Twenty-three states in Nigeria have experienced a 64.26% hike in bilateral loans. The total now stands at $462.81 million as of the end of June.
Most of these loans come from countries like China, India, and France. This is despite the nairaโs ongoing depreciation, making dollar-denominated loans pricier.
In June 2023, the Central Bank of Nigeria removed the rate cap on the naira. This led to its value plummeting from 471/$ to 750/$.
Despite this, state governors continue to show a growing appetite for such loans. Data from the Debt Management Office supports this trend.
The loans are mainly from Chinaโs Exim Bank, India, and Franceโs Agence Francaise Development. Other contributors include the Japan International Cooperation Agency and Germanyโs Kreditanstalt Fur Wiederaufbua.
Debt to France alone has grown by 21.84% to $306.32 million. Loans from China, India, and others have surged by 415.79% to $156.49 million.
A breakdown by state reveals a varied loan profile. Lagos leads with a loan of $130.67 million. Sokoto is at the lower end with a loan of $3.82 million.
Editorial
The 64.26% surge in foreign loans among 23 Nigerian states is alarming. It raises questions about fiscal responsibility and long-term sustainability.
Loans can indeed fuel development and infrastructure projects. However, the rapid increase in just six months signals potentially reckless borrowing.
The devaluation of the naira complicates matters. It increases the actual cost of these dollar-denominated loans.
State governors must, therefore, exercise caution and transparency. The Central Bank of Nigeria and the Debt Management Office should also step in.
Stricter guidelines for state-level borrowing are needed. Especially when these loans are from foreign entities, strengthening the naira should also be a government focus.
This would mitigate the risks associated with foreign loans.
Immediate action is required to address this burgeoning debt. Failure to do so could lead to a financial crisis.
This would affect not just the states involved but the nation. Those in power must take responsible steps now to avert a future catastrophe.
Did You Know?
- Nigeriaโs external debt was $36.3 billion as of December 2020.
- China is Nigeriaโs largest creditor, making up nearly 30% of its external debt.
- The naira has lost over 90% of its value against the dollar in the last decade.
- Franceโs Agence Franรงaise de Dรฉveloppement focuses mainly on sustainable development projects in Nigeria.
- Nigeriaโs debt-to-GDP ratio was 21.6% in 2020, relatively low compared to other African countries.
