LAGOS, KADUNA LEAD IN $2.4BN FOREIGN DEBT

• ‘Why Debt Instrument Was Moribund For 18 Yrs’

AFTER paying a total of $76.78 million for debt service in 2012, the total external debt stock of the 36 states and the Federal Capital Territory (FCT), Abuja, now stands at $2,384,178 million, according to official figures released by the Debt Management Office (DMO).

The Director-General of the DMO, Mr. Abraham Nwankwo, also noted that the market for debt instrument on the domestic front, especially bonds, was moribund for 18 years because the Military era didn’t subject itself to the discipline of the market.

Nwankwo was guest speaker at the Citizen Newspaper’s Annual Public Lecture in Lagos on Thursday.

A detailed breakdown of figures from his office revealed that, as was the case in 2011, Lagos, Kaduna and Cross River States recorded the highest external debt stock of $611.25 million (25.64 percent), $215.68 million (9.05 percent) and $113.03 million (4.74 percent) respectively in 2012.

Conversely, Borno, Delta and Plateau States had the lowest debt stock, ‘booking’ relatively paltry $14.15 million, $18.99 million, and $21.93 million, representing 0.59 percent, 0.80 percent and 0.02 percent respectively.

Additional information from the DMO shows that States borrowed more external loans last year than they did in previous years.

The States’ debts, according to Nwankwo, were mainly Federal Government’s on-lent loans obtained from multilateral sources on concessional terms to fund projects and programmes in education, health, water supply, housing and sanitation, among others.

The DMO observed that total State Governments’ external debt stock as at the end of December 2012 represents 36.53 percent of the total external debt stock of the country.

This is coming to support the position of the Coordinating Minister for the Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala, who puts the nation’s external debt at $6.67 billion, adding that the figure represents just three percent of Nigeria’s Gross Domestic Product (GDP).

Meanwhile, the Kaduna State Government has been under pressure over domestic and foreign debts incurred to finance various programmes, which the opposition considers as elephant projects.

The State’s foreign debt stock has reportedly hit over $380 million and domestic debt N45 billion since the former governor, and now Vice President, Alhaji Namadi Sambo, handed over to the late former Governor, Patrick Yakowa.

It is believed that debt servicing took a toll on the State’s economy, dwarfing the developmental efforts of the deceased governor, Yakowa.

The Kaduna State Chapter of the Action Congress of Nigeria (ACN) recently urged Governor Yero to resign if he could not run the State without foreign loans.

State Chairman of the Party, Mohammed Soba, in a statement called on the State Assembly to probe all foreign loans obtained by Governor Yero with a view to ascertaining their economic viability.

In Lagos, Commissioner for Budget and Planning, Mr. Ben Akabueze, explained why he could not give specific figures on the state’s debt profile.

Akabueze said: “We are not talking of static figure. By the time we conclude today’s activities, the figure must have either moved up or down. “If you are expecting me to give you specific amount, I am not going to do that,” he said.

The commissioner described as immaterial, the issue of ascertaining the exact amount of debt.

“What is going round as the figure is, at best, an aggregate sum. However, what is important is the sustainability of the debt. In Lagos State, the aggregate debt amounts to less than one percent of annual revenue. Because of this, it is not correct to say the State is having financial problem”, the Commissioner said.

Sources within government circles in Cross River debt profile of the Cross River State is estimated at about N80bn.

Although no government official in Cross River is willing to comment on the exact debt stock of the State, it was gathered that much of its debt was incurred during the construction of Tinapa Business and Leisure Resort, as well as the Cable Car in Obudu Mountain Resort under the administration of former Governor Donald Duke.

The State Governor, Senator Liyel Imoke, in his 2012 Budget presentation, had stated that, “as a state, we are committed to meeting our debt servicing obligations.  In 2011, we spent over N10bn on servicing of our local and international debt obligations.

“Let me re-state our commitment to remain a responsible government by honouring the terms of our debt agreements and maintaining a sustainable level of debt commensurate with the rate and pace of our development as a State. We, accordingly set aside the sum of N13 billion for debt servicing in 2012.  This represents 22 per cent of our total recurrent estimate for the year.

“Encouraged by our progress and seemingly impressed by the management of our debt profile, we are expecting about N5.6bn as loans and grants from International Development Organisations in 2012. We intend to continue to meet our debt servicing obligations in 2012.”

Making a presentation in Lagos, Nwankwo, said government is prepared to moderate the growth rate for external and domestic debts. He, however, stressed that government would also use the paraphernalia of public debt to encourage the private sector “to take the lead in taking advantage of both the domestic and external market to mobilise resources to grow the economy, to generate employment/growth and reduce poverty.

“It is important to say this, because each time we talk about debt in Nigeria, we focus on the amount borrowed, and not how you use what you have borrowed. But this has neglected the other benefits of debt that have continued to propel the progress of our economy.

Nwankwo noted that inefficiencies in public debt management, prior to the establishment of the DMO in 2000, had pushed Nigeria into unsustainable external debt. According to him, “there were a lot of inefficiencies in Nigeria’s public debt management to the extent that debt/credit auctions were scattered in the various departments of government. Of course, that was one of the factors that caused our unsustainable external debt.”

On the domestic front, the DMO boss said the market for debt instrument, especially bonds, was moribund for 18 years because the    Military era didn’t subject itself to the discipline of the market. So, even if they needed to borrow, they didn’t do so by going to the capital market. Rather, they borrowed from the Central Bank of Nigeria (CBN) through words and means.

“Even when the CBN issued Treasury Bills on their behalf, the bills were underwritten and, given the shortfalls of pricing in the market at the time, you will expect that there would be under-subscription. Since the bonds are underwritten, they will soak up most of the money. So, for the external bonds, there were inefficiencies; and for the domestic bonds, there were inadequacies.”

Source: Guardian