The Director General of the Debt Management Office yesterday said that the federal government was indebted to local contractors to the tune of over N1.1 trillion, while stating that the nation’s foreign debt profile had hit over $28.6 billion.

Arikawe who gave the details of federal government’s domestic and foreign debts profile said that 60 percent of the local debts was owed to the Central Bank of Nigeria (CBN), while others are debts to banks, insurance companies and local contractors.

According to the Director General, who was testifying at the House of Representatives public hearing on the national treasury, said that the nation’s foreign debt profile hit $28.6 billion as at December 2002 with $22 billion of the debt belonging to the Paris Club.

He explained that in actual terms, the debt owed by Nigeria to the club was $13.5 billion, but due to the increase in interest rate and penalty for default, the debt rose to $22 billion.

Arikawe adding that Nigeria had earlier paid $40.6 billion to the club, explained that over 85 percent of the debts were incurred between 1980 and 1985 at a time when the interest rate was at three percent.

But, he explained that the interest rate went up to 15 percent in 1990, adding that what made the debt to be on a high side was the non-payment of actual loan.

The Chief Executive of DMO told the House ad-hoc committee that between 1999 and 2002 Nigeria paid over $6 billion in debt servicing alone. He said that what was needed for the debt servicing was $3.3 billion per year, but lamented that only $1.5 billion is being appropriated per year from 1999.

According to the Director General, the effect of the under servicing of the debt has resulted in a debt over shoot of $800 million.

He advised that it was in the interest of Nigeria to adopt the International Monetary Fund (IMF) programmes, because it would help in the rescheduling of debts.

At the moment, he said that the IMF interest rate stood at 11.5 percent, but explained that Nigeria is currently negotiating for a downward reduction to five percent.

Arikawe told the ad-hoc committee that Nigeria has taken a loan facility of $4 billion from Japan at an interest rate of one percent, but if the nation defaults, the interest rate would be increased to six percent.

On the whole, he said that the foreign debt profile consists of $22 billion from the Paris Club, $4 billion from Japan and $2.04 billion from the London Club, giving a total of $28.6 billion. This, he said is not inclusive of the loans borrowed this year.

Also yesterday, the Central Bank of Nigeria represented by Deputy Governor Policy, Ernest Ebi blamed the current economic crisis on the inability of government to apply the right policy therapy.

Ebi in his presentation said that the problem with the economy is that fiscal policy is usually applied where monetary policy is required.

The dominance of fiscal policy, he said was largely responsible for the comatose situation. He advised that government should employ long term instrument instead of the short term being currently applied.

On budget deficit, he said that the apex bank had written to government advising them to resort to capital market as way of balancing up the inadequacies.

Chuks Okocha, This Day (Lagos), July 11, 2002