http://thenationonlineng.net/web2/articles/19697/1/Group-wants-NASS-intervention-on-external-borrowing/Page1.html

By Onyedi Ojiabor

A civil society organisation, Social Action, yesterday urged the National Assembly to urgently pass a law banning further acquisition of foreign loans by the Federal and other tiers of government.

The group in papertitled; "Leaving the Debt: Nigeria’s External Borrowing and the Call for Moratorium: delivered at a town hall meeting in Abuja to flag off a campaign against external borrowing by the government, also called for public auditing of all loans taken by government at all levels to ascertain their conditions, purposes and what they were eventually used for.

The group said it was worried that the debt status of the country had already risen to $3.7 billion as at June, while another $500 million was approved by the World Bank in July.

It called for immediate suspension of such borrowing until the government discloses what the previous loans were used for.

It said: "Despite its celebrations over exit from indebtedness to the Paris Club of creditors, the Nigerian government may be returning to unsustainable indebtedness with fresh ‘frivolous’ borrowings from external creditors including China and the World Bank Group. 2

"As it stands, Nigeria ’s external debt profile has increased to $3.7 billion as at July 2009, and is gulping a reasonable portion of the annual budget in service charges."

The group noted that the House of Representatives had in July called on President Umaru Musa Yar’Adua to halt further foreign loans, describing the condition in which recent loans were acquired as "shrouded in secrecy".

The House described the manner in which loans were taken as "dubious, shady and corrupt" and mandated its committee on debt management to investigate Nigeria ’s loans and ascertain their legality or otherwise.

"This recent call to halt external borrowing represents a rare response on the part of the legislators to matters of urgent national importance," the group observed.

According to the group, servicing the growing debt was gradually becoming a burden for the federal government and the states whose allocation this year has been declining due to the supposed fallen crude oil price.

"In 2007, Cross River State suffered a 10.40 percent deduction from its gross federation account allocation to external debt service. Oyo State had a deduction of 8.84 percent, Lagos State 7.78 percent, Nasarawa State7.05 percent and Akwa Ibom State 5.88 percent. In actual monetary terms, the deductions amounted to $2.2 billion for Lagos State , $2.07 billion for Oyo State , $2 billion for Cross River State , $1.2 billion for Nasarawa State and $1.19 billion for Akwa Ibom State . According to the Debt Management Office, the total debt service payment by Nigeria to external creditors in 2007 was $3.186 billion." it said.

It noted that international creditors like the World Bank lure Nigeria into more loans because of what they gain from it as their service charges grow higher than the actual borrowed amount, while Nigeria suffers huge capital flight through annual debt servicing.

"For instance, it is reported that before the supposed debt write-off by the Paris Club in 2005, Nigeria ’s actual borrowing was put at about $10 billion, while it had spent over $35 billion in annual debt service payments for a period of 20 years and still owed about N36billion," it said.

It regretted that the loans were usually acquired in the guise of monetary assistances from the developed countries and international institutions for intervention in critical issues as well as development of key infrastructures and sectors of the economy; while those areas remain neglected.