NIGERIA TO PAY OFF $2.15 BILLION DEBT TO LONDON CLUB Dec 5, 2006
The federal government of Nigeria is to embark on the paying off the last batch of outstanding debts owed to the London Club amounting to $2.15 billion.
“President Olusegun Obasanjo has disclosed that Nigeria would exit the London Club of creditors by March when it would pay the final tranche of about $900 million to the club and the country would thereafter become debt free.
Speaking yesterday while receiving the Third Quarter 2006 Report of the National Economic Intelligence Committee (NEIC), at the State House Abuja, the President said Nigeria has so far paid $1.4 billion to the London Club in debt repayment.
“We have paid off $1.4 billion of the amount we owe to the London Club, and the balance of about $900 million will be paid by March, this year, effectively wiping clean, the debts we owe”, he stated.
Commenting on parts of the Report that expressed concern at high interest rates and inflation, the President agreed that interest rates were still high compared to other economies."
Previously, in the letter to the Senate President dated May 24, 2006, the President of Nigeria, Mr. Obasanjo said “With the successful conclusion of the Paris Club debt deal, I wish to intimate you that we have now turned our attention to the London Club category of debts, made up of Promissory Notes, Par Bonds, and associated Oil Warrants.
“As these categories of debts are traded in the international markets, possessing different characteristics from Paris Club debts, a different approach is being adopted for their treatment. This is likely to take the form of a market-based transaction that will confer optimal financial and economic benefit to the country.”
“We have invited proposals from reputable financial advisory services firms which will be competitively assessed to help us determine our strategic options. I will revert to the Senate as appropriate and will count on your support.”
Earlier, Nigeria have settle her Paris club debt. On Friday, April 21, 2006 Nigeria paid the final installment of $4.518billion to exit the Paris Club. The earlier arrangement and concord reached with the Paris club in June last year, which Nigeria has fulfilled by the paid off $12.4 billion in arrears and debts as was stipulated.
President Obasanjo’s administration, under the leadership of the former finance minister, the able Dr. Ngozi Okonjo-Iweala secured the $18billion debt relief for Nigeria from the Paris Club of creditors. Then Nigeria's total foreign debt stood at $35.916billion as of June 2005. The largest chunk of the debt $31billion was owed to 15 of the 19 creditor-countries of the Paris Club.
Settlement of both Paris and London club debts are success stories. These development will enable Nigeria to secure a favorable financial rating and reputation among global financial institutions. The greatest effect will be felt on the attraction of foreign capital and investors, propelled by comprehensive economic reform called Policy Support Instrument endorsed by IMF. All these with the latest “BB” rating from two major international credit rating agencies will embolden investors. If Nigeria can embark on refurbishing her physical infrastructures investor confidence can soar high. The windfall from high oil price made these deals successful.
AFRIPOL organization's policy and financial experts are working on a WHITE PAPER on how to avoid enormous foreign debts among African nations, below are the salient points.
HOW TO AVOID ENORMOUS FOREIGN DEBT :
STABILIZE THE NATION’S FINANCIAL AND ECONOMIC HOUSE: Balance the budget. Implement timely and appropriate budget. Avoid budget deficit by spending within nation’s means, so to avoid un necessary borrowing and check corruption.
SET UP NATIONAL ADVISORY COMMITTEE ON BORROWING AND DEBT MANAGEMENT:
This body will comprise of individuals and experts from the office of the Presidency, legislature and from the public. They will instituted transparency and probity policy to check mismanagement. Broaden deliberations on borrowing and debt management to involve tax paying citizens.
HIRE TOP NOTCH NEGOTIATORS: Financial, economic and legal experts to negotiate on behalf of nation seeking foreign loans. The experts can favorably negotiate for reasonable interest rates and duration on the maturity of the loans.
BORROWING/DEBT LEGISLATION: The legislatures will enact a law, that will be a deterrent to unnecessary and excessive foreign borrowing.
RAISE FUNDS INTERNALLY: Domestic borrowing by the government will be promoted by the issue of bonds and increase of revenue through fiscal and monetary policies.