Thompson Ayodele and Olusegun Sotola of the Initiative for Public Policy Analysis, a Nigerian libertarian think-tank, argue that doing away with Big Government is the only antidote to Nigeria's foreign debt: "Despite the shortcomings associated with foreign loans and past experiences, there are fears that Nigeria‘s loan portfolio might be on the rise and consequently put the nation among debtor nations. It is not accidental that the Minister of Finance, Olusegun Aganga, warned of dire consequences for unbridled borrowing in the face of cash crunch. The fiscal deficit right now has risen to an estimated deficit of 10 per cent of GDP in 2009 from a surplus of 3.7 per cent of GDP in 2008. Nigeria is gradually on the road to being a highly indebted country. In view of the mounting debt, what is more worrisome is the penchant for increased foreign loans. The external debt stands at $4.3billion. Early this year, domestic debt was $21.3billion. This amount excludes the verified $40 million owed local contractors and $200million unverified amount."
They continue their commentary: "The World Bank has said that no nation with aggressive agenda like Nigeria can succeed without massive borrowing. The Bank needs to be reminded that a country with poor debt management and hard-earned resources going into debt servicing will scarcely succeed. This route, treaded in the 80s, resulted in economic turmoil and triggered the Structural Adjustment Programme. The bulk of the debts negotiated for cancellation in 2005 were obtained in the 80s. Unfortunately, a large percentage of the loans was expended on projects that had doubtful value and most of which became moribund or abandoned. There is a tendency to mismanage loans in a way that only the leaders, lenders and the privileged few benefit. It does not inspire confidence that any loan will be well spent this time."
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THOMPSON AYODELE & OLUSEGUN SOTOLA COMMENTARY: Foreign Loans: Lessons From The 1980s
