Reducing the Nation’s Foreign Debts

Debt is a dynamic part of economic and business transactions involving individuals, organisations or countries.

From economic perspective, debt is considered necessary in a situation where funds need to be sourced to execute projects or infrastructural development for the benefit of the citizenry.

While some debts are described as internal or domestic, other debts are external involving foreign countries or international monetary organisations such as International Monetary Fund, IMF and World Bank.

For example, external debt according to analysts could be a possible tool to drive economic growth if properly managed through repayment rather than servicing.

According to the National Bureau of Statistics, NBS report, the country’s debt profile in 2016 stood at about eleven billion dollars, while domestic debt was over fourteen trillion naira.

Of these, Federal Goverment’s debts accounted for over sixty eight percent of foreign debt and seventy nine percent of domestic debts.

States and Federal Capital Territory accounted for thirty one percent of the foreign debt and twenty one percent of domestic borrowing.

The 2017 figure showed a further rise to fifteen billion dollars foreign debts.

The International Monetary Fund, IMF has expressed worry over Nigeria’s ability to repay its foreign debt which has continued to rise.

For example, Federal Government recently stated its intention to take an external loan of two hundred million dollars for infrastructure development.

Though, IMF said conditions were favourable for the country to continue to borrow but concerns over the capacity to repay is high.

On the one hand, it is very good because the facility will allow Nigeria to invest more; but on the other hand it portends a great risk.

In a swift reaction to the IMF statement, the Minister of Budget and National Planning, Senator Udoma Udo-Udoma, argued that the loan posed no harm to the economy of Nigeria.

As it is now, it is imperative for Federal Government to work towards a sound debt structure by ensuring the sustainability of public debt at its level and rate of growth.

It is also important that government institutes deep budget cuts, especially excesses in administrative spending and unviable projects.

Furthermore, President Buhari should plug the loopholes in the operations of the Nigerian national petroleum corporation, strengthen the regulatory and revenue collecting agencies and drive tax reforms.

Government should equally ensure that loans are obtained on favourable terms.

There is also the need for government to explore possibilities of using private capital in financing rails, sea ports, air ports and oil ventures rather than depending on foreign loans, especially from the Chinese.

To reduce foreign debts, it is imperative for government to encourage local manufacturers and discourage citizens from using imported goods.

Above all, government should learn from the experience of Greece whose economy got weighed down as a result of financial crisis.

Olukemi Akintunde

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