By Ben Agande
ABUJA — Nigeria’s foreign and domestic debt stock jointly held by the federal and state governments has hit N6.189 trillion.
Director General of Debt Management Office, DMO, Mr. Abraham Nwankwo, who made the disclosure to the House of Representatives Committee on Aids, Loans and Debt Management put Federal Government external debt stock at $3.316 billion while state government’s external debt stock was put at $2.317 billion as at 30th September 2011.
The figure represents 58.87 per cent owed by the Federal Government while states owed $2.317 billion (or 41.13 per cent) during the period under review.
Nwankwo, briefing the committee led by Hon Adeyinka Ajayi, pointed out that the establishment of the DMO hasd led to drastic reduction of the external debt from over $35 billion (41.86 per cent) of GDP in 2004 to $3.55 billion (3.7 per cent) of GDP in 2006.
Nwankwo, who also disclosed plans for effective management of the country’s debt portfolio, added that the agency had issued the National Debt Management Plan (2008-2012) aimed at guiding against excessive and uncoordinated borrowing by government.
He added that the agency also conducted Debt Sustainability Analysis (DSA) as part of measures towards tracking the dynamics of the country’s debt sustainability under changing internal and external scenarios.
He said: “DMO reintroduced the issuance of sovereign bonds in 2003 but started regular bond issuance in 2005 based on a programmed monthly issuance calendar” as well as three-year, five-year, seven-year, 10-year and 20-year are being issued monthly.”
Huge debt stock
He also reacted to public outcry on the huge debt stock, saying: “Between 2004 and 2006, the implementation of the exit from Paris Club was completed such that Nigeria was forgiven 60 per cent of the $30 billion foreign external debt, and $18 billion was written off while $12 billion was paid and so we completely exited.
“It is important to note that there was a challenge and discussion as it was not preferable for Nigeria to go ahead and use the $12 billion paid as at that time to pursue the development objectives. But when we looked closely into the implications of being a defaulting and bad debt nation, you will appreciate that it was a better option to pay off the $12 billion and for us to be forgiven $18 billion.
“Prominent issue in this regard was the fact that, because of our debt default situation, we are economically, commercially a barren country if not politically as well. And implication was that, our businessmen (private sector) were at disadvantage in terms of relationships, transactions, assess to capital within international capital market (economy).
“Under that situation, Nigerian businessmen were asked to make 100 per cent cash payment before they could secure goods from other countries either for capital goods or raw materials. Under normalcy, for a businessman to obtain certain concessions from their suppliers such that they need not make 100 percent cash payment before they take goods and services.
“But because of our high debt situation, that facility was lost to Nigerian businessmen which mean production in Nigeria becomes uncompetitive, so our businessmen were at disadvantage. Of course, this has relationship with total economic activity, to cost of production, growth of our private sector, to generation of employment. It was important that that issue be dealt with, so that the private sector which is usually the engine of growth usually a major source of employment would found its feet. This was one of the most advantages of finding a way of existing from the Paris Club debt.”
Speaking earlier, Adeyinka Ajayi, chairman of the House Committee on Aid, Loans and Debt Management assured that the committee would provide necessary support for the agency in achieving its objectives, urging that the agency should be open and direct as much as possible.