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Why Do We Borrow Money When We Have 40-something Billion In Reserves? - Politics - Nairaland

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Why Do We Borrow Money When We Have 40-something Billion In Reserves? by MyJoe: 1:42pm On Dec 03, 2013
I hope people knowledgeable in economics and finance will help me make sense of this.

We have $43 billion or so in reserves, yet we borrow billions in "development loans" from multilateral institutions, China, and others and spend billions of naira “servicing” these debts. I understand this is not limited to Nigeria. I swear I have even heard on India borrowing from Nigeria. shocked Why is it so?

This thread is not opened to criticize the present administration or anyone. I simply want to, hopefully, educate myself on why this happens and certainly won’t mind hearing from the experts.

See The Punch: Nigeria to service debts with N2.08tn in three years
http://www.punchng.com/business/business-economy/nigeria-to-service-debts-with-n2-08tn-in-three-years/

Re: Why Do We Borrow Money When We Have 40-something Billion In Reserves? by Nobody: 2:17pm On Dec 03, 2013
Cash Reserves Or Foreign Reseves account is a balancing item of the current account and capital account both under the balance of payments( Summary of the financial transactions of a country with the rest of the world)
So when there is a balance of payments deficit The foreign reserves increase and when there is a balance of bayments surplus it increases , its also an indicator of the credit worthiness of a nation, and it must be able to pay for at least four months of imports of a country at the current rate of imports, so i don't think it's meant for infrastructural devt and other uses , it's meant for servicing of debt and increasing a nations wealth with respect to the world, if your Foreign reserve is very low you're like kinda poor internationally or foreign trade wise.
Hope this Helps?

You're yet to reply my message about the clairvoyance, prohecy , and vision tingy thread, check ur mail bro.
Re: Why Do We Borrow Money When We Have 40-something Billion In Reserves? by Nobody: 3:44pm On Dec 03, 2013
Double Post.
Re: Why Do We Borrow Money When We Have 40-something Billion In Reserves? by simpleseyi: 3:59pm On Dec 03, 2013
We have over $40 billion in Reserves but we still keep borrowing money so that the president and his group of treasury looters will have money to share and loot and keep generations unborn in debts.
Re: Why Do We Borrow Money When We Have 40-something Billion In Reserves? by bloggernaija: 5:15pm On Dec 03, 2013
A layman explanation,
Foriegn reserves is like the savings account of foriegn currency.
The foriegn holding is required for trade with other countries .
A country like Benin republic,Niger may accept the naira but most do not.
The main reserve currencies are dollars ,euros,pounds,yuan,yen in that order
When nigerian travel abroad for a visit,shopping or to buy electronics ,
He changes his money to one of the currencies listed above ,before travelling.

Why have a reserve,
The day the reserve runs out is the day nigeria will run out or have a scarcity of
Rice , beans ,palm oil and everything not made in Nigeria.
They will also become more expensive and the people will become poorer.
The naira will lose value because the demand for foriegn currency cannot be met because of a lack of adequate supply.
So a bag of rice which used to cost 5000 becomes 10,000 naira
Because the naira has lost value from say 100 naira to the dollar to 200 naira to the dollars.

And for a country which makes absolutely nothing,
A lack of foreign reserves is a recipe for absolute disaster.

On the debt issue and perpetual borrow borrow of the current regime,
It is a sign of a broken and corrupt government .
The foriegn reserve should have broken the 200 billion naira mark if this government had been only half as effective as OBJ's.
Obj got the reserve from almost zero(abubarkar squandered Abacha's $10 billion ER within 6 months) to 68 billion dollars,at an average of less than 40 dollars a barrel.
The government was funded from revenues earned and not loans.
As it is,
Important project are left to gather dust while the government is wasting money on projects without economic significance.

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