On Wednesday, the senate gave a go-ahead to the Federal government to borrow another $1.5 billion and 995 million euros from World Bank, the Export-Import Bank of Brazil, and Deutsche Bank.
The new loans which are about N1 trillion in naira terms will bring Nigeria’s total external public debts to over N13 trillion.
As at December 2020, Nigeria’s external debt was N12.71 trillion, an increase of 40.82 percent from N9.02 trillion in December 2019.
How is the external loan sourced?
Nigeria’s external debt is in four categories: agreements; multilateral, bilateral, commercial and in Promissory notes.
The multilateral category is external debt burden to international financial institutions (IFIs) such as the International Monetary Fund (IMF) and the World Bank.
A breakdown from the Debt Management Office shows that as at December 2020, Nigeria owed $17.93 billion to the international financial institution.
A bilateral debt represents money borrowed from other countries. DMO data show that debts of this kind currently stand at $4.06 billion as of December 2021.
Furthermore, $11.17 billion is recorded in the commercial category which have Eurobonds and Diaspora Bonds and $186.70 billion in Promissory notes.
The countries Nigeria is indebted to
As of December, DMO reveals that Nigeria borrowed from China through Exim Bank of China, France through its Agence Francaise Development.
Others are Japan through Japan International Cooperation Agency, and India (Exim Bank of India) and Germany (Kreditanstalt Fur Wiederaufbua).
The new entrant is Brazil, through its Export-Import Bank.
Disaggregation of the debt
80.4 percent of Nigeria’s debt to countries is from China which stands at $3.26 billion.
China is followed by $493.71 million borrowed from France and $184.32 million from Germany.
Others are $80.20 million borrowed from Japan and $37 million from India.
The latest €995 million loans will be from Brazil and Germany which is about $1.2 billion.
When the $1.2 billion is added to the bilateral loan amount of $4.06 billion as at December 2020, Nigeria’s debt to countries will be about $5.19 billion.
What is the new loan for?
The newly approved loans from Brazil and Germany, the federal government said, will be used to ensure food security in the country.
In a post on its Twitter handle, the Federal government explained “Today, the Nigerian Senate, approved the President’s request for approval of €995 million in loans from the Export-Import Bank of Brazil (BNDES) & Deutsche Bank of Germany (and guaranteed by the Islamic Development Bank) for the Green Imperative Agricultural Mechanisation program.
The Loan will fund 632 privately-operated primary production (mechanisation) service centres and 142 Agro-processing (value addition) service centres across Nigeria’s 774 LGAs, and reactivate 6 privately-owned partially operational or moribund tractor assembly plants nationwide.”.
Paying back the debts
Although loans under the bilateral agreement are relatively cheaper than other categories of loans, nevertheless the country is spending more compared to the previous year to service these debts.
In 2020, the federal government spent $258.1 million to repay these loans from other countries. This is a 47.65 percent increase from $174.8 million paid in 2019.
The breakdown shows, as expected, China received $195.4 million, increasing from $138.7 million paid in 2019.
$35 million matured loan was repaid to France from $17.7 million in 2019. Germany also saw the amount increase to $26.55 million from $17.7 million in 2019.
While the Indian government received $794,000, also increasing from $609,870, the Japanese government received nothing in 2020 just as in the previous year.
Any cause for concern?
While Borrowing allows governments to cover shortfalls in revenue, it comes at a cost, especially in a situation where the value of Naira on daily basis is depreciating against the dollar.
This burden is made clear when the accumulated debt is calulated per citizen, that is, if each Nigerian is ready to pay for the debts.
Although very unfashionable, compared to debt to GDP or debt to revenue, debt per capita provides a clear context for a layman.
For instance, if the $3.2 billion owed to China is shared among 200 million Nigerians to repay, a Nigerian will have to pay $16 (N6,096) using the official exchange rate of N381.
A former Governor of the Central Bank of Nigeria (CBN), Mallam Sanusi Lamido Sanusi has described this as very worrisome.
In his words: “It is no cheering news that the external debt profile to total revenue grew from eight per cent in 2011 to over 400 per cent in year 2020, more worrisome is the components of bilateral loans, of which China is a major player, with $3.2 billion of Nigeria’s $4.1 bilateral debt.”
“Honestly, I think debt relief is very necessary if this country is going to have the fiscal space to pursue any kind of developmental objectives. We can’t be spending 90 or 100 per cent of our revenue on debt service and don’t have anything to invest in development”, he added.
Join the conversation
INVESTIGATION….N.3bn down the drain: Why water projects for Enugu communities don’t work
In this concluding part, ARINZE CHIJIOKE talks about some of the projects that are serving the people and how various WASH programmes have failed to tackle...
INVESTIGATION…PARKVIEW ESTATE: Exclusive images of how billionaire property developer incurred Lagos govt‘s anger
Many have seen the demolished building, but not many know the circumstances that led to the teardown of the about...
INVESTIGATION… N.3bn down the drain, as Enugu communities suffer from dry taps
In November 2020, three organizations and the Enugu State government celebrated the completion of N300 million worth of projects that were expected...
INVESTIGATION… How herdsmen crisis compounds woes of already deprived Ogun communities
Earlier in January, the Nigerian media space was awash with reports of violence between herders and farmers across the country....
Investigation… Inside Enugu markets where traders are choked by multiple taxes
In recent times, the world economy has developed tremendously and this is partly linked with activities of petty traders who...
SportsBusiness: How COVID-19 slashed Leicester’s FA Cup prize & why Arsenal rejected Ek’s money
On this edition of SportsBusiness, Ripples Nigeria’s Ben Ugbana takes a look at the slashed prize money won by recently-crowned...
CAFCC Q’finals: Enyimba walk a tightrope after heavy first-leg defeat at Pyramids
Nigeria Professional Football League (NPFL) club, Enyimba will be hoping to have a superb outing when they host Pyramids FC...
BREAKING… Oshoala wins historic Women’s Champions League title with Barcelona
Super Falcons forward, Asisat Oshoala has helped her club, Barcelona Femeni to win the 2020/21 UEFA Women’s Champions League. Oshoala...
NPFL: Musa bags assist in Pillars’ win but Akwa Utd maintain lead
Super Eagles captain, Ahmed Musa was in action for Kano Pillars and bagged an assist while at it as his...
Barca out of La Liga title race, Madrid in contention ahead of final day
Barcelona fell to a surprise 2-1 defeat at home against Celta Vigo on Sunday to end their hopes of clinching...
Latest Tech News
AlphaCode awards R2-m to support Fintech startups. 2 other things and a trivia
This line-up of stories will help you discover the latest happenings around the tech world, today. 1. AlphaCode awards R2-million...
TechNigeria: A weekly digest of what went down in Nigeria’s tech space
Today, let’s do a quick one on: • Afrinurse launch • Cyber crime via messaging apps • CDcare launch •...
Nigeria’s CDcare launches zero-interest, pay-later platform. 2 other things and a trivia
This line-up of stories will help you discover the latest happenings around the tech world, today. 1. Nigeria’s CDcare launches...
Nigeria’s ClassNG launches as open marketplace for education. 2 other things and a trivia
This line-up of stories will help you discover the latest happenings around the tech world, today. 1. Nigeria’s ClassesNG launches...
Healthtech startup launches engagement app for African nurses. 2 other things and a trivia
This line-up of stories will help you discover the latest happenings around the tech world, today. 1. Healthtech startup launches...
GirlCode partners Amazon to upskill unemployed women. 2 other things and a trivia
This line-up of stories will help you discover the latest happenings around the tech world, today. 1. GirlCode partners Amazon...