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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.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Economy

Prepaid Meter is Free, Buhari Warns DisCos, Agents

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President Muhammadu Buhari once again warned Power Distributing Companies (DisCos) and their agents selling prepaid meters to electricity customers against the Federal Government directive that meter is free.

Ahmed Rufai Zakar, the Special Adviser to the President on Infrastructure, who represented Buhari at the FGN/NLC-TUC ad-hoc committee on electricity tariff stakeholders held in Ibadan, Oyo State on Wednesday, said President Buhari understood people’s concerns on issues surrounding electricity and was determined to curb and deal with unscrupulous individuals in the power sector.

He said, “We have made it very clear through the regulators direct order as well as intervention from the Ministry of Power that the meters are to be provided to Nigerians at no cost.

“Even for meters that were paid for, there is the directive from the regulator to the discos that they would need to find a way to reimburse those citizens over time.

“In cases where we find any disco or disco representative selling the meters or exploiting Nigerians to be able to get meters by paying, we would take the full measures of the law.

“The President has mandated that these meters must be free. We have also said that they must come from local manufacturers.

“This would create jobs and revive our industry.”

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Economy

Nigeria’s Real Estate Sector Shrinks by 8.06% in the Third Quarter -NBS

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Economic uncertainty plunged Nigeria’s real estate sector by 8.06 percent in the third quarter of the year, according to the National Bureau of Statistics (NBS).

Nigeria’s statistics office said “In nominal terms, real estate services recorded a growth rate of –8.06 per cent in the third quarter of 2020, indicating a decline of –11.78 per cent points compared to the growth rate at the same period in 2019, and by 9.12 per cent points when compared to the preceding quarter.

“Quarter-on-quarter, the sector growth rate was 18.92 per cent.

“Real GDP growth recorded in the sector in Q3 2020 stood at -13.40 per cent, lower than the growth recorded in third quarter of 2019 by –11.09 per cent points, but higher relative to Q2 2020 by 8.59 per cent points.

“Quarter-on-quarter, the sector grew by 17.15 per cent in the third quarter of 2020.

“It contributed 5.58 per cent to real GDP in Q3, 2020, lower than the 6.21 per cent it recorded in the corresponding quarter of 2019.”

Nigeria’s economy contracted by 2.48 percent in the first nine months following a 6.10 percent and 3.62 percent contraction in the second and third quarters respectively.

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Economy

Nigeria Requires N400 Billion Annually to Maintain Federal Roads -Senator Bassey

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The Chairman of the Senate Committee on road maintenance, Senator Gersome Bassey, on Friday said Nigeria requires about N400 billion annually to maintain federal roads across the country.

The Senator, therefore, described the N38 billion budgeted for road repairs in the 2021 proposed Budget as grossly inadequate. According to him, nothing meaningful could be achieved by the Federal Roads Maintenance Agency (FERMA) with such an amount.

He said, “For the 35 kilometres federal roads in the country to be motorable at all times, the sum of N400bn is required on yearly basis for maintenance.”

Bassey “What the committee submitted to the Appropriation Committee in the 2021 fiscal year is the N38bn proposed for it by the executive which cannot cover up to one quarter of the entire length of deplorable roads in the country.

“Unfortunately, despite having the power of appropriation, we cannot as a committee jerk up the sum since we are not in a position to carry out the estimation of work to be done on each of the specific portion of the road.

“Doing that without proposals to that effect from the executive, may lead to project insertion or padding as often alleged in the media.”

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