Notwithstanding the country's celebrated exit from Paris and London clubs debt, Nigeria is not yet out of the wood, as a significant chunk of state governments revenue is being deducted at source for external servicing.
Special checks by the Economic Confidential reveal that in terms of external debt service revenue ratio, some states have had to surrender a huge proportion of their accruals from the Federation Account. For instance, in 2007 Cross River State suffer a 10.40 percent deduction of its gross Federation Account allocation to external debt service; followed by Oyo State with 8.84 percent and Lagos State with 7.78 percent. Others who got their allocation heavily debited in 2007 were Nasarawa State 7.05 percent, and Akwa Ibom 5.88 percent. On the other hand, the States with least deductions within the same period were Ekiti 0.44 percent, Zamfara 0.54 percent and Gombe 0.61 percent.
In actual monetary term however, Lagos State experienced the largest deduction with over N2.2 billion, followed by Oyo over N2.07 billion, and Cross River State in the region of N2 billion. Others states that paid dearly for their external indebtedness were Niger N1.3 billion, Nasarawa N1.2 billion and Akwa Ibom N1.19 billion. From the rear were Ekiti State with a paltry N76 million, Zamfara N107 million and Gombe N107 million.
According to a recent Debt Management Office (D.M.O) report, the total debt service payment for the year 2007 amounted to 3.186 billion U.S dollars, which represents a decrease of 60.39 percent as compared to 2006 figure. Out of this, 2.162 billion U.S. dollars, or 67.88 percent, was for domestic debt principal and interest repayments, while 1.022 billion U.S dollars or 3.211 percent, was for external debt service payments. Of the debt service payments, 46.63 percent constituted the payment to promissory notes holders, while 38.43 percent was payment made to multilateral creditors.
The report also shows that the multilateral debt outstanding as at 31 December, 2007 amounted to 3.080 billion U.S dollars or 84.31 percent of the total external debt stock. Of this, 2.358 billion U.S dollars was owed to concessional multilateral creditors and 722 million U.S dollars to non-commercial creditors. Among the concessional creditors are the International Development Association (IDA) with 1.941 billion U.S dollars; International Fund for Agricultural Development (IFAD) with 222 million U.S dollars; and the European Development Fund (EDF),with 146.10 million U.S dollars. The non-concessional creditors consisted of the International Bank for Reconstruction and Development (IBRD) with 368.51 million U.S dollars and African Development Bank $353.80mn or 18.12 percent, compared to the values as the end of 2006.
As at December 2007, total debt Federal Government and states owed external creditors stood at 3.654 billion U.S dollars. This is made up of 1.540 US billion dollars multilateral debt owed by states and $2.114 billion multi-lateral and non-Paris bilateral debt owed by the Federal Government. Lagos State is most indebted with its liability amounting to $243.28 million U.S dollars or 6.66 percent of the total external debt followed by Oyo State with $108.92mn or 2.98%, and Cross River State with $94.44mn or 2.58%. Others on the top six most indebted states are Kaduna $93.154mn, Katsina Stte $69.105mn and Bauchi State $19.105mn. On the other hand, the five least indebted states are the F.C.T $12.20mn, Borno State $13.567mn, Zamfara $13.6mn, Gombe State $14.27mn and Anambra State $15.19mn.
It could be recalled that in 2005, both the Federal Government and the states exited Paris Club debt, though not without controversies. Some analysts faulted the exit process and terms, while others insisted that Nigeria was short-changed. As at December2004, states owed Paris Club 5.4 billon U.S. dollars, while the Federal Government owed 25.4 billion U.S. dollars. However, the unprecedented Paris Club debt relief deal resulted in the writing off of 18 billion U.S dollars by the Paris Club following a payment of 12 billion U.S. dollars by Nigeria in one fell swoop. In addition, a whooping 1 billion U.S. dollars was controversially paid to some unnamed "consultants" who facilitated the deal. Critics equally flayed the mere marginal role played by the National Assembly in the deal. This was as a result of obvious unilateralism of former President Olusegun Obasanjo and his then Finance Minister Ngozi Okonjo-Iweala.
According to Abraham Nwankwo, Director General of Debt Management Office (D.M.O), the country completed its exit from the London Club in the first quarter of 2007. Nigeria initiated London Club Redemption Exercise in 2002. In November 2006 par bonds amounted to 1.44 billion U.S. dollars were redeemed at par. In March 2007, under an obligor substitution arrangement, Nigeria paid 519 million U.S. dollars to exit obligation to holders of promissory notes. Similarly, in March 2007 Nigeria issued a call notice and about 21 percent were retired at 220U.S. dollars par unit of oil.
After the exit from both Paris and London Club debt, only multilateral debts are outstanding for the states while the Federal Government has some Non-Paris Club Bilateral Debt
However, the Economic Confidential is of the opinion that Nigeria should brace up for more indebtedness, because Federal and State governments have been taken fresh multilateral facilities. A top economist believes that this is inevitable, because multilateral loans are very tempting ÔÇô being soft loans of very low interest rate, up to 40 years repayment period, including 10 years grace period. Multilateral debts are equally tempting because they appear to be supportive of development, i.e., they are useful for funding health, water, education and other social services.
But one hopes that government will be circumspect in their endless acquisition of new foreign loans, so that we do not fall into the debt trap again, and so that precious limited revenue are not diverted for debt servicing and repayment.
Please click here for the Table of Figure