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Saturday, 03 October 2009 00:00
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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.