The Islamic Development Bank said on Tuesday that Nigeria is one of the countries in the world using a greater percentage of its revenues – up to 80 per cent – to service both its local and foreign debts.
The assertion came just as the Senate Committee on Foreign and Local Debts disclosed that Nigeria would spend N1.351tn in the 2016 budget to service its total debts which currently stands at $60bn with $10bn out of it being foreign loans.
The Resident Representative of IDB in Nigeria, Abdallah Kiliaki, who was on a courtesy visit to the Chairman, Senate Committee on Local and Foreign Debts, Shehu Sani, said though Nigeria’s debts GDP ratio is low at 17 per cent, resources being used to pay the debts were enormous going by percentages taken on a yearly basis.
He said for Nigeria not to get itself suffocated by the debts being serviced with limited resources, there was an urgent need for the country to expand its resources through diversification of its economy.
Kiliaki suggested the expansion of sectors such as agriculture and processing, saying such would earn Nigeria the required foreign income.
His said, “My visit is very crucial because we need to look at the debt profile of a country before we give it a new contractual sort of financing. We also work closely with the International Monetary Fund and the World Bank to ensure that our financing has the required threshold of grant financing which is normally 35 per cent.
“When talking about unsustainable debt, it means that a country or a borrower is unable to pay. So, we take very that very seriously. When you look at the debt GDP ratio of Nigeria, it is very low. It is 17 per cent compared to Italy and other countries which is about 150 per cent, while that of the United States is about 100 per cent.
“But there is a caveat; it is true that debt to GDP ratio is low but when you look at the amount, the revenue to debt servicing ratio, the amount of money that the government is collecting, the revenue of the government vis-a-vis the ratio to the total debt, I think Nigeria pays about 75 to 80 per cent of its revenue to service debt.
So, this is very, very high compared to other countries where they use just 10 per cent.
“What this means is that one, the government of Nigeria needs to expand or mobilise additional resources through taxation by broadening the tax base but at the same time, we as lenders, financiers, we need to reconsider our conditions of financing, meaning that we should try, as much as we can, to extend to Nigeria a financing that will not make it difficult for the country to pay its debt.
“In a nutshell, as clearly shown by available financial records, Nigeria still has considerable leverage of taking loans from multilateral financial institutions for development or investments purposes going by her very encouraging low ratio of debts servicing to GDP, but the factor of dwindling revenues being used to service the debts must be urgently looked into , by way of possible expansion”.
Kiliaki also noted that the recent visit of the 19 states governors to the Head office of the Bank in Jeddah, Saudi Arabia for rehabilitation assistance for the Internally Displaced Persons in the north-eastern states had no financing envelope agreement yet, being a sensitisation move.
According to him, even if the northern states governors had approached the bank for definite financial assistance, there was no way the Federal Government would not been carried along.
“No amount of financing was agreed upon by the bank and the governors during their recent visit to Jeddah since we don’t deal with states directly for such purposes.”
Sani urged the bank and other multilateral financial institutions to stop prompting the country to take more loans on account of its low ratio of debts servicing to GDP.
He specifically told IDB, through its representative, to be practically involved in the country’s effort at diversification of its economy and not just presenting its guided loan offer, warning that his committee would monitor ”every cent, every dollar and even kobo any government in Nigeria borrows.”
He said: “Available records have clearly shown that Nigeria’s total debts profile stands at $60bn out of which $10.6bn is from foreign loans.
“Borrowing should simply be a last option for any serious-minded government and not the first option way out of problems at hand because we don’t need to overburden our next generations for repayment of needless loans taken before their time.”
Sani described the IDB as a development partner renowned for its ethical values and commitment to development in third world nations.
He said, “We will be happy for your bank to be fully involved in our effort to diversify our economy. Nigeria’s economy is not in total crisis but it is in a serious problem.
“We fully depend on oil revenue to run the affairs of the country and the reality is that we are moving towards a post-oil era and investment in agriculture and solid minerals and other services.
“We need the intervention of your bank in our development agenda. We need to be cautious in order not to overburden the next generation of Nigerians with debt they cannot pay.” Punch
