Amidst rising external loans, Buhari seeks debt relief for Nigeria, others | Dailytrust

Amidst rising external loans, Buhari seeks debt relief for Nigeria, others

President Buhari on Tuesday wrote the National Assembly for approval to borrow fresh $6.183 billion (N2.343 trillion) to fund the 2021 budget deficit of...

Buhari with Senate and House
Buhari with Senate and House

President Muhammadu Buhari has urged countries in Europe and multilateral lenders to consider the restructuring of debt portfolios of African countries as a full relief towards helping them tackle the effects of the COVID-19 pandemic.

The president made the case on Tuesday at the Financing Africa Summit in Paris, France, less than a year when the federal government rejected overtures for debt relief from the International Monetary Fund (IMF) in October 2020.

Since then, Nigeria’s domestic and foreign debts keep increasing while oil revenue plummets as governments at the federal and state levels struggle to fund capital and recurrent commitments.

President Buhari on Tuesday wrote the National Assembly for approval to borrow fresh $6.183 billion (N2.343 trillion) to fund the 2021 budget deficit of N5.602 trillion.


Fresh appeal for relief

Speaking in Paris on the theme, “External Financing and Debt Treatment”, Buhari said the fall in commodity prices as COVID-19 took a toll on the global economy further slowed growth in some countries and strained health facilities.

Buhari was quoted in a statement by his Senior Special Assistant on Media and Publicity, Garba Shehu, saying: “It is in this vein that we solicit the support of the French government with its influence in the European Union to lend its voice to the efforts being made to mobilise additional resources for developing economies most especially Africa in order to strengthen the quantum of investments to our economies.”

He noted that many African countries already suffered a debt distress and the suspension of debt services by France and G20 was insufficient.

He said more sustainable and affordable finance solutions were required, including debt relief and additional debt restructuring. 

Nigeria owes N33tr – DMO

The Debt Management Office (DMO) had in March placed Nigeria’s public debt at N32.915 trillion.

In a statement, DMO stated that the debt as at December 31, 2020 included the debt stock of the federal and state governments as well as the Federal Capital Territory (FCT).

It had pointed out that after Nigeria exited from recession in 2017, the level of new borrowings at the federal level in the Annual Appropriation Acts had been reducing due to measures to ensure moderate rate of growth in the Public Debt Stock for debt sustainability.

“New borrowing to part finance budget deficits had declined steadily from N2.36tr in 2017 to N2.01tr in 2018, N1.61tr in 2019 and N1.59tr in the first 2020 Appropriation Act.”

It noted that apart from the new domestic borrowing of N2.3tr, the other new borrowings were concessional loans from the IMF, $3.34 billion, and other multilateral and bilateral lenders.

“Total Public Debt to Gross Domestic Product as at December 31, 2020 was 21.61 per cent, which is within Nigeria’s new limit of 40 per cent.”

According to the annual Nigeria’s External Debt Stock of 2020, 53.78% of the country’s debt is owed to multilateral organisations; debt from bilateral was at 12.17%, commercial debt was 33.49% and promissory notes formed 0.56% of the debt profile.

A breakdown of the debt showed that multilateral organisations like the International Monetary Fund (IMF) is owed 3,535.23, International Development Association 11,123.04, International Bank for Reconstruction and Development. 409.74.

African Development Bank is owed 1,600.53, Africa Growing Together Fund 0.17 African Development Fund 949.34; Arab Bank for Economic Development in Africa 5.88; European Development Fund 54.83; Islamic Development Bank 30.08 and the International Fund for Agricultural Development 224.80 culminating to a total of 17,933.64.

Bilateral debt sees Nigeria owing China (Exim Bank of China) 3,264.16; France (Agence Francaise Development) 493.71; Japan (Japan International Cooperation Agency) 80.20; India (Exim Bank of India) 37.00 and Germany (Kreditanstalt Fur Wiederaufbua) 184.32, making a total of 4,059.39.

