Thursday, November 20, 2008

Nigeria struck the black gold jackpot in 1956 when oil was discovered in a small village called, Oloibiri. Nigeria soon became a heavyweight in the oil market, dominating as the top African producer of crude (until Angola briefly stole the 'King of African Crude' crown) and the 8th largest producer of oil in the world.

According to IMF estimates, Nigeria made over $300 billion since the 1970s from the sale of oil. But, rampant corruption and theft left the nation with little to show for the oil wealth but poverty and incredible debt. Although penalties and late payments forced the country's debt to reach $35 billion in the 1990s, in 2006, Nigeria became the "first African nation to settle with its official lenders" when it arranged to have most of its debt erased by the Paris Club. Nigeria went on to create a plan that allowed it to pay off its debt and has steadily kept its debt low ever since. According to the CIA, Nigeria's debt accounts for only 14.40% of national GDP, in comparison to countries like Zimbabwe (218%), the U.S. (60.8%), Ghana (58.5%), the U.K.(43.6%) or South Africa (31.3%).

The World bank has offered a 3-year, $3 billion loan for Nigeria's crippled infrastructural facilities via its International Development Assistance program. This loan would push the nation's foreign debt portfolio to $6.5 billion. However, it is not quite clear whether Nigeria has accepted the loan, which amounts to N315 billion, or is merely in talks with the World Bank. According to the Daily Independent Newspaper,

"The Sustainable Development Sector Manager of the World Bank, Semeon Ehui, announced in Abuja last week that the facility comes with zero interest rate.
He said the loan would not add any burden to Nigeria, but stressed that one of the conditions is that projects such as education, health, roads and agriculture get priority because of their importance to the economy at all levels"
The possibility of a World Bank loan has raised the ire of various interest groups and members of the National Assembly. NGOs like Human Rights Writers Association of Nigeria (HURIWA) criticized the loan, and condemned the
"governments' decision to take the loan facility at this time without conducting referendum to find out from Nigerians whether we are prepared for another enslavement by the World Bank."[sic]
HURIWA went on to suggest,
"It is logically wiser to take from Nigeria's foreign reserve some good amount of money to transparently and equitably fix our dilapidated infrastructural facilities ... instead of opting to take a loan that will attract commissions under surreptitious guises and which will in future return Nigeria to a near-pariah status as a heavily indebted nation..."
Members of the National Assembly have also come against the loan. On November 14th, the House passed a resolution "to pressure the government to reject the offer of a $3 billion World Bank loan." It also directed the Joint Committee on Finance and Appropriation to advise the government on the consequences of the loan.

Only last week, Nigeria's foreign reserves inexplicably rose from $58.4 billion to $59.7 billion. Nigeria's Central Bank did not explain the rise in reserves even though those reserves had "dropped consistently in the past few months as a result of lower crude oil prices in the international market."In fact, Nigeria has the third largest reserves in Africa, behind Algeria and Libya. This recent increase in foreign reserves also means that Nigeria is ahead of Saudi Arabia, and maybe even the United Kingdom in terms of reserves of foreign exchange and gold according to the CIA.

Considering the foreign reserves, does Nigeria really need to take a $3 billion loan?  I am no financial specialist, but I do not believe the risk is worth it. Although the loan is interest free, it comes with a service charge and non-utilization fee of 0.5% and 0.7%, respectively, with up to a 40 years repayment period. Therefore, if, as has been the case in Nigeria's past, that loan is not used as directed but pocketed by those in charge, Nigeria's children will be stuck paying back a loan they never benefited from. It would be much different if the World Bank loan was for a much larger amount, then it could make sense to leverage that money for domestic infrastructure and anti-poverty projects.

Although the World Bank spokesman, Ehui, also said that "The loan has been offered to Nigeria because of the massive improvement in the economy", I can't help but wonder - Who gives a loan with zero percent interest? Sounds like a car dealer trying to get rid of last year's models and I'm just not buying it. I'd rather Nigeria get a loan from its certified billionaire, Aliko Dangote. But, he's only worth about $3 billion. Maybe if we hadn't given Bill Gates so much trouble to get a visa last year, he would have been willing to lend us some chump change.

Related Articles of Interest:
- Nigeria's Sovereign Wealth Fund
- African Finance Corporation
- Should Yar'Adua Get A Pay Raise?
- How To Become A Millionaire
- Excess Crude Fund Depleted
- No Longer King of Crude
- Nigeria's Oil Expiration Date Draws Near

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Sugabelly said...

Of course we took the loan. Any chance for the fools in government to pad the pockets cannot go unexplored. Rule of Law my ass.

bumight said...

you do not accept every credit card offer that u receive.

what is the loan for? why can't money be taken from the "reserve" to execute it?

why is the World bank even offering Nigeria a loan in the first place?

N.I.M.M.O said...

Of course, who else would a bank offer a loan to but someone who has been able to clear the slate of a previous debt burden. You finish paying one, they offer you another.

If the World Bank is really serious about 'helping' Nigeria with her infrastructure problems, let them undertake to repair the Lagos-Ore-Benin-Owerri-Port Harcourt highway, the moribund Nigerian Railways and one or two other projects in a number of states. All of them under $3bn.

World Bank MD, Okonjo-Iweala knows the areas of infrastructure that money needs to be spent on in Nigeria better than anyone else. Even better than UMYAwn and the jokers there now.

If they can do all these, we will pay them back in 10 years time (not even 40). They don't have to hand over the cash to anybody or pay into any account. Just do the job and we will reimburse you.

Otherwise, na the usual Banker's wayo. We took enough of those loans in the 80's.

Chxta said...

We've already accepted the loan.

Anonymous said...

Africa as a whole is in dire need of development but the giant that is Nigeria has yet to take on the responsibilities that would initiate a start on transformation as SA begins its regression (google Zuma). World Bank's Ngozi et all see themselves as powerless, they are all awaiting the messiah Obama to begin his magic.

Dangling $3Bn in front of our clueless and inept government that the CIA labeled a reform minded administration is quite lame. Do we need cash flow? Yes we do, just ask the finance people but why via World bank or IMF? People even compare Nigeria to India (it is not all Bollywood).

How about using our shocking arrogance (serious shakara) to tax all the multinationals in Nigeria $100Bn as corruption & pollution levy? How much is their investments in Nigeria worth while our people go abroad to wash toilets?

It is easy to kill a country (just ask those church and mosque people still in the dark ages) but it will take a little bit of brainware to transform it. Baba-Go-Slow and his Hench men should go investigate that one instead of looking for trash bloggers like us. Anyone visited NVS lately?

ChiefO said...

Finally we have completed our 360 degree spin. some of us tried to believe they'll pick the lower number i.e. 180 but no my people prefare the larger one. Bigger is better. Correct?

Jinta said...

it should not be accepted. $2.9b would probably go into the pockets of the thieves anyway, that's probably what makes it attractive

guerreiranigeriana said...

...oh wow again with the world bank...i really hope nigerian so called leaders aren't stupid enough to agree to this loan...nothing, absolutely nothing comes that easy, especially not from the world bank...if naija takes that loan, i may have to seriously mobilize some plans i have been sitting on...

Jämför smslån said...

If it can pay off their loan why not. A country wouldnt borrow unless it needs it. they may not have oil anymore, but they have other resources.

Pharmacy Colleges in Mumbai said...

I prefer to use an African or European banker; hopefully with an address and phone number that cannot be verified. I would like to pay my fees and collateral through Western Union of Money Gram. Where should I go to do this?

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