Islamic Development Bank, IDB yesterday disclosed that 75 to 80 per cent of Nigeria’s annual revenues are being used to service debts.
Resident Representative of IDB in Nigeria, Abdallah Mohammed Kiliaki, dropped the hint during a courtesy call on the Chairman, Senate Committee on Local and Foreign Debts, Senator Shehu Sani (APC Kaduna Central) at the National Assembly complex, Abuja.
Kiliaki said though, Nigeria’s debts GDP ratio is low at 17 percent, resources being used to pay the debts are enormous, going by percentages taken on yearly basis.
According to him, for Nigeria not to get herself suffocated by such huge debt servicing with limited resources, there is the urgent need for her to expand the scope of its resources through diversification of her economy into other critical areas, especially agriculture on the template of value addition from production, to processing and to export which would earn her required foreign incomes.
His words: “My visit is very crucial because we need to look at the debt profile of a country before we give it new contractual sort of financing. We also work closely with the International Monetary Fund and the World Bank to ensure that our financing has the required threshold of grant financing which is normally 35 percent but at the same time there is financing that is not a burden to a country to the extent that the debt may not be sustainable.
“When talking about unsustainable debt, it means that a country or a borrower is unable to pay. So we take very serious note of that. When you look at the debt GDP ratio of Nigeria, it is very low. It is 17 percent compared to Italy and other countries which is about 150 percent, while that of the United States is about 100 percent.
“But there is a caveat; it is true that debt to GDP ratio is low but when you look at the amount, the revenue to debt servicing ratio, the amount of money that the government is collecting, the revenue of the government vis a vis the ratio to the total debt, I think Nigeria pays about 75 to 80 percent of its revenue to service debt. So, this is very, very high compared to other countries where they use just 10 percent.
“What this means is that one, the government of Nigeria needs to expand or mobilise additional resources through taxation by broadening the tax base but at the same time, we as lenders, financiers need to reconsider our conditions of financing; meaning that we should try as much as we can to extend to Nigeria, financing that will not make it difficult for the country to pay its debt.
“In a nutshell, as clearly shown by available financial records, Nigeria still has considerable leverage of taking loans from multilateral financial institutions for development or investment purposes, going by her very encouraging low ratio of debts servicing to GDP, but the factor of dwindling revenues being used to service the debts must be urgently looked into by way of possible expansion.”
He declared that the recent visit of the 19 state governors to the Head office of IDB in Jeddah, Saudi Arabia for rehabilitation assistance for the Internally Displaced Persons, IDPs, in North East states, has no financing envelope agreement yet , being a sensitisation move.
According to him, even if the Northern states governors had approached the Bank for definite financial assistance, there was no way the federal government of Nigeria would not be carried along.
“No amount of financing was agreed upon by the Bank and the Governors during their recent visit to Jeddah since we don’t deal with states directly for such purposes,” he said.
But in his remarks, Senator Sani declared that Nigeria’s total debts presently stand at $60billion.
He therefore urged IDB and other multilateral financial institutions to stop propping the country into taking more loans on account of its low ratio of debts servicing to GDP, saying, what is 17 per cent today may if needed control measures are not applied, go up to 77 per cent and invariably return the country back to where it was before 2006 when London and Paris Club wrote off substantial part of her foreign debts then.
He specifically told IDB through its representative to be practically involved in the country’s effort at diversification of her economy and not just presenting her guided loan offer, warning that “henceforth, this committee would monitor every cent, every dollar and even kobo any government in Nigeria borrows.
“Available records have clearly shown that Nigeria’s total debts profile stands at $60billion out of which $10.6billion is from foreign loans.
“Borrowing should simply be a last option for any serious minded government and not just first option of way out of problems at hand because we don’t need to overburden our next generations for repayment of needless loans taken before their time,” he stressed.

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