Alhamdulillah Wasalatu wasalaam ‘ala rasulillah

“Interest based loan is an instrument of exploitation and modern way of slavery”

Across the globe, nations are classified into two; self-sufficient and dependent nations. Dependent nations look to other sources of financing expenditures, hence incurring debt. Debt assists dependent nations to meet budgetary needs.

However, debt service creates problems for many nations because a debt has to be serviced. And debt service cost (interest) plus the principal loan is more than the actual amount borrowed, thus, imposes a number of constraints on a country’s growth condition through draining out limited resources and restricts financial resources for domestic need.

You will pity Nigeria if you’re aware of how much our government is spending in servicing the national debt. The former Nigerian President of State, Chief Olusegun Obasanjo on the excesses of the World’s financial system cited in Shakespeare (2007) states: “All that we had borrowed up to 1985 was around $5 billion, and we have paid about $16 billion; yet we are still being told that we owe about $28 billion. That $28 billion came about because of the injustice in the foreign creditors’ interest rates. If you ask me what the worst thing in the world is, I will say it is compound interest”.

According to debt management office, Nigeria’s public debt stock as at September 30, 2017 is N 20,373,428.59 in Millions ($66,634.27 in Millions). The Senate Committee on Foreign and Local Debts disclosed that Nigeria would spend N1.351tn in the 2016 budget to service its total debts.

Imagine, 2018 Nigeria’s revenue projection is 8.612 trillion Naira (the Budget had a projected oil revenue of N2.442 trillion, non-oil projection of N4.165 trillion, and N2.005 trillion budget deficit). The Budget had a Capital expenditure projection of N2.428 trillion, Recurrent expenditure of N3.494 trillion, Debt Servicing, N2.014 trillion and Fiscal Deficit of N2.005 trillion. Remember, oil revenue of N2.442 trillion and non-oil projection of N4.165 trillion are not certain, while N2.014 trillion that would be spent on debt servicing is a must, how on the earth would there be economic growth and development?! This has forfeited the entire economic future of the country since. Major proportion of export earnings and other revenues that would have been used to provide essential facilities to improve the economy has been used for debt servicing payments.

Nigeria has multifaceted problems; debt is affecting Nigeria’s repayment capacity, the loan has been channeled to unproductive activities, major looted funds seems unrecoverable, and so on. The beginning of the problem was when Nigeria took interest based loan while Arab Aid grants soft loan is available. Is it a must to take interest based loan? Or soft loan, with no interest, is not granted?

Interest on loan is strictly condemned in both Islam and Christianity, and it is an instrument of exploitation and modern way of slavery.

Nigeria cannot afford to pay back the loan, in fact, if we have the means it is not a free choice to pay back anytime in compliance with stringent debt conditions. Rather, it can be achieved through begging – also seeking debt relief is achieved through begging! And our leaders are still questing for more of interest based loans – it seems there is conspiracy somewhere?!

Contracted loan has been looted, probably all systems of government are corrupt, Nigerians (voiceless) are wallowing in cycles of poverty and distress…these are facts that are directly contributed to economic recession. Interest based loan is an instrument of exploitation and modern way of slavery. Please wake up!

May Allah grant us understanding, forgive us, have mercy on and not punish us by the sins of wrongdoers among us.

Source:http://fiqhclass.org/index.php/category/fiqh_class/islamic-finance/