DESPITE exiting the Paris Club debt conundrum in 2005 when her $36 billion unsustainable external debt was cancelled, Nigeria’s total debt stock now stands at $44 billion.

The situation has elicited criticism from the Action Congress of Nigeria (ACN) which decried the country’s rising external debt, saying “it negates everything the Federal Government told Nigerians when it paid $12 billion to get a debt relief of $18 billion in 2005.”

But, according to the Director-General of the Debt Management Office (DMO) Dr. Abraham Nwankwo, there is no cause for alarm once the economy continues to grow and the volume of economic activity steadily rises in a sustainable manner.

According to the DMO chief, all the outside world needs to know to make a fitting business decisions about Nigeria is how dynamic the Nigerian economy is nothing more. He spoke at the end of the Nigeria Non-Deal Road show investment presentation in Boston, Massachusetts after an earlier meet-the-Investors programme in New York, United States (U.S.) where Nigerian officials, including a team from the Asset Management Corporation of Nigeria (AMCON) demonstrated why American investors should take advantage of new opportunities in Nigeria’s infrastructure, agriculture, and oil and gas sectors.

The breakdown of Nigeria’s total debt stock as at March this year shows in dollar terms, an external figure of 5.6 billion while externally incurred debt (domestic) stood at 38 billion. Approximately 86 per cent of Nigeria’s total debt is in local currency with the largest debt instrument being the bonds owned by the Federal Government. Clarifications were also made here to the effect that of the 13 per cent of Nigeria’s total external debt, the majority is concessional lending from multi and bilateral creditors.

On how the investors being sought would make any move given the interconnectivity between a debt spinning economy and the local environment in terms of production and manufacturing activities, Nwankwo maintained that “there are other variables that genuine investors look at. Forty per cent is the threshold for countries in our pay group. Now, in terms of our GDP (Gross Domestic Product), the debt-GDP ratio is 17.83 per cent. So even though the debt stock is growing, because the economy is a living organism, our economy is growing at 7.26 GDP growth rate, a plus for any country in the world.”

Elaborating further, he said: “Our volume of economic activity must be related to debt. So you cannot talk of debt growing without relating it to the volume of economic activity. Not the figure of debt 10 years ago. What is important is what was the volume of your economy ten years ago? Is it bigger than it is now? You don’t judge a company by the amount of money it has borrowed from the bank, you relate it to its output. If a company 10 years ago borrowed N10 from a bank to produce twenty cartons of shoes, you don’t expect it to borrow N10 in 2012 when it should be producing one million cartons of shoes. Today, it has to need more working capital or it will not have what it takes to produce one million shoes. So it is a dynamic, it is not static.”

In a statement issued in Lagos yesterday by its National Publicity Secretary, Alhaji Lai Mohammed, ACN however said it was shocked and saddened to learn that less than seven years after the much-celebrated debt relief, which supposedly wiped the country’s debt slate clean, Nigeria’s external debt has risen to $5.9 billion and, when the domestic debt is added, a whopping $44 billion!

To service this debt in 2012 alone, the party said, some N559.6 billion (more than the allocation to Education and power combined in the budget) has been earmarked, even at a time the economy is wallowing in an incredible paradox of achieving growth with engendering development.

The ACN said: “It is time to ask questions about the gains of the debt relief that Nigeria got in 2005. Where is the better life that the PDP-led Federal Government promised Nigerians after the debt relief? Where are the massive foreign investments promised? Where are the jobs that Nigerians were told would be created since the country would no longer need to spend billions of naira to service its debt? What did Nigeria gain from paying 12 billion dollars that could have been used for, if nothing else, massive infrastructural development?

‘’We are bound to ask these questions because all we have heard is that Nigeria’s debt profile is rising alarmingly again, that huge funds are still being spent to service the debt, and that the debt could rise by another $7.9 billion as President Goodluck Jonathan has forwarded a request to the National Assembly to approve a plan to borrow that amount.’’

The party said before the PDP would accuse it (ACN) of playing politics with this serious issue, it will like to quote from what then President Olusegun Obasanjo - elected on the platform of the PDP - and then (and current) Minister of Finance Ngozi Okonjo-Iweala said while basking in the glory of the 2005 debt relief.

Obasanjo: ‘’There is nothing like freedom, freedom from debt and the image that the debt relief and exit from Paris Club debt give to

Nigeria .The debt relief has brought benefits to Nigerians and that it first represents a direct saving on debt-service repayment, interest, surcharges and other fees. It also improves the country’s worthiness in the global community and builds credible financial confidence for transactions. More investment would start to flow into Nigeria knowing we are no more classified as a bad and doubtful debt country. “The debt relief is expected to create jobs and new wealth with new investments, which would translate into improved standard of living.’’

Okonjo-Iweala: “The fact that we have this debt reduction and we will be able to pay off the balance of whatever is left will leave Nigerians free, to start on a new slate. I mean it will be like a

second independence, a rebirth, if you will, giving us the freedom to focus squarely on our economic activities. It means that generations who would have been paying these debts in future will not have to pay it. And I think that is something that our children will appreciate and thank the President and thank the team and thank every one who has contributed to these all”.

The ACN noted that contrary to the picture of Utopia painted by then President and his Finance Minister, Nigerians are sadly worse off today than they were in 2005: no jobs, no power, no water, no roads, no hope, and the only investments we have witnessed are investments into the pockets of the fat cats!

http://www.guardiannewsngr.com/index.php?option=com_content&view=article&id=83966:govt-allays-fears-over-44-billion-external-debt&catid=1:national&Itemid=559

The state of the debt profile in Nigeria is getting scary. The country does not need destructive debts although debts that are used constructively are not altogether bad.

What have they used the N1.2trillion increase in debt under GEJ for?