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About Nigeria's External Debt - Part 6
Reconstructed by
Bolaji Aluko
May 19, 2001
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Table 1: Nigeria's External Loan Rescheduling (1983-1989)
Source: Falegan: "Nigeria's External Debt Burden", Fountain
Publications (1992)
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Date of Signature Amount Amount Note
Restructured Deferred
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Bilateral Debt Relief
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July 1983 1,350 1,350 (1)
Sept 1983 657 657 (1)
Oct 1984 258 258 (1)
July 1985 1,050 1,050 (1)
1985 365 365 ITT rescheduling
1986 202 202 (1)
1986 95 95 Bilateral off.
debt, parallel to
1986 Paris Club
1987 1,684 1,684 (1)
1988 1,653 1,653 (1)
Commercial Banks (Multilateral)
------------------------------
Nov 1987 4,687 4,687 Includes ST debt
March 1989 5,986 5,986 Incl. LOC arrears
Official Creditors (Multilateral)
---------------------------------
Dec 1986 6,830 6,830 Incl. arrears and
ST debt as of
June 30, 1986
March 1989 6,426 6,426
---
Note (1) Uninsured short-term (ST) suppliers' credits
LOC - line of credit
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Excerpt from: "Nigeria Structural Adjustment Program: Policies,
Implementation, and Impact", May 13, 1994, Document of the World
Bank (Report No. 13053-UNI). Pages 90-94.
QUOTE From Chapter 7
D. Rescheduling, Arrears, and Reserves
7.22 .....Over the past six years, total scheduled debt obligations
have averaged US6 billion - or about 66 per cent of total exports of
goods and nonfactor services.
Nigeria has relied on exceptional financing from main creditor groups
or - whenever this was not forthcoming - accumulated large arrears.
With several successive rescheduling arrangements, Nigeria's
scheduled debt-service ratio (including rescheduling credits) has
averaged about 39 percent. For 1986-92, the debt-service ration
(inculding rescheduling credits and arrears accumulation) averaged
about 29 percent.
7.23 From 1986 to 1988, foreign exchange reserves in relation to
imports were very low. The increase in exports in 1989-90, together
with the 1989 rescheduling provided Nigeria with an opportunity to
raise its level of reserves to a more sustainable level (equal to
sevent months of 1990 imports.) By 1992, however, the country's
increasing imports, added to the financial requirements of the London
Club [SEE NOTE 1] debt-reduction operation, brought reserves to a
level equal to slightly less than one month of imports, or about
US$830 million.
E. External Debt
7.24 Throughout the 1980s, as a consequence of failling oil export
revenues, Nigeria's external debt grew rapidly. The Government
borrowed heavily, and large trade arrears were amassed in 1982-83.
When oil prices fell in 1986, Nigeria found itself unable to meet its
external obligations, and embarked on a program to reconcile and
reschedule its debts. On a per capita basis, Nigeria's external debt
stands at US$300, which is roughly equivalent to its per capita
income.
7.25 Stock of Debt. As shown in Figure 7.1 and Table 7.4, Nigeria's
stock of external debt grew from US$23.5 billion at end-1986 to
US$34.5 at end-1991. Two-thirds of this increase came from the
Government's assumption of nonguaranteed debt (particularly in
1986/87) and from successive rescheduling agreements; both changed
the status of Nigerian external liabilities to public and publicly
guaranteed medium- and long-term debt. [SEE NOTE 2] Cross-currency
revaluations (brought about by the depreciation of the US currency)
contributed another 27 percent. By comparison, new net borrowing
accounted for only 8 percent of the increase in external debt.
7.26 Net Transfers. During the SAP era, Nigeria's net transfer
position on a cash basis (defined as project loan disbursements and
balance-of-payments support minus total debt-service paid) was
persistently negative, averaging about US$2.1 billion per annum. (On
average, debt-service payments amount to $2.9 billion and new
disbursements US$800 millin.) For the period 1986-1992, this net-
resource outflow averaged 6.4 per cent of GDP (see Table 7.4)
F. Agreements with Creditors
7.27 By the end of 1992, following the debt-reduction operation with
London Club creditors concluded in March [SEE NOTE 3],Nigeria's total
external debt had declined to US$30.7 billion. This operation
effectively cut the volume of London Club debt by 60 percent, which
was 7.5 percent of Nigeria's total external debt at the end of 1992.
The rest (58 percent) of the stock is owed to Paris Club creditors;
to other bilateral creditors (5 percent); to multilateral
institutions, in particular IBRD (13.5 percent) and to uninsured
private and other creditors (15%).
7.28 Paris Club. More than half of Nigeria's external debt is owed
to Paris Club creditors. Most of the associated debt-service
obligations falling due in 1986 and 1987 were rescheduled in 1986.
That agreement covered US$3.3 billion in