is nothing logical in the claims that the proposed $29.9 billion credit facility being sought by the Federal Government is a trap to sink Nigeria into more debts.
The agency’s Director-General, Dr. Abraham Nwankwo, who articulated the government position, dismissed insinuations that that the planned borrowing is a booby trap into the web of indebtedness, saying there is nothing sinister in the move to get loan to develop infrastructure.
“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”, Nwankwo said in Abuja at the weekend.
Justifying the move, especially during recession, the DMO chief stated: “Every year, there is a budget, and if you check the budgets many years back, you will see that we have been borrowing both from external and domestic sources. So, there is nothing new about this.
“Let me also emphasize that since we exited from the Paris and London Clubs’ debt in 2005-2006, we have always borrowed almost from all these sources we want to borrow from now.”
On how the $29.9 billion external loan would afftect the local economy if secured, Nwankwo assured: “If we build infrastructure in the next five to seven years before those loans mature in 15 to 30 years, Nigeria would be in a position to service its debts and turned around the economy.”
Speaking to reporters on the disputed loan proposal, the DMO director argued that the Federal Government must do something drastic to take the country out of recession.
He said: “We want to move forward by mobilizing resources but if there is a way anybody can propose we mobilise revenue that is enough to cover the infrastructure deficit in the next five to seven years that would be fine but the important thing is that we need to mobilise revenue from whatever appropriate source to solve the infrastructure deficit to turn around the economy, to exit recession, to make sure that ones and for all we are no more a mono cultural economy.”
By providing infrastructure, Nwankwo noted that “if the country is exporting five to 10 different products, whether there is a shock globally or not, Nigeria will be stable and we will not be crying about exchange rate reserve because we are well diversified that is the whole idea and that is what government wants to achieve.”
Reacting to one of the conditions that Nigeria must carry out reforms by some of the multilateral agencies approached for the loan, the Nwankwo insisted: “We don’t need them to tell us before we carry out our reforms. Our reforms are ongoing and we are maintaining the momentum of fiscal reforms like the fiscal sustainability plan, the establishment of the efficiency unit to improve efficiency, there is the presidential initiative on continuous audit these are reforms so we know we must have reforms.
“The reforms are ongoing. So, whether our friends ask us how far we are doing or not we know we need reforms and we have been doing reforms and will continue doing reforms because we know we need them.
“We are also doing structural reforms, this is to assure you that the Nigerian government and people know that we need reform and we are going ahead to carry out these reforms for our benefit.”
According to him, the Federal Government has the wherewithal to service existing and the proposed loans. “From the analysis and the programmes of government, we know we can service our debts. Ever since we exited from Paris and London clubs’ debts, we have never defaulted in servicing our debts, whether external or domestic, we have managed our debts prudently.
“That doesn’t mean we are not in a position to improve. There is no country that has any system that is not improving. Even the best systems in the world – the United States (U.S), United Kingdom (UK) and Germany – they’re still improving so we are not saying that we have arrived at the peak, we are still improving.”
Urging Nigerians to accord the Federal Government the deserved credit, he said: “Nigeria’s public debt service management is among the most respected in the world in terms of what they do and how they do it. I assure you that the proposal, which Mr. President has put before the National Assembly for external borrowing, has taken into account the country’s ability to service the debt.
“Those external borrowings are at very affordable interest rates. Most of them are below three per cent per annum and all of them range between 15 and 30 years in tenure and their moratorium range between five and 10 years. So, those loans are at relatively concessional terms.”
Explaining government’s preference for external credit facilities, Nwankwo said: “One of the reasons the Federal Government tilts to external borrowing is because, compared to domestic borrowing, they are much cheaper, at least seven per cent cheaper than domestic borrowing which means, when you look at their tenure and the interest rate, it means that their impact on debt service will be minimal per annum. So, they are even more serviceable.
“If you borrow the same amount from the domestic source, you will find out that the impact of the domestic one will be at least three times higher than the impact of the external one.”
Speaking on why the $6 billion item in the borrowing plan did not have specific details, but simply marked for ‘others’, Nwankwo said he was not sure about the specific details.
“But I can assure you there is no way the Federal Government will go and borrow billions of dollars on nothing. It must go to a project because even the person lending it will have to lend it for a project.”
“The World Bank”, he said, “cannot give you the money in full. They have to supervise the projects. It’s as the project progresses that they continue to disburse and at the end of the project, they sign off because also they have to go and report to the board of the bank to show that the project has been completed. I can assure you that every money borrowed will be well utilised, particularly under this administration.”
When asked why a region was excluded from benefiting from the loan, Nwankwo stated that packaging the loan was demand-driven.
His words: “It is demand-driven. All I can say about that is if there are states or regions that believe that they have been excluded, what we should do is to find out from them whether they submitted proposals to both the creditors as well as to the International Economic Relations Department of the Ministry of Finance and those proposals were not considered.
“Even if you make a proposal and it was not considered, between you and the people evaluating your proposal, you would have agreed on what is appropriate and what is not. You should find out whether there are states that proposed and were left out. The DMO is not responsible for receiving those proposals so it would be nice to find out from the states whether there is a discrepancy between what was submitted and what was put forward.”
