By 1985 Nigeria’s total external debt had hit US$19 Billion and the country was faced with a massive problem though the Military Politicians at the time refused to or could not see it. Between 1985 and 2005, Nigeria paid US$35 Billion in debt service, borrowed an additional US$15 Billion, yet our outstanding External Debt balance as at the end of 2004 ballooned to circa US$35.9 Billion.
If this maths seems a bit off to you, it is because you have not factored in compound interest over the period, in short, Debt Service. The thing about Debt Service is that it gets worse if the full interest is not serviced thus the outstanding interest is compounded / capitalised and both your principal and interest will continue to grow even if you are not borrowing any additional money!
That is where we found ourselves in 2005 and the rest like they say, is history.
In October 2005, we initiated a historic debt relief agreement with the Paris Club of lenders. This deal was concluded on April 21, 2006, and saw our external debt stock reduced by US$30 Billion (US$18 Billion was written off while Nigeria made a cash payment of approximately US$12 Billion) and our books cleared of all Paris Club debt.
12 years seems to be a long time ago for Nigeria’s politicians; the memories have faded, the sense of panic and helplessness magically erased, and selective amnesia has set in. Now we all seem to have forgotten the lessons learnt between 1985 and 2005 when we spent most of our revenue just servicing debt. So, as at March 31st 2018, Nigeria’s external debt had ballooned to US$22.07 Billion (US$3 Billion more than the 1985 trigger point of US$19 Billion) and US$11.76 Billion more than the US$10.31 Billion outstanding External debt as at June 31st 2015, shortly after this administration came to power.
I hear that some people keep talking about Debt to GDP ratio (rather than focus on the Debt Service to Government Revenue ratio that applies in Nigeria’s circumstances). That is like boasting that your father’s farm is the size of the whole of Lagos while the only portion being farmed and yielding crops is the tiny section in Aradagun and not even the whole of Badagry in which it is situated
They say that he who the gods want to destroy…
