Nigeria’s Rising Foreign Debt: 23 States Grow Bilateral Loans by 64% – In an eye-opening development, 23 Nigerian states have seen a significant surge in their bilateral loans, recording a growth of 64.26% over six months. By the end of June, the loans amounted to $462.81m. This trend reveals a keen interest from states in acquiring foreign debt, primarily from countries like China, India, France, among others.
Why the Surge?
Despite the consistent depreciation of the naira, making dollar-denominated loans more burdensome, the appetite for these loans among state governors hasn’t waned. This growing penchant for external debt comes amidst economic challenges, as the Central Bank of Nigeria removed the rate cap on the naira in the official Investors and Exporters’ Window of the forex market in June 2023. The aftermath? The naira’s value plunged from 471/$ to a staggering 750/$ by the end of June 2023 and has been on a downward trajectory since.
A Closer Look at the Numbers
Data from the Debt Management Office provides a detailed snapshot of this borrowing trend. The lion’s share of the bilateral loans came from the Agence Francaise Development (AFD), with the debt to France alone surging by 21.84% to $306.32m by June’s end. In contrast, loans from China, India, and other countries witnessed an astronomical rise of 415.79%, amounting to $156.49m as of June 2023.
A state-wise breakdown showcases varying levels of borrowing:
- Abia: $3.82m
- Adamawa: $4.75m
- Akwa Ibom: $3.82m
- Bauchi: $3.82m
- Cross River: Decreased to $46.85m
- Ebonyi: First-time loan at $31.29m
- Enugu: Decreased to $4.75m
- Imo: $26.04m
- Jigawa: First-time loan at $864,535.16
- Kaduna: $91.47m
- Kano: $24.39m … and the list goes on, with Lagos securing the highest at $130.67m.
A Trip Down Memory Lane
To provide some historical context, back in 2018, Nigeria secured a loan of $475m from France, targeting developmental projects in Kano, Lagos, and Ogun states. This deal was inked between Mrs Kemi Adeosun, the then Minister of Finance, and Mr Rey Rioux, the Chief Executive Officer of the AFD. The loan was distributed across various projects, including a $200m grant for Lagos’ transport projects and another $200m for land degradation initiatives in Ogun State, among others.
The soaring foreign debt among Nigerian states underscores the pressing economic challenges the country faces. While such loans can offer a lifeline for critical development projects, they also come with the added burden of repayment, especially given the depreciating naira. The hope is that these funds are utilized judiciously, ensuring long-term benefits that can offset the associated debts.