Nigeria needs to lower its debt profile in order to make financial resources available for priority projects, the Senate committee on Local and Foreign Debts has posited.
During a courtesy visit to the Vice President, Yemi Osinbajo, on Monday, Chairman of the committee, Shehu Sani, said the country’s borrowing which was heightened during the period of recession, needs to be cut.
The lawmaker said the borrowings that followed the period of recession was justified as the country needed to invest massively in infrastructure, agriculture, mining and manufacturing, with multiplier implication of increasing employment and reflating the economy.
He, however, maintained the need to check excessive borrowing.
“The country took up more borrowings, and gradually Nigeria’s total debt stock has significantly increased, such that as at September 2017, the nation’s total debt stock was put at $66.6 billion (or ₦20.3 trillion) as given by the DMO.
“Also, according to the DMO, as at June 2017, Nigeria’s spending on debt servicing stood at 34.02 per cent of revenue, up from 33.94 per cent recorded as at December 31, 2016,” he said.
The lawmaker harped on the need to make conscious effort at reducing the debt ratio.
“There is a clear need to lower this ratio in order to make financial resources available for priority projects, for the benefit of Nigerians.
“Understandably, there are growing concerns over the country’s rising debt profile. Indeed, by the projections of the International Monetary Fund (IMF), Nigeria’s debt to GDP ratio would surge by 100 per cent, from 12.1 per cent in 2015 to 24.1 per cent in 2018. Also, the World Bank had expressed concern over the debt payment to revenue ratio, saying that reduced revenue earnings might render the country’s debt unsustainable.”
He commended the Debt Management Office (DMO), which has Mr. Osinbajo as Chairman of its Supervisory Board, for bringing ‘sanity’ into debt management in the country.
“The recent drive by the Debt Management Office (DMO) to restructure the nation’s debt profile, in favour of external borrowings, that are usually at highly concessional interest rates, relative to domestic borrowings, is indeed a welcome development and well appreciated by the Committee. This was why the Senate and indeed the National Assembly swiftly considered and approved the external borrowing to re-finance maturing domestic debts through the issuance of USD 3.00 billion Eurobond in the International Capital Market in 2017.
“The DMO must also continue to assist States of the Federation in the managing and restructuring of their debts as a result of the failure of many of these States to meet their financial obligations, while the agency is commended for its efforts thus far in the successful restructuring of N322.788 billion short term commercial bank debts of 11 States out of the 22 States that applied to it, into long term domestic bond at 14.83 per cent yield, in 20 years.”
Mr. Sani said the committee has, since inception, been engaged in oversight visits to project sites funded by local and foreign loans obtained by the federal and state governments.
He urged the DMO executive to regularly provide detailed performance report to the National Assembly, extract commitments from lending agencies and governments for a significant increase in local and prevail on the relevant agencies of government to negotiate the best possible cost without compromising quality for projects to be financed by government borrowings.
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