External Debt Servicing Gulps $1.62bn in Five Years

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  • External Debt Servicing Gulps $1.62bn in Five Years

Amid attempts by the country to borrow more from external sources, Nigeria has in the past five years spent $1.62bn to service its external debts that include loans secured for what turned out to be white elephant projects.

In the past five years, Nigeria has spent $1.62bn for servicing of external loans contracted by both the federal and state governments.

A breakdown of statistics obtained from the Debt Management Office showed that the country paid $293,003,540 for external debt servicing in 2012. The following year, the amount stood at $297,329,300.

In 2014, a total of $346,723,290 was paid to external creditors. The amount came down slightly in 2015 to $331,059,850, but moved up a bit to $353,093,540 last year.

Nigeria’s external debt stood at $6,527,070,000 on December 31, 2012. However, over the past five years, it has grown to $11,406,028,000.

This means that within the period of five years, the country’s external loan commitment has grown by 74.75 per cent.

If the service fee of $1.62bn in the past five years is checked against the principal at the peak of the debt, $11.41bn in 2016, it means that 14.21 per cent of the total has been paid in debt servicing obligations.

In 2016, 44 per cent of the debt service commitments were for multilateral loans. These include loans secured from the World Bank Group, the African Development Bank Group, Arab Bank for Economic Development in Africa, the European Development Fund, and the Islamic Development Bank.

Eighteen per cent of the amount for debt servicing was paid to bilateral agencies, including the EXIM Bank of China, French Development Agency, Japan International Cooperation Agency, EXIM Bank of India, and Kreditanstalt fur wiederaufbua.

Commercial loans consumed 26 per cent of the debt servicing commitments, while oil warrants and agency fees were responsible for the rest nine per cent.

What observers may not know is that some of the foreign loans for which the nation has been servicing were obtained for ill-conceived projects, some of which are not yet completed or have been abandoned, while the impact of others cannot be felt on the economy.

One of such white elephant projects is the National Rural Telephony Project. The project was conceived in 2001 to extend telephony services to 218 of the 774 Local Government Areas in the country.

By the time the contract for the project was awarded in 2005, the digital mobile services championed by the Global System for Mobile Communication service providers was already making waves across the country.

The contract was awarded to two Chinese firms, ZTE and Alcatel Shanghai Bell, while a $200m loan for its execution was secured from the China EXIM Bank. The implementation of the project lingered beyond the given timeframe as a result of several issues and payment of counterpart funding.

The project was said to have been poorly implemented in some locations, while in a few others, it was not implemented at all as a result of difficulties in securing project sites.

By the time the project was completed around 2007, it was clear that the government did not have a model for its management. When it eventually decided to give out the project as a concession and divided into six operations according to the geopolitical zones in the country, six firms emerged victorious.

However, that was the beginning of another controversy with letters being exchanged between the Ministry of Information and Communication, the Attorney General of the Federation, the Bureau of Public Procurement and the Infrastructure Concession and Regulatory Commission.

The consequence of the bureaucratic bottleneck is that 17 years after it was conceived, the NRTP has not been put into use and Nigeria is repaying principal for the loan borrowed for the project as well as the interest.

Another project for which a loan was secured from China is the Nigeria National Public Security Communication System. A total of $399.5m was secured from the China EXIM Bank and the contract was awarded to ZTE. The Federal Government paid a counterpart funding of $70.5m.

The project is meant to install cameras and monitoring stations in three cities of the federation and to give the police a technological capacity for monitoring and prevention of crimes. Some of the installations for the controversial project have since been vandalised.

For the Abuja Light Rail Project, the Federal Government secured $500m from the China EXIM Bank. The project has yet to be completed, that is if it has not been abandoned.

For the Nigeria Communications Satellite, a loan of $200m was secured from the China EXIM Bank. The satellite constructed by a Chinese firm was put in the orbit in May 2007.

However, the communications satellite failed in the orbit on November 8, 2008. Another satellite known as NigComSat-1R was launched into the orbit on December 19, 2011 as a replacement for the first, which developed a power problem in the orbit.

The utilisation and contribution of the satellite to the economy remain controversial as authorities in the satellite firm say that the company needs at least two more satellites to run profitably.

World Bank loans, on the other hand, are difficult to evaluate as the group concentrates on poverty alleviation projects such as in agriculture.

As Nigeria bids to secure more foreign loans, experts say the importance of the citizens monitoring the projects they are to be committed to cannot be overemphasised.

About the Author

Samed Olukoya
Samed Olukoya is the CEO/Founder of investorsking.com, a digital business media, with over 10 years' experience as a foreign exchange research analyst and trader. A graduate of University of East London, U.K. and a vivid financial markets analyst.

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