The economy of Nigeria is a mixed economy and emerging market, ranking as the 26th largest economy in the world in terms of nominal GDP, 24th largest in terms of purchasing power parity and still has the largest economy in Africa.
Over the years, Nigeria has been constantly borrowing funds from top organisations, countries and World Bank.
Nigeria’s external debt is one of the biggest in all of sub-Saharan Africa if not the largest in absolute terms and has always been rescheduled several times. Despite this refinancing by creditors who were either members of the Paris Club (governments), London Club (banks) or independent creditors, Nigeria meets a very inconsequential part of its external debt obligation today. Consequently, the arrears of this debt have accumulated relentlessly, and is one of the major reasons why Nigeria is in the bad books of the international financial community. It also strains relations between Nigeria and her international partners, especially members of the European Union, and particularly three of her major creditors, Great Britain, Germany and France.
Nigeria’s External Debt in Perspective.
Nigeria’s external debt (including short-term debts) remained low until the middle of the 1970s – US$ 1.5 billion in 1970, more than half of which was short term; and US$ 2.5 billion in 1975, of which US$ 1.35 billion represented short-term debts. The situation began to get out of control in 1977 when an outstanding growth rate in the country’s debt became manifest and that’s the genesis of our journey into the debt and borrowing world. The outstanding debt (in current dollar rates as of then) tripled, reaching US$ 7.5 billion in 1979 and 8.9 billion in 1980, 3.55 billion of which represented short-term debts. Yet, the international financial community was not worried about this progression and Nigerian economy appeared to be taking off at the time, exhibiting a GNP growth rate of 9 per cent. A record fiscal surplus of US$ 10 billion was obtained and about the same amount was secured as external reserves.
In the following years, Nigeria’s financial decline launched the nation’s authorities on the path of debt Creditors, acting on the initial good impression, continued to lend despite accumulating debt figures, which ought to have made them a lot more circumspect. In fact, the total outstanding debt, according to the World Debt Tables of the World Bank reached US$ 19.55 billion in 1985 and US$ 23.40 billion in 1986. The first arrears on long-term debts began to emerge in 1984. These were either arrears on interest or capital payments which were all consigned to an indeterminate future.
Fast forward to 2015, The debt management office reports on Nigeria’s debt every three months. Its website shows that at the end of March 2015 – two months before Buhari took office on 29 May – the country owed a total of ₦12 trillion.
At the end of 30th December 2015, this debt had risen slightly to ₦12.6 trillion. This was US$65.4 billion at the official exchange rate of the time, ₦197 to the dollar.
At the end of 31st December 2017, this debt had risen heavily to ₦21.7 trillion. This was US$70.9 billion at the official exchange rate of the time, ₦306 to the dollar.o
At the end of 31st December 2019, this debt had risen heavily to ₦27.4 trillion. This was US$84 billion at the official exchange rate of the time, ₦326 to the dollar.
And as at 30th June 2020, this debt had risen to ₦31 trillion. This was $85.8 billion at the official exchange rate of the time, ₦361 to the dollar.
As at March 31, 2020, the Total Borrowing by Nigeria from China was $3.121 billion (₦1,126.68 billion at USD/₦361). This amount represents only 3.94% of Nigeria’s Total Public Debt of $79.303 billion (₦28,628.49 billion at USD/₦361) as at March 31, 2020. Similarly, in terms of external sources of funds, Loans from China accounted for 11.28% of the External Debt Stock of $27.67 billion at the same date.
The US$3.121 billion Loans are project-tied Loans. The projects, (eleven – 11 in number as at March 31, 2020), include: Nigerian Railway Modernization Project (Idu-Kaduna section), Abuja Light Rail Project, Nigerian Four Airport Terminals Expansion Project (Abuja, Kano, Lagos and Port Harcourt), Nigerian Railway Modernization Project (Lagos-Ibadan section) and Rehabilitation and Upgrading of Abuja – Keffi- Makurdi Road Project. All this would aid transportation and reduce road accidents but what is going on is unlike what we assume to be the outcome of the money borrowed.
Moreover Nigeria owes World Bank $9.81 billion according to the Debt Management Office.
Sometimes, the country needs to borrow for the proper running of the administration but, when there is no achievement in relation to the money borrowed it raises questionns of what do they do with the money?