Nigeria borrowed just about $10 billion in total between 1978 and 1999, paid about $20 billion in interest, and ended up in 2000 with a $30 billion debt stock outstanding. This, in short is the summary of the story of Nigeria’s debt experience.
Nigeria was at point where it cannot continue to pay $3 billion annually to external creditors while the domestic economy was comatose and without a dent on the debt stock.
In 2004 and 2005, as oil prices were firming up, and western countries were undergoing mild recession and desperate for a life line to stimulate their economies, they through the Paris and London Clubs, cashed on Nigeria’s eagerness, nay desperation for a debt relief.
They thus found a willing ally in former President Obasanjo who was desperate for western political approval for his third term gambit. With a stroke of a pen, Obasanjo paid off from from Nigeria’s oil earnings $12 billion at once, and got $18 billion written off.
In a technical sense, this was not a debt write-off which many less developed countries enjoyed, as debt relief, considering that Nigeria had paid almost twice the amount it borrowed already. It was considered one of the most costly debt repayment ever in the history of less developed countries. Yet, it was applauded by the western powers who stood the risk of permanent debt default or repudiation and the attendant implications for their banks and their economies.
In 2008 the global financial crisis which lasted till 2010, led to drying of global credit. Hence, late President Yaradua and later former President Jonathan looked inwards to bridge the financing gap through massive accumulation of domestic debt. This trend intensified under Jonathan despite oil prices at above $100 for most of the 2011-2014. While Jonathan was borrowing to pay salaries, nothing was saved for the rainy day.
Enter PMB in 2015. At this point Nigeria had no one dollar of savings, budget deficits had gone haywire, capital budget was minimal, domestic debt accumulation was on the increase, huge debt service cost was running into trillions of Naira.
And fortune turned it back on Nigeria, as oil prices crashed by over 75%. On top of these were: a revolution of expectations. Also, Infrastructure had collapsed, particularly power, and the stage was set for deindustrialization, job losses and mass poverty.
The above is the context within which to understand the resort to external borrowing to bridge the huge financing gap for infrastructure and poverty reduction by the present administration. Any body that closes his eyes and mind to the grim realities that necessitated the borrowings in the first place, and just blame government for it, is simply playing to the gallery.
It is also wrong to equate the borrowing experiences of 1978-2000 with what obtains now. In the past, western financial institutions lent money to the country, which got looted by the leaders, and went back to the same western banks. Nobody talked. And no one can point to a single beneficial project for the nation. The debt over hang only exacerbated the nation’s misery and underdevelopment.
Now, it is a different ball game. It is a paradigm shift, and a new model of development partnership that elicits a win-win for everybody. The focus is on power, railway, refineries, ports, airports, all projects that can easily liquidate the debt.
There may be issues, there may be concerns, about the terms and conditions of the loans. These are the costs Nigeria has to pay for not getting its house in order for the past 25 years. But, let not any one be in doubt that the opportunities and possibilities of Nigeria’s partnerships with China regarding development financing are far greater. And that is the way yo go.
For one, PMB will never allow borrowed funds to be looted. Secondly, with prioritising of railway and power we are sure yo reset Nigeria again on the path of industrialization, connecting economic hubs and linking rural communities. With growth in the GDP that will ensure, there will be no cause for alarm, all things being equal.
Posted By Yakubu Aliyu.