Commercial debt from Eurobonds is 10,868.35 and Diaspora Bond 300.00, with a total of 11,168.35, Promissory Notes stood at 186.70 with a grand total of 33,348.08. 

How Nigeria rejected debt relief in 2020

In October 2020, the federal government refused debt relief overtures from the IMF.

The Minister of Finance, Budget and National Planning, Mrs Zainab S. Usman had announced the FG’s decision to reject the debt relief at the public presentation of 2021 FGN Budget Proposal- breakdown & highlights held in Abuja.

In April, the World Bank’s Development Committee and the G20 Finance Ministers endorsed the Debt Service Suspension Initiative (DSSI) in response to a call by the World Bank and the IMF to grant debt-service suspension to the poorest countries to help them manage the severe impact of the COVID-19 pandemic.

But the federal government said the risks of debt relief now far outweigh the potential benefits. “No, we are not taking the World Bank debt relief offer”, the minister declared when asked.

“The reason being, we have assessed the offer and we have reviewed the loan agreements that we have committed to between us and other countries. We have also had to review our agreements with the commercial lenders such as private parties that buy our Eurobonds. Right now we are being limited in being able to access the debt relief.

“The risks are high and taking the offer might trigger the incident of default by some of our lenders. We will try to play safe and not take it. The good news for Nigeria is that the component of debt service obligation that we have under the bilateral agreement is actually very small and it is something we can contain and manage. But if the next version comes up, and these limitations are taken into account, just like some of our peers who also could not take the debt relief because of the same limitations, then we will consider it at that time and see the terms and conditions and what the risks are to our country,” Mrs Ahmed had said.

Experts faults debt relief request

Economic experts have said Nigeria should focus on revenue drive rather than seeking debt relief.

Mr. Paul Alaje, the Lead Economist and Enterprise Partner at SPM Professionals said Nigeria should grow its revenue base to meet its financial obligation rather than to continue to borrow and then go begging for forgiveness.

He said it was not about debt forgiveness but revenue growth profile of Nigeria, saying with the right policies in place, Nigeria could raise at least N100 trillion in revenue annually thus would need not continue to borrow indiscriminately.

“Naira historically has continued to be devalued without much appreciable value in the last 40 years. When we continue to borrow from foreign markets, it may not be thinking of growing our revenue position.  I am also not advocating that we should borrow internally because when you borrow internally and excessively, we are crowding out investments and we are also crowding out jobs.

“The revenue drive is the only way to remove ourselves from the shackles of debts” he said.

An expert, Manney Uto, faulted President Buhari’s debt relief appeal saying African countries had already benefited from debt pardon.

He said the debt relief to Africa had also been extended. “Who writes Buhari speeches? Debt relief has been granted to African countries, extended to 2022,” he said.

Describing the request for debt pardon for Africa from the international community as “disgraceful”, Uto said Nigeria was excluded from the debt relief.

Nigeria “was excluded because of the massive direct payments to government officials by ministers and CEOs of MDAs with no consequence management,” he said.

Executive Director of CISLAC, who is also the Head of Transparency International – Nigeria, Auwal Ibrahim Musa Rafsanjani, said Nigeria’s debt profile had defied all economic prudence frameworks that existed in the laws.

“Hardly do we pass any week without the president’s request for a fresh loan and a concurrent approval by the National Assembly. National public finance management regime is meant to save our entire national economic system from collapse: rescuing jobs, supporting livelihoods and bailing out many businesses on the brink,” he said.

Rafsanjani said that although this essential spending was being made by the governments today, the debate over how to deal with the debt generated by the COVID-19 crisis will be of vital importance to Nigerians.

It’s a specialised area – Presidency

When contacted on phone Wednesday, Special Adviser to the President on Media and Publicity, Femi Adesina, asked our reporter to contact the Director- General, Debt Management Office (DMO) or the minister of finance, budget, and national planning since it was a specialized area.

By Muideen Olaniyi, Chris Agabi, Francis A. Iloani, Faruk Shuaibu (Abuja) & Sunday M. Ogwu (Lagos)


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