$7.9bn loan: Nigeria to pay $5.4bn charges.

At least $5.34 billion of the $7.9 billion foreign loans being taken by Nigeria will go back to the lenders in form of interests and other charges within the 10-year moratorium period alone, according to a Daily Trust analysis of figures submitted to the National Assembly by President Jonathan.

The charges will amount to an equivalent of N833 billion out of the total N1.3 trillion foreign loans, which are being taken from several international creditor institutions including the World Bank, African Development Bank, Islamic Development Bank and French Development Agency.

On Thursday, senators debated the loan details, and accused President Jonathan of leading Nigeria into a debt trap.

Documents obtained by Daily Trust show that at least $5.3 billion, representing 67.6 percent of the total $7.9 billion package, will be paid back to the lenders over a period of 10 years in interests, service charges, commitment charges and management fees.

A total of 35 different loans of varying amounts for the financing of different projects were being sought by the Federal Government along with several state governments. The interest rates and other charges vary among the creditor institutions.

The Islamic Development Bank charges 1 to 2 percent interest rate on most of the loans, as well as service charge not exceeding 2 per cent and commitment charge of 0.5 per cent on some of the facilities.

IDB is to provide $44.69 million loan for tertiary health services in Kaduna, $234 million for Zungeru hydroelectric power project and $300 million for agricultural operation, at 2 percent interest rate per annum, service charge of 0.7 percent, and commitment charges of 0.5 percent.

Five different loans are to be taken from the African Development Bank with 10-year maturity period and will be used to finance Zaria water supply for $81.23 million and another $300 million for the provision of infrastructure in FCT satellite towns.

The Federal Government is also seeking to collect $56.6 million from the French Development Agency with 15-20 years maturity period, 5-7 years grace period, 0.25 percent service charge, consolidated fixed rate of 6 percent for six months, and 2.07 percent fixed rate before repayment.

Under the International Development Agency (IDA) supported projects of the World Bank, the government is seeking to borrow money to finance 17 projects ranging from $140 million, $450 million to $50 million. Each of the loans has 40 years maturity date and 10 years grace period. The lenders are to take back 0.75 percent of the total sum on each item as service charge, and 0.50 per cent as commitment charge.

Government is also planning to borrow $3 billion from the Exim Bank of China, for Abuja light rail project ($500 million), Zungeru hydroelectric power project ($765.7 million), infrastructure projects ($1.6 billion) and national information and communication technology project ($100 million).

The Chinese loan is predicated on 25 years maturity period, including 10 years moratorium, 0.5 percent management fee, 2.5 percent interest rate per annum and commitment fee of 0.2 percent.

However, the total amount of money to be paid back to the lenders could be higher when the interest rate per annum is calculated on reducing balance every year.

Other details include $2.98 billion from the World Bank for such projects as growth and employment project ($140 million), state health programme investment credit ($50 million), electricity and gas improvement ($150 million), erosion watershed management ($450 million), polio eradication ($95 million), state education programme investment ($150 million), food and waste management ($200 million), among others.

Expected from the Islamic Development Bank is a loan of $672.8 million for projects like bilingual education programme ($70 million), Zungeru hydroelectric power project ($234 million), Gashua water supply ($40 million), upgrading of hospital facilities in Kaduna State (44.69 million), science secondary schools in Kaduna ($17.32 million), among others.

A source in the Debt Management Office said the loans have advantage because they are targeted at certain developmental needs and government would not feel the impact of the charges.

“If those loans are used to develop infrastructure, government would be able to grow the economy and provide more jobs to the unemployed youths in the country,” the source said.

But last week, senators said the loan plan was a return to the days when Nigeria was weighed down by foreign debt.

Senator Benedict Anyade (PDP, Cross River) said there was no basis for seeking fresh external loans when most of the projects for which huge funds were borrowed in the past were abandoned. He said resorting to foreign loans is a celebration of the inefficiency and lack of moral credibility.

Senator Kabiru Gaya (ANPP, Kano South) said he could not understand why the Federal Government was seeking an external loan of N244bn for the eradication of illiteracy in just three states.

Yesterday, the same foreign loan proposals were read in the House of Representatives.

In a letter addressed to Speaker Aminu Waziri Tambuwal, President Jonathan also sought approval to increase Nigeria’s external borrowing from $7.9 billion to $9.2 billion.

Members of the House are to debate the President’s request at a later date.

Source: http://www.dailytrust.com.ng/index.php/other-sections/lead-stories/181075-79bn-loan-nigeria-to-pay-54bn-charges