Nigeria needs to be careful on its debt profile as debt servicing drains resources and impacts on service delivery.
According to a report in 2011 by Léonce Ndikumana and James K. Boyce at Yale university. It was observed In 2005 that Congo’s government spent $101 million on external debt service – more than it spent on public health, while at the Centre Hospitalier Universitaire de Brazzaville, the main hospital in the Republic of Congo,  patients were carried up and down the staircase on people’s backs because the hospital’s broken lifts were not repaired.
To the optimist, the Congo’s example does not fit Nigeria’s trajectory at that time, now or in the future because Nigeria is richer, cannot default and her debt profile is sustainable.
In the simplest way possible, we need to take caution from Benjamin Franklin’s wisdom that he that goes a borrowing goes a sorrowing.
It is true that for critical infrastructures and our level of development, we cannot escape borrowing.
We must however change certain things to reduce our borrowings. The first being the cost of governing the country as it impacts on the recurrent expenditure which in turn affects provision for capital projects hence which makes borrowing inevitable.
The clamour for the reduction of cost of governance is as good as the clamour for reduced borrowings because of the burden of repayment.
We have have ocassionally had the experience whereby the amount allocated to debt servicing is more than the budget of critical sectors like education and health.
Also from experience, most of these debts are stolen by some government officials and some used to execute white elephant projects.
That is why the recent loans by minister of transport calls for concern, not because reviving the railways is bad but because of skepticism by citizens on the cost of the loans and projection for the viability of paying back the loans.
Though I am always sceptical of business with China in any form but we cannot totally avoid China as they share some simarities with Nigeria and Africa as a whole in terms of classification along the indices of development but despite this reality, caution has to be applied.
Beyond China however we need to worry about our constant borrowing. Infact, China is said to be responsible for just about 10% loans to Africa. Individual nations must consider her trajectory and the terms of loans sourced from China.
IMF had warned as far back as 2018 that loans in foreign currencies are not good for African nations because of its low to medium income.
Also UN under secretary-general and executive secretary of the UN Economic Commission for Africa; Vera Songwe  writing for the Financial Time in November,  2018 said; “In an environment of tightening financial conditions, a rising dollar and heightened global protectionism, foreign currency-denominated debt has a pernicious effect on the debt service burden as interest rates rise”.  Also stating that in 2018 alone, African countries have sold $18.3bn-worth of euro and dollar-denominated debt. The frequency of bond issuances has also increased. As a result, about 70 per cent of Africa’s foreign debt is denominated in dollars or euros.
In the same 2018, the BBC reported that the World Bank  classified 18 countries as being at high risk of debt distress , where debt-to-GDP ratios surpass 50%.
The total amount of external debt for the continent was estimated at $417bn (£317bn) then.
Also around 20% of African government external debt is said to be owed to China , says the Jubilee Debt Campaign, a charity which campaigns for the cancellation of poor countries’ debt. This makes China the largest single creditor nation, with combined state and commercial loans estimated to have been $132bn (£100bn) between 2006 and 2017.
A further 35% of African debt is held by multilateral institutions such as the World Bank, with 32% owed to private lenders.
It is also observed that most of China’s loans to Africa goes into infrastructure projects such as roads, railways and ports.
In 2015, the China-Africa Research Initiative (CARI) at John Hopkins University identified 17 African countries with risky debt exposure to China, potentially unable to repay their loans.
It says three of these – Djibouti, Republic of Congo and Zambia – remain most at risk of debt distress derived from these Chinese loans.
In 2017, Zambia’s debt amounted to $8.7bn (£6.6bn) – $6.4bn (£4.9bn) of which is owed to China.
For Djibouti, 77% of its debt is from Chinese lenders. Figures for the Republic of Congo are unclear, but CARI estimates debts to China to be in the region of $7bn (£5.3bn).
The major concern is that all these data are in public domain and Nigeria is still warming up to Chinese loans with what has been experienced by some other countries who borrow from Chona for similar reasons whereas Nigeria has not really taken advantage of concessionary loans and financing from organisations like World bank but have been neck deep in commercial loans.
Estimates suggests that  Nigeria’s loan is about $85 billion almost same as pre 2005-06 when Paris Club, IMF, World Bank and the African Development Bank gave the country a big debt relief.
The plethora of litigation and skewed rule of law is another stumbling block which may make those who could potentially invest in Nigeria’s debt stock stay away. The most recent being the Process & Industrial Development (P&ID) case which ruled in favour of P&ID , that was about $9billion.
The present government must understand that while it’s drive for massive infrastructural development is appreciated, it must not fall into the pit of trying to reform too much at a time especially with a huge loan portfolio that can become unsustainable if the tide is not stemmed. Government is a continuum and successive governments can always continue from wherever this administration stops.


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