We have received several enquiries about a story titled “Nigerian Government broke; targets pension savings” posted on the website of Saharareporters.

The story, like many other recent articles by Saharareporters purporting to be exclusive stories on various aspects of the Nigerian economy, is a complete fabrication.

As Nigerians know, the administration of President Goodluck Jonathan recently presented its mid-term report which is a forthright account of the achievements as well as challenges facing the economy.

The country has $48 billion in reserves, including N5 billion in the Excess Crude Account to help shore up the economy. So the idea that the country is broke is alarmist.

It is true that the country is experiencing some revenue shortfalls that everyone knows about due to oil theft for which the President is taking some serious measures.

Also, contrary to the claim in the story that the country has borrowed from local and international banks to finance recurrent spending, the Jonathan administration has in fact reversed the tendency of borrowing to finance recurrent as was the practice in the past.

Also untrue is the claim that the country has been downgraded by international ratings agencies. In fact the truth is the exact opposite; ratings agencies and international investors have consistently stated, through various platforms, that the Nigerian economy is a well-managed one with good prospects in the medium and long term.

Regarding the country’s debt situation, the overall picture is positive as the Coordinating Minister showed clearly in her recent well publicized statement. The multi-dimensional strategy adopted by the Jonathan administration is leading to positive outcomes.

The level of borrowing has been brought down, bonds are being paid off through a sinking fund and the country is not taking the kind of high interest loans that led to the debt burden which existed before the historic Paris Club debt deal. The Borrowing Plan which was approved by State Governors and the National Assembly is focused on financing power transmission projects, inter and intra city rail projects, dams and other key infrastructure.

The notion that the Jonathan government is “eyeing” the N3.4 trillion pension funds to finance deficits underscores the desperation of this “activist” medium and its sponsors. It is a total invention. In fact, the government is currently engaged in strengthening institutions and critical processes in the sector to enhance security and stability of the funds.

With this latest outing, Saharareporters has reinforced its well-earned reputation as a discredited purveyor of falsehood.

Paul C Nwabuikwu,
Special Adviser to the Coordinating Minister

errr. GBAWE, DEMDEM THE RETARDEEN, PROF CORRUPTION, ILUGUN BOY , DAYOKANU (Chairman of the NURTW Youth Wing), and other members of the anti-GEJ brigade, we need your attention please.

if you ever hear the owner of sahara reporter talk about nigeria with his dog beads around is neck, you would have known that noting truthful aside dates can come out of that site

When I heard the Sahara's sources..I couldn't help but laff but a question I kept on asking is the ECA dried up?..a question Sahara didn't answer..so I asked if that is not the case so why target PENSION FUNDS?..Like taharqa said a report on the economy in which no well known economic indices was used as a pointer to the alledged ailing economy is very laughable...

Also, contrary to the claim in the story that the country has borrowed from local and international banks to finance recurrent spending, the Jonathan administration has in fact reversed the tendency of borrowing to finance recurrent as was the practice in the past.

This guy must be high on some cheap drugs to think we will swallow this crap. You have a budget dominated by about 70% recurrent expenditure and deficit is debt financed, that is borrowing to finance recurrent expenditure.

Agreed deficits are going down but we are not certain on why deficits are falling. What we know is the government is struggling to meet its budgetary obligations. The Senate and House of Reps have complained time and time again about poor implementation, what is wrong?

You are holding reserves yet you struggle to finance your budget.

Anybody that says Nigerian gov is not broke is either blind, lives in d cave or something unmentionable is wrong with him or her. otherwise how will one explain the walking out of all state comisioners of finance on minister of state finance, the inability of fed gov to pay her staffs the june salary, rejection of last month allocation by state gov, refusal to release second quater fund for MDA's and so many things dt has been happening. The earlier we accept and find a way forward the better, instead of lies and weaping of sentiment by the blind supporters.

seunfly: Anybody that says Nigerian gov is not broke is either blind, lives in d cave or something unmentionable is wrong with him or her. otherwise how will one explain the walking out of all state comisioners of finance on minister of state finance, the inability of fed gov to pay her staffs the june salary, rejection of last month allocation by state gov, refusal to release second quater fund for MDA's and so many things dt has been happening. The earlier we accept and find a way forward the better, instead of lies and weaping of sentiment by the blind supporters.

Nobody is denying the fact that there is a shortfall in revenue...the minister even alluded to that..

It is true that the country is experiencing some revenue
shortfalls that everyone knows about due to oil theft for
which the President is taking some serious measures.

What the press statement tries to correct is the lies by Sahara reporters which include that the Govt is targeting pension funds..

I don't know what people achieve by peddling lies.

I'm not a finance expert so I can't claim to know if the country is broke or not but what I take from this rebuttal is the manner in which it was presented; something Abati and Okupe should take note of

Hedge funds are pulling money from emerging markets. Buy DOLLARS to save your cash from an upcoming Naira devaluation.

oddy4real: errr. GBAWE, DEMDEM THE RETARDEEN, PROF CORRUPTION, ILUGUN BOY , DAYOKANU (Chairman of the NURTW Youth Wing), and other members of the anti-GEJ brigade, we need your attention please.

Those scallywags don't show up on threads like this.
They are haters and like their master Liar Muhammed feast on lies.

Where is the bitter soul Gbawe and his bunch of touts?

Why are we like this?
Why should truth totally leave our mouths?
We have declared truth to be our mortal enemy and we glory in falsehood.
May God help Nigeria.

There isn't good news coming out of China as the Communist part is deliberately slowing down growth hence the liquidity squeeze and the flash HSBC PMI coming at below 50.

