Domestic debt: N373bn borrowed by military regime still outstanding – Investigation

By Everest Amaefule, Abuja

Thursday, 11 Nov 2010

A total of N373.12bn borrowed by the Nigerian military government 25 years ago is still outstanding, investigation by our correspondent has revealed.

Our correspondent gathered that the Federal Government was currently paying interest rate of between 9.41 per cent and 12.5 per cent per annum on the debt.

Part of the money, it was learnt, was borrowed to finance the nation’s budget deficit, as well as convert some excess currencies printed by the military government into securities.

The second period of military interregnum in Nigeria’s polity, which stretched from December 1983 to May 27, 1999, was characterised by large printing of currencies to finance annual budget deficits.

The debt instruments used to convert some of the notes printed 25 years ago were treasury bonds and development stocks.

While treasury bonds stood at N372.9bn, development stocks totalled N220m.

According to our correspondent’s findings, the Federal Government is paying an interest rate of 9.41 per cent per annum on treasury bonds and 12.5 per cent on development stocks.

When contacted, the Debt Management Office confirmed the development.

It said in a document made available to our correspondent, “The treasury bonds and development stocks are old government securities issued 25 years ago during the military era to partly finance the government budget deficit then, and to partly convert the ways and means of government at that time to securities.”

This was during the General Ibrahim Babangida (retd) administration.

The wave of borrowings from the domestic market, however, increased in 2003 when new borrowing instruments were introduced by the Federal Government, especially as the nation struggled to get out of foreign debts.

Additional statistics provided by DMO put the total domestic debts at N4.23tn as at September 30, 2010.

FGN bonds constituted most of the debts. The instrument accounted for N2.79tn, while Nigeria Treasury Bills accounted for N1.06tn.

The Federal Government pays an interest of 10.68 per cent per annum on FGN bonds, while the interest rates vary widely for NTBs.

Our correspondent gathered that some of the loans obtained by the Federal Government over the years were not tied to specific projects. They are, however, put into a pool of funds to finance budget deficits as confirmed by the DMO.

The office further explained, “All government securities, which make up domestic debts are issued to form a pool of funds for the Treasury, which is used to finance the budget deficit of government.

“FGN bonds were introduced in 2003. The money raised through the issuance of the FGN bonds was used as appropriated by the National Assembly (Appropriation Act) to finance government budget deficit.

“Some specific projects in the budget, such as the Gurara Water Scheme, the Central Bank of Nigeria Commercial Agricultural Credit Scheme, the expansion of Kubwa and Airport expressways and the development of infrastructure in four districts of the Federal Capital Territory, have been funded with proceeds of the FGN bonds.”

 

Source: Punch