Written by Anas A. Galadima
Thursday, 02 August 2007

A $200million foreign loan secured by the administration of President Olusegun Obasanjo to finance the launching of a communications satellite has been questioned by the International Monetary Fund (IMF).

The loan was secured on non-concessionary terms in January 2006 and was not reported to the Fund, a move that goes contrary to the agreement the government reached with the IMF under the Policy Support Instrument (PSI) programme.

These revelations were made yesterday by the IMF in its latest report of its review on Nigeria.

According to the fund, the federal government secured the loans as early as 2006 and failed to report it to the IMF in its first two reviews of Nigeria under the PSI.

"A nonconcessional loan of $200 million was contracted in January 2006 to finance a communication satellite. This loan (0.2 percent of GDP) represents a small deviation from the program and does not substantially weaken Nigeria’s debt sustainability. The supplier’s contract was signed in 2004 and the satellite was launched in May 2007," the IMF report which was obtained by Daily Trust revealed.

"The authorities failed to ensure the accuracy of information provided to the Board on nonconcessional borrowing in the context of the completion of previous reviews under the PSI. The borrowing did not significantly undermine Nigeria’s debt sustainability. In light of this, and the authorities’ ongoing efforts to strengthen debt management, the Board decided to maintain a positive assessment of Nigeria’s past program performance under the PSI," said the IMF.

When officials of the Fund

raised the question with the government early this year when its officials visited the country for the third review of Nigeria’s PSI implementation in February this year, Nigerian officials admitted and said it was an omission.

IMF Executive Director for Nigeria, Peter Gakunu who reacted on behalf of the country said "The (Nigerian) authorities agree with the concern raised by the Fund. They have, therefore responded to Management’s letter on the subject and provided relevant documentation to assist clarify matters relating to the loan."

"As indicated in the authorities’ letter to Management and in the staff report, the loan

arrangement was part of a supplier’s contract agreement executed on December 15, 2004 when the PSI had not come into effect and was subjected to protracted negotiations which carried through 2005 to improve its terms."

He said "The authorities have regretted the oversight in not providing information on the loan during the first and second reviews of the PSI, which was also attributable to changes in key personnel in the Ministry of Finance, poor debt database and weak debt management capacity at the time. Given this experience, the authorities have now strengthened their debt management practices."

Based on the explanations, the IMF however decided to waive Nigeria’s non compliance in that regard and went ahead to do the review in February.

In the same report however, the IMF commended some of the reforms in the country.

"The Nigerian authorities are to be commended for implementing their reform program in recent years. The improved policy framework, strengthened institutions and macroeconomic policies, and major progress with wide-ranging structural reforms led to impressive macroeconomic outcomes—notably robust growth and low inflation—as well as improved investor confidence," the report said.

It added that: "Maintaining the reform momentum and safeguarding economic gains of recent years will be necessary to realize Nigeria’s growth potential, which is important for Nigeria’s fight against poverty."