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About Nigeria's External Debt - Part 2

Reconstructed from various sources by
Bolaji Aluko

May 19, 2001

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TABLE 1: Average Terms of External Loan Commitments
(Interest Rate, Maturity and Grace Period)


Private Creditors Official Creditors All Creditors
------------------- ------------------- ----------------
Int% Mat'ty Grace Int% Mat. Grace Int% Mat. Grace
Years Years Years Years Years Years

1971 - 8.7 - 7.3 19.8 - 4.6 25.8 -
1972 6.6 6.9 1.4 6.0 25.5 6.6 6.1 22.6 5.8
1973 - - - 7.3 - 24.4 6.6 23.7 -
1974 6.5 8.4 2.9 4.2 24.9 7.0 4.3 24.0 6.8
1975 6.0 8.7 2.5 7.7 19.1 4.7 7.6 17.5 4.3
1976 - - - 8.5 18.6 5.1 8.5 18.6 4.1
1977 - - - 8.2 19.7 5.2 8.2 19.7 5.2
1978 10.5 7.5 3.5 7.0 12.6 3.6 10.1 8.0 3.0
1979 12.5 8.1 3.7 5.9 15.4 4.7 12.0 8.6 4.7
1980 11.5 8.8 3.4 8.2 16.1 3.9 10.0 10.9 3.6
1981 9.3 9.3 4.0 8.3 18.8 5.2 9.2 10.3 4.1
1982 10.1 9.0 3.3 9.2 14.1 4.7 10.0 9.9 3.7
1983 9.8 8.0 2.7 10.9 11.1 3.6 10.2 9.2 3.0
1984 9.8 9.9 1.9 9.9 16.6 4.1 9.8 11.8 2.6
1985 9.1 10.7 3.2 8.9 19.6 4.4 9.0 12.6 3.6
1986 8.4 10.8 3.0 8.5 16.2 5.1 8.5 16.7 4.4
1987 8.0 9.7 1.4 7.9 18.2 5.1 7.9 14.9 4.4
1988 8.3 9.5 3.7 7.3 18.5 4.9 7.6 16.0 4.6
1989 8.4 9.6 3.5 8.1 19.8 5.3 7.1 16.5 4.8

Int% - Interest rate Mat'rty - Maturity (years) Grace Period (years)

Source:"Nigeria's External Debt Burden", S.B. Falegan, Fountains
Publication (Ibadan), 1992

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TABLE 2 Selected Interest Rates (Percentages) of Domestic Banks

Year T-Bills MRR Deposit Rates Lending Rates
issue (3 months) (Prime)
rate ComBanks MerBanks ComBanks MerBanks

1986 8.5 10.0 9.2 0 10.5 0
1987 11.5 12.8 13.1 0 17.5 0
1988 11.8 12.6 13.1 14.5 16.3 16.5
1989 13.3 18.5 15.6 20.4 20.4 20.8
1990 17.3 18.5 19.7 22.9 25.6 28.8
1991 14.5 15.5 15.2 17.6 19.9 20.6
1992 21.0 17.5 20.8 38.8 29.8 44.4
1993 28.8 26.0 23.6 37.7 36.1 59.1
1994 12.5 13.5 13.4 13.8 20.2 20.6
1995 12.5 13.5 13.6 14.3 20.2 20.7
1996 12.0 13.5 12.3 13.4 19.1 20.1
1997 12.0 13.5 9.4 11.3 18.4 19.4
1998 13.0 13.5 10.4 15.4 18.3 22.2
1999 17.0 18.0 12.7 17.6 21.3 25.8

T-Bills - Treasury Bills issue rate
MRR - Minimum rediscount rate
ComBanks - Commercial Banks; MerBanks - Merchant Banks

Sources: (i) Annual Reports and Statement of Accouns 1996, 1997,
1998, 1999 (Central Bank of Nigeria) (ii) "Nigeria Structural
Adjustment Program: Policies, Implementation, and Impact (May 13,
1994) Report No. 13053-UNI (Document of the World Bank.)


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AN EXCERPT

Pages 38-40 of SB Falegan's "Nigeria's External Debt Burden",
Fountains

BEGIN QUOTE

International Capital Markets

Nigeria entered the International Capital Market, including the
foreign and international bond markets, for the first time in 1977
when it negotiated jumbo loan of $1 billion from the Euro-Market.
During that year, a number of proposals were made by some Euro-banks
to the Nigerian Government for medium-term syndicated bank loans
and/or direct Euro-bond issues. The characteristics of the loan
offers were as follows:

(a) Medium-term maturities, ranging between five and seven years;
(b) All the syndicated loan offers had variable iinterest rates
and were all between 1 and 2 percent above the Lond interbank
offered rate (LIBOR) which was then about 8 or 9 percent. The
practice of establishing rates above LIBOR emanated from
inflationay pressures and fluctuations which introduced a lot
of uncertainty.
(c) The Euro-bond offers had fixed interest rate, but the
maturities were no longer than those for syndicated bank loans.

(d) There were various "middle bank negotiators" involved in
matching the borrower and the ultimate lender. They ranged from
management groups to syndicators to agency banks. Each of them
charged its own fees. There was therefore a chain of variable
charges, apart from the interest charge in the following order:

(i) commitment fee of at least 05. percent per annum;
(ii) Agency fee of not less than $10,000 per annum for
administration of the loan;
(iii) Placement fee of up to 0.625 per cent payable to
participating banks.
(iv) management fee if 9,375 per cent per annum.
(v) legal fess and other expenses.


TERMS OF FOREIGN LOANS

...The cheapest and least burdensome loan terms came from the United
States both as to maturity, interest rate and grace period. West
Germany and Israel imposed the most costly terms. Little or no grace
period was provided on their loans.

The British loans, largely ECG lons, were among the most costly for
the rates (prevailing in the 1960s with interest rate ranging between
5 and 7 percent or more (..) Interest costs were uncertain, eing
based on the United Kingdom bill rate prevailing at the time the loan
was contracted. When the Bank of England's rate rotse to as high as
7 percent, interest charge on some of the United Kingdom's loans to
Nigeria rose by at least 1 per cent higher than the Bill Rate.
British bilateral loans had repayment periods ranging between 15 and
20 years and were among the most generous repayment terms.

Table 2 above "Selected Interest Rates (Percentages) of Domestic
Banks" shows the terms of loan commitments, that is interest rates,
maturity (years) and grace period (years) in the 1970s and 1980s.
Interest rates were generally much higher in the 1980s than in the
1960s or 1970s. For example, interest rose from 7 per cent int he
1960s to as high as 11 percent in the 80s. However, the rates were
much higher for private credits than for official credits. The
repayment period was shorter for private credits than for offical
credits, while the grace period attached to official credits was more
generous than that granted by private creditors. Debt service burden
increased correspondingly and the total debt service ratio on
maturity exceeded 1 for the loans i.e. for more than the initial
principal amount.


END QUOTE


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