In view of the Fed's imminent tapering of QE by 2014, most hedge funds are heading towards the exit door in emerging and frontier markets since rates should start to climb in their own economies. SLS informed us that we have at least 5 Billion Dollars in "HOT MONEY" from these guys.

The key to this period is: LIQUIDITY. BUY DOLLARS LIKE CRAZY!!! The only logical way is for SLS to devalue the Naira or else we will be in for a greater shock down the road.

In recent years, a growing number of African governments have issued Eurobonds, diversifying away from traditional sources of finance such as concessional debt and foreign direct investment. Taking the lead in October 2007, when it issued a $750m (£485m) Eurobond with an 8.5% coupon rate, Ghana earned the distinction of being the first Sub-Saharan country – other than South Africa – to issue bonds in 30 years.

This debut Sub-Saharan issue, which was four times oversubscribed, sparked a sovereign borrowing spree in the region. Nine other countries – Gabon, the Democratic Republic of the Congo, Côte d'Ivoire, Senegal, Angola, Nigeria, Namibia, Zambia, and Tanzania – followed suit. By February 2013, these 10 African economies had collectively raised $8.1bn from their maiden sovereign-bond issues, with an average maturity of 11.2 years and an average coupon rate of 6.2%. These countries' existing foreign debt, by contrast, carried an average interest rate of 1.6% with an average maturity of 28.7 years.

It is no secret that sovereign bonds carry significantly higher borrowing costs than concessional debt does. So why are an increasing number of developing countries resorting to sovereign-bond issues? And why have lenders suddenly found these countries desirable?

With quantitative easing having driven interest rates to record lows, one explanation is that this is just another, more obscure manifestation of investors' search for yield. Moreover, recent analyses, carried out in conjunction with the establishment of the new Brics bank, have demonstrated the woeful inadequacy of official assistance and concessional lending for meeting Africa's infrastructure needs, let alone for achieving the levels of sustained growth needed to reduce poverty significantly.

Moreover, the conditionality and close monitoring typically associated with the multilateral institutions make them less attractive sources of financing. What politician wouldn't prefer money that gives him more freedom to do what he likes? It will be years before any problems become manifest – and, then, some future politician will have to resolve them.

To the extent that this new lending is based on Africa's strengthening economic fundamentals, the recent spate of sovereign-bond issues is a welcome sign. But here, as elsewhere, the record of private-sector credit assessments should leave one wary. So, are shortsighted financial markets, working with shortsighted governments, laying the groundwork for the world's next debt crisis?

The risks will undoubtedly grow if sub-national authorities and private-sector entities gain similar access to the international capital markets, which could result in excessive borrowing. Nigerian commercial banks have already issued international bonds; in Zambia, the power utility, railway operator, and road builder are planning to issue as much as $4.5bn in international bonds.

Evidence of either irrational exuberance or market expectations of a bailout is already mounting. How else can one explain Zambia's ability to lock in a rate that was lower than the yield on a Spanish bond issue, even though Spain's credit rating is four grades higher? Indeed, except for Namibia, all of these Sub-Saharan sovereign-bond issuers have "speculative" credit ratings, putting their issues in the "junk bond" category and signalling significant default risk.

Signs of default stress are already showing. In March 2009 – less than two years after the issue – Congolese bonds were trading for 20 cents on the dollar, pushing the yield to a record high. In January 2011, Côte d'Ivoire became the first country to default on its sovereign debt since Jamaica in January 2010.

In June 2012, Gabon delayed the coupon payment on its $1bn bond, pending the outcome of a legal dispute, and was on the verge of a default. Should oil and copper prices collapse, Angola, Gabon, Congo, and Zambia may encounter difficulties in servicing their sovereign bonds.

To ensure that their sovereign-bond issues do not turn into a financial disaster, these countries should put in place a sound, forward-looking, and comprehensive debt-management structure. They need not only to invest the proceeds in the right type of high-return projects, but also to ensure that they do not have to borrow further to service their debt.

These countries can perhaps learn from the bitter experience of Detroit, which issued $1.4bn worth of municipal bonds in 2005 to ward off an impending financial crisis. Since then, the city has continued to borrow, mostly to service its outstanding bonds. In the process, four Wall Street banks that enabled Detroit to issue a total of $3.7bn in bonds since 2005 have reaped $474m in underwriting fees, insurance premiums, and swaps.

Understanding the risks of excessive private-sector borrowing, the inadequacy of private lenders' credit assessments, and the conflicts of interest that are endemic in banks, Sub-Saharan countries should impose constraints on such borrowing, especially when there are significant exchange-rate and maturity mismatches.

Countries contemplating joining the bandwagon of sovereign-bond issuers would do well to learn the lessons of the all-too-frequent debt crises of the past three decades. Matters may become even worse in the future, because so-called "vulture" funds have learned how to take full advantage of countries in distress. Recent court rulings in the United States have given the vultures the upper hand, and may make debt restructuring even more difficult, while enthusiasm for bailouts is clearly waning. The international community may rightly believe that both borrowers and lenders have been forewarned.

There are no easy, risk-free paths to development and prosperity. But borrowing money from international financial markets is a strategy with enormous downside risks, and only limited upside potential – except for the banks, which take their fees up front. Sub-Saharan Africa's economies, one hopes, will not have to repeat the costly lessons that other developing countries have learned over the past three decades.

• Joseph Stiglitz is a Nobel laureate in economics and professor at Columbia University. Hamid Rashid is a senior economic adviser at the United Nations Department of Economic and Social Affairs
http://m.guardian.co.uk/business/economics-blog/2013/jun/26/subsaharan-africa-eurobond-borrowing-debt