There is no economic reason to fear long term loans at low-interest rates. In relation to GDP, Nigeria is not even a debtor nation. Its debt is a mere 11% of GDP. Nigeria is among the least indebted nations of its size on earth.
A loan with a tenor of 20 years at 5 – 10% interest, if handled by a financially prudent and responsible government, is a welcome idea anytime. It is a fast way to develop Nigeria’s critical infrastructure.
Of course, there are economic issues like inflation, high-interest rate, high taxes, crowing out and interest repayment to worry about, but the loan this government has taken so far is not the type that will lead to such problems.
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The truth is every nation needs a leverage of loans to fast track its growth. There is no developed nation without a debt hanging on its neck. The biggest and richest countries in the world are the most heavily indebted. The UK, for instance, is in debt deficit of 11% of its GDP and has a 43bn pounds of interest to pay.
In the United States, if you share national debt among its citizens, each man, woman, and child will be owing about $42,998 according to Money & Time survey carried by The Time magazine International.
But there is a huge difference between national debt and family debt. What most people don’t know is that national debt is not like family finances. The difference is that countries have the central bank to manipulate their economy. They have more financial and monetary flexibility to get out of financial troubles.
Also, a country lives a long and infinite life unlike a family with an average life span of 75 years.
Today US National debt is $19trillion about, 104.27% of its GDP, yet it paradoxically has the largest economy in the world and remains the richest nation on earth.
The fact that institutions are willing to lend Nigeria money tells much about its economic viability and credit rating. Kenya had sought and failed to secure a loan of only $200m because its economy is not strong and big enough to repay the debt when its GDP is taken into consideration. It is like a case of someone with N100,000 income seeking a loan of one million Naira.
By Aliyu Nuhu
