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Foreign commercial loans rise by $7.87bn in two years


 Nigeria’s commercial foreign loans have risen by $7.87bn in the last two years, investigation has shown.

Data obtained from the Debt Management Office on Monday showed that the country’s commercial loans as of March 2017 stood at $3bn.

However, as of March 31 this year, the commercial foreign loans had risen to $10.87bn. This means that in two years, the commercial foreign loans rose by $7.87bn, reflecting an increase of 262.33 per cent.

Within the same period, the country’s indebtedness to multilateral agencies grew from $8.86bn to $11.25bn.

This means that the multilateral loans rose by $2.39bn, indicating an increase of 26.98 per cent within the two-year period.

Most multilateral loans are concessional loans and they include loans from the World Bank, the African Development Bank and Islamic Development Bank. Apart from coming with low interest rates, they also come with generous moratoria.

Commercial loans, on the other hand, come with higher interest rates and they include facilities secured from Eurobonds and the International Capital Market.

Nigeria had also secured some commercial loans from Nigerians in the Diaspora. This was tagged Diaspora Bond.

Although the multilateral loan commitments of the country rose by 26.98 per cent within the period, the size of such loans as a proportion of the country’s external loans had dwindled.

While multilateral loans made up 64.13 per cent of Nigeria’s external loans in 2017, they constituted only 43.92 per cent of the country’s foreign loans as of March 31.

As of March 31, 2017, the country’s external commitments stood at $13.81bn. The figure rose to $25.61bn as of the end of March this year. This shows an increase of $11.8bn, reflecting 85.45 per cent increase within the two year period.

The rise in the commercial debt commitment of the country reflects two developments. One is the drying of multilateral and bilateral sources of loans as the government prefers concessional loans to commercial ones.

The second factor leading to the rise in commercial loans is the increasing drive of the administration of President Muhammadu Buhari to find more resources to address the challenge of decreasing revenues.

Although the commercial loans are costlier than multilateral and bilateral loans, both the Federal Government and the DMO see them as cheaper options to domestic loans, which come with high interest rates.

Within the same two-year span, the country’s bilateral loan commitment rose from $1.95bn to $3.19bn, showing an increase of $1.24bn and reflecting an increase of 63.59 per cent.

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