From Onwuka Nzeshi in Abuja,
As Nigeria’s external debt portfolio balloons to $3.7billion, a civil society organisation, Social Action, has urged the National Assembly to urgently pass a law banning the Federal Government and other tiers of government in the country from further taking any form of foreign loans.
The demand for a special legislation came as the group launched its campaign against external loans by Nigerian leaders at a Town Hall Meeting held at the National Press Centre, Radio House, Abuja. The meeting which featured paper presentations and interactions by experts in international economic relations, warned that a few years after exiting from the grips of the London and Paris Clubs of creditors, Nigeria was gradually slipping back to indebtedness.
In the lead paper titled; “Leaving the Debt: Nigeria’s External Borrowing and the Call for Moratorium" presented at the meeting, Programme Officer of Social Action, Mr. Ken Henshaw called for a comprehensive public audit of all loans so far takeemmn by government at all levels to ascertain their conditions, purposes and how the borrowed funds have been deployed.
Henshaw expressed worries that the country’s debt portfolio had swollen to $3.7 billion as at June, this year, while another $500 million was approved by the World Bank in July. He called for immediate suspension of such borrowing until the government discloses how the previous loans were disbursed.
“Despite its celebrations over an exit from indebtedness with the deal with 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. 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 warned.
It recalled 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 they recent loans were acquired as “shrouded in secrecy”.
The House had at that time, described the manner in which loans were taken as “dubious, shady and corrupt” and mandated its Committee on Debt Management to investigate the debt profile loans and ascertain their legality or otherwise. The action taken by the House to halt external borrowing, the group said, represents a rare response on the part of the legislators to matters of urgent national importance.
According to the group, servicing the growing national debt was gradually becoming a burden for the federal government and the states whose allocation this year has been declining due to the crash in crude oil price in recent months.
“As expected, servicing the growing debt stock is gradually becoming a burden on the federal government and its federating states.
In terms of external and domestic debt service revenue ratio, some states have had to submit a large proportion of their allocation from the federation account.
“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.
The Social Action alleged that the 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.
Some analysts have observed that before Nigeria was granted partial debt relief by the Paris Club in 2005, the country’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.
Henshaw lamented that the loans were usually taken by Nigerian leaders under the guise of intervention and assistance from the developed countries and international financial institutions but the goal of using the funds for the development of key infrastructures in critical sectors of the economy have remain neglected over the years.