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Anxiety over Nigeria’s rising commercial loan profile



A RECENT Debt Management Office (DMO) report states that Nigeria’s Commercial Debt Profile has within the last three years risen to $8.8bn.
THE analysis revealed that the commercial debts made up 39.87 percent of the nation’s $22.07bn debt exposures. This means that in the last three years, the country’s exposure to foreign commercial loans has grown by $7.3bn or 486 per cent, a record that should be worrisome to anybody knowledgeable  in  economics.
MORE worrisome is the fact that as at March 31, 2015, commercial loans alone made up 15.89 per cent of the country’s total foreign debt commitment of $9.40bn. The development is sequel to federal government’s detour on its earlier commitment to concentrate on only concessional loans, citing relative decline in the loans as an example.
IT IS  necessary to state here that the difference between commercial loans and concessional loans is that while commercial loans come with higher interest rates, and could vacillate in accordance with market forces, concessional loans usually come with negligible interest rates, and always come with extended moratorium, which is a period of grace within which the repayment of the principal capital is suspended.
COMMERCIAL loans on the other hand, are known to have faster periods of maturity within which the debt must be repaid or renegotiated. It must be stated here also that while commercial loans have maturity periods ranging from five to 15 years, concessional loans can have a moratorium of up to 40 years.
THE interesting thing however, is that the multilateral agencies which issue the concessional loans hold 49.52 percent of the country’s external debt portfolio. Bilateral debts make up 10.61 percent or $2.34bn of the country’s external debts.
Some international financial institutions like the World Bank, African Development Bank, The International Bank for Agricultural Development, the Arab Bank for Economic Development, The EDF Energy (France) and the Islamic Development Bank are some of the banks that hold the country’s external debt portfolios.
THE bilateral agencies, which hold the country’s debt portfolio include, the Import, Export Bank of China, the Agence Francaise de Development, the Japan International Cooperation Agency and Germany Development Agency. The federal government has in recent times been issuing bonds dominated in dollars in the international market to raise the required capital to fund budget which unfortunately has not addressed the situation.
THE important question that must be asked at this juncture is when the loans will be repaid considering the fact that the interest rate grows fast coupled with the problem of the not-too-impressive returns from crude oil sales which is Nigeria’s chief foreign exchange earner.
EXPRESSING fears over the ugly development, Head, National Advocacy, Social Development Integrated Center, Vivian Bellonwu-Brown, warned in a recent interview that “for a country like Nigeria where inflationary trend had been very volatile, the current increase in external commercial borrowing had reduced the value of the local currency and it will definitely make ability to repay difficult.
“IT ALSO means that Nigeria’s balance of payment will be unfavorable as more money will leave the economy. Most of the country’s resources, which hitherto would have been applied to infrastructural development and thus engendering economic growth, will now be used serving the monstrous loans”
IT IS our opinion that amassing debts in the form of loans spells doom and disaster for the country especially a country like Nigeria where historically, accountability on the management of public loans has been at the bottom level.
IT IS also our opinion that commercial loan acquisition in whatever guise is not the best for any country that cherishes her development, economic and political independence, since it is he that pays the piper that calls the tune.
National Light believes in the economic independence of the country through inwards looking. Sources like agriculture, mining and other non oil sector must be explored to the fullest to raise the funds needed for the development of the country.
TO BE able to achieve the desired success, managers of the loans must as a matter of patriotism, jettison the old tradition of feeding fat on them, while projects they are made for remain untouched.
WE BELIEVE that too much resort to external commercial debts could once again plunge Nigeria into debt as was the case prior to the country’s liberation from the Paris Club debt stranglehold in 2005.
THE Federal government, through its anti graft agencies owe it as a duty to Nigerians to ensure that the loans acquired so far are being properly managed and any person or persons, no matter how highly placed that had in any way abused the management of the loans or any funds entrusted to his or her custody, should be made to face the full wrath of the law irrespective of ethnic, religious and political affiliations.

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