Olusegun Obasanjo stated that a country needs 50% of foreign earnings to service commitments as Nigeria is rapidly sinking under the weight of foreign and domestic debts, and this should border us.
This was part of former President Olusegun Obasanjo’s opening lines on Friday as he presented a paper titled ‘Nigeria: The Challenges of Debt and Sustenance of Democracy.’
Speaking after Dr. Olurotimi Badero, the Nigerian American cardiologist and international nephrologist who was recently recognised as world’s first and only fully trained cardio-nephrologist, Obasanjo said: “There is a dangerous emerging trend today in Africa, and it is eerily familiar with developments on the continent in the 70s.
“Our political leaders have suddenly developed not just a taste for, but a voracious appetite for debt.
“As usual, most of such debts procured are hardly thought through.
“Predictably, ability to repay such debts is lacking.
“Unfortunately for us and unlike in the past, the new creditors are less tolerant of our limitations and inadequacies and are now demanding to manage institutions and agencies with a view to recouping their loans.”
Flaunting his nearly 12 years as head of state, Obasanjo, who was guest speaker before a largely youthful audience at an event tagged ‘The Nigerian Story, Why I am Alive Campaign’, sponsored by Unity Bank, in Lagos, said: “Using debt to finance growth and/or development is a double-edged sword that must be wielded with a high degree of discipline, responsibility and foresight.”
Stressing that a well-caliberated debt for infrastructure and other developmental goals could be positive, the former president said: “Everyone knows that our governments are notoriously deficient in serious and adequate discipline and most often lack competence and consistency as well.”
He cited the case of Lagos, which borrowed to build a light rail, but which the succeeding government abandoned for its full four years even at “65% completion when it should have started paying down the loan.”
Stressing that such problem is not limited to states, he said, “The federal government built a nice looking extension to the Murtala Mohammed International Airport that looks completed from outside but not in service.
“To rub aboniki on the injury, some clowns are talking of demolishing the main airport and rebuilding from scratch. Where on earth is a poor country wasting resources that way? he queried.
Obasanjo also said defaulting on debt repayment is very easy and convenient, which also favours the creditor.
“Deliquescent behaviour allows the opportunity to impose stipulated sanctions and later appear friendly by offering to restructure your debt.
“At the end of the day, what is done is simply to add to your interest payments and other fees to the principal sum at a high premium.
“So, overnight, a debt of USD$1 million will become $5 million in spite of the fact that you had repaid $1.2 million.
“I say this without fear of contradiction. I have borrowed from banks as a private sector operator and I have borrowed as a political leader, so I believe you would understand my fears and experience about jumbo loans and my agony in getting rid of our external debts and developing a sustainable approach to address our domestic debts.”
He added that to now see all those efforts go to waste barely less than 15 years is more than disturbing to him.
Obasanjo, who noted that the situation he found the government in his second coming was such that the country owed both the Paris Club and Look neon club a whopping $36 billion and servicing it annually with $3bn, said the situation was, to say the least, suffocating.
He also lamented a situation where Nigeria’s debt, which stood at $10.32 billion in 2015, has risen to $81.274 billion in just four years, stressing that the nation will need to commit at least 50 per cent of its foreign earnings to service such humongous debt profile.
“As if this is not bad enough, we are currently seeking to add another $29.6 billion loan to our already overburdened debt portfolio,” he said.
The former president warned that the oil which Nigeria is banking on to pay up this debt is fast losing value, with at least 50 per cent of African countries already discovering oil and gas in reasonable quantities.
He also warned that getting debt relief like Nigeria got under him may not be so easy anymore, citing the case of Algeria, which under President Bouteflika tried to no avail to get debt relief like Nigeria did.
He said: “I fear for the future we are bequeathing to our children and to their children and their children s children.
“I believe that it will be foolhardy, irresponsible and wicked for us to tie a mill of stone around the neck of the successor generations of Nigerians.
“We need to take hard and important decisions that will facilitate a balanced allocation of resources to both capital and recurrent expenditures.”