[size=14pt]Accumulating debt for unborn Nigerians[/size]
By Simon Ekpe
Wednesday, 1 Sep 2010


Not too long ago, Nigeria was like a lumbering giant, toiling under the excruciating weight of debt. It is not so clear how much was owed but it was anything between $30 billion and $38 billion. A substantial portion of the country’s oil wealth was channelled into servicing debts of doubtful provenance. The actual amount and the purpose for which the money was borrowed were not clear to many Nigerians.


According to a report quoting former President Olusegun Obasanjo, Nigeria ’s borrowings stood at $5 billion by 1978, when he was still the military Head of State. By 2000, however, it had spiralled out of control. About $16 billion had been paid in debt servicing, while the country was still in debt to the tune of $31 billion. By the same token, between 1980 and 2000, sub-Saharan Africa, of which Nigeria is a part, paid over $240 billion as debt service, about four times the amount actually owed. The burden of debt servicing and repayment was becoming stifling and something had to be done to save the country from grinding to a halt.


But, as fate would have it, Obasanjo, the man who helped to accumulate some of the debt, was instrumental to leading Nigeria out of the debt trap. After much lobbying and countless trips abroad, debt forgiveness came. Nigeria had to pay up $12 billion of the debt while about $18 billion was written off. The former president was able to achieve the feat by taking advantage of favourable oil prices in the international market.


For a country that depends on oil for about 90 per cent of her income, fortune has really been smiling on Nigeria. From below $20 per barrel in 1999, oil prices rose steadily and peaked at an all-time high of $147 per barrel in the seventh month of 2007. Right now, oil is still selling at close to $80 per barrel. According to a recent report by an online journal, Economic Confidential, Nigeria earned N34 trillion between 1999 and 2009. Nigeria has made enough money to make an impact on the lives of her citizens.


Quite inexplicably, less than five years after Nigeria cleared practically all her debt, the country is now gradually creeping back into the hole. Officially, the Debt Management Office says the country owes about $4 billion. But the World Bank and other foreign sources indicate that the figure is over $11 billion. Recently, President Goodluck Jonathan sought the approval of the National Assembly for a $4.2 billion loan facility. The specifics for the loan were not mentioned.


It will not be out of place to ask what the country has done with the generous earnings from oil and all the borrowings so far. For instance, the country still remains among the poorest in the world where all the infrastructure and things that make life livable are lacking. The cholera epidemic currently ravaging some parts of the country and which has claimed more than 500 lives is evidence of the poor standard of living in the country. It is evidence of the failure of the primary health care programme of the government. Cholera is a water borne disease that was eradicated in the United States as far back as 1911. A recent United States State Department report said that only 17 per cent of Nigerians have access to potable water. If the government cannot provide drinking water, electricity, good education, functional rail system and good roads, what are the loans being used for?


The lesson from Nigeria’s earlier debt history, and that of the larger sub-Saharan Africa, is that a small amount of debt could multiply far beyond what was originally borrowed. After the way the earlier borrowings were handled, one would have thought that any loan taken by Nigeria would be tailored to specific projects that could generate income for repayment. For instance, if Nigeria takes a loan to fix electricity, or the rail system, then, at the end of the day, when the loan is being repaid, people would know what the money was used for.


Two weeks ago, I wrote about the country’s plans to buy three additional aircraft at the cost of $154 million to boost the Presidential fleet that already has eight. Initially, we were told they were not meant for the use of the President himself but were to serve the Senate President and the Speaker of the House of Representatives. The President however came out to defend the decision of the Federal Executive Council to buy the planes during his recent visit to Kogi State, saying, “The President of Nigeria must be transported safely at all times.” He also advised that criticisms must be constructive.


Not surprisingly, reactions of Nigerians to the plan to buy the aircraft have been laced with anger and frustration, the same way they felt when they read about the legislators’ jumbo pay. The latter article had chronicled Prof. Itse Sagay’s claims that Nigerian legislators were the highest paid political office holders in the world. Just like the Nigerians who reacted to that article, I still find it difficult to fathom how legislators can be earning between N204 million and N240 million (between $1.45 million and $1.7million) in a country that is into serious borrowing. Sagay also said that the Senate President received N88.33 million a month while the President of the United States earned $400,000 per annum and the British Prime Minister takes home $190,000 monthly.



Surprisingly, the National Assembly has not come out with its own defence and why critics must criticise its actions “constructively.” The only thing I have heard is that the money was fixed by the Revenue Mobilisation, Allocation and Fiscal Commission. If, indeed, it is true that the RMAFC is responsible for the arbitrariness that goes in the name of salaries and allowances of political office holders in Nigeria, then this is the time for a comprehensive review. The world over, these are not the times for ostentation but time for cost cutting.


When the British treasury chief, George Osborne, recently called on taxpayers to help in drafting tough spending cuts, the suggestions were as interesting as they were realistic. Among suggestions received were the abolition of the monarchy and the reduction of sitting days in the parliament to four days a month. The Government is planning to cut its spending by £30 billion (about $44 billion).


Perhaps Nigeria should also start thinking along that line. The cost of governance cannot be sustained by the Nigerian economy. The various arms of government must wake up and work with the RMAFC towards fixing realistic remunerations for our politicians. This is the time for cost cutting. Nigerians leaders should be responsible enough not to accumulate debt for unborn generations of Nigerians

http://www.punchng.com/Articl.aspx?theartic=Art201009010495965

this article is lying, not citing sources, and exaggerating numbers

on top of that debt isn't bad, no country can develop without it.

Dem don start again.
Generalist 'expert' Nigerian reporters. He should start by asking what Nigeria's debt to GDP ratio is, and compare with Spain, Germany, and other Eurozone countries. So long as the money is going towards much-needed infrastructure, who gives a crap? When they were not borrowing money, were the oil revenues not consistently stolen?