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Debt office laments debt,
export ratio
By Sanya
Adejokun
Senior
Correspondent,
Abuja
The Debt
Management Office (DMO) has lamented the unsustainable ratio of the
nation's external debt service currently standing at over 176% to the
ratio of annual export.
�The
severity of the external debt overhang could be seen in terms of debt to
export ratio of over 176. 9 per cent and a debt service due to export
ratio estimated at 19.41 per cent in 2003.These ratios represent a
standard case of debt overhang and classify Nigeria as a severely indebted
poor country,� the Office said in its 2003 annual report released in Abuja
at the weekend.
Moreover,
DMO declared that debt level was clearly unsustainable, requiring
pragmatic and proactive actions by creditors if the economy was not to be
strangulated by debt.
In order to
prevent politicians from further worsening the situation however, the DMO
has put stringent conditions against further reckless government external
borrowings at all levels.
In the
report, the DMO said the debt stock as at the end 2003, which was $32.92
billion was 64.43 per cent of the nation�s Gross Domestic Product (GDP)
and translates to $261.26 per capital.
Even at
that, President Olusegun Obasanjo disclosed during the 2005 budget speech
that the debt has now risen to $34 billion.
The high
increase was despite the N183.60 billion allocated to external debt
services in this year�s budget.
�The
severity of the external debt overhang could be seen in terms of debt to
export ratio of over 176. 9 per cent and a debt service due to export
ratio estimated at 19.41 per cent in 2003. these ratios represent a
standard case of debt overhang and classify Nigeria as a severely indebted
poor country,� it said.
With the
debt to export ratio, the DMO believes that Nigeria should be qualified as
a Highly Indebted Poor Country (HIPC) but the World Bank has refused to
make such necessary classification.
Some of the
relief for the HIPC countries include outright cancellation of their debt
and other robust debt reduction strategies.
DMO
lamented that the nation�s external debt which was less than $1 billion in
1970 rose to over $33 billion in less than 10 years, in 1980 and has
continued to hover around $30 billion �either slightly less or above that
mark, in spite of several billion dollars spent on debt
servicing.
Total
external debt service payments for the year 2003 was $1.809 billion
compared to $1.168 billion in 2002, representing an increase of $640
million or 54.87 per cent rise.
The amount
comprised of principal payments of $$1.261 billion; an interest payment of
$522.66 million; commitment charges of $12.71 million; penalty charges of
$6.27 million; and other charges amounting to $5.98 million.
DMO said
that appropriation for external debt service in 2003 was only about 34.27
per cent of the external debt obligations for that year which was put at
$5.250 billion, which was more than 60 per cent of the entire federal
government budget for the year.
As at end
2003, Nigeria�s highest indebtedness to the Paris Club members was to her
former colonial master, the United Kingdom which stood at $6.104 billion,
followed by Japan, $4. 146 billion; France, $3.710 billion; Germany $3.
544and Italy, $2. 025 billion.
The least
debt of $2.68 million, as at then was owed Finland.
Nigeria�s
heavy debts were incurred during the 1970s and 1980s, according to the
DMO, when the London-Inter Bank Offer Rate (LIBOR) hovered between 3 and 4
per cent. The debt grew rapidly through the 1980s mainly due to the
accumulation of debt service arrears owing
to
inability to pay and secondly due to the escalation of market interest
rate. LIBOR rose from 4 per cent to pick at 13 per cent in 1989 and
thereby quadrupled the debt of many developing countries of the world,
including Nigeria.
Analysis of
external debts owed by states showed that Abia topped the list with $647.4
million, followed by Plateau with $569 million and Niger with 500.4
million. Others with high debt profile are: Lagos $415.1million , Imo $428
million, Osun $398.6 million, Kogi $ 364 million, Kwara $ 352 million,
Enugu $311.1 million. States with smallest figures were:
Zamfara
$23.1 million, Kebbi $29.8
million and Yobe with $40.6 million.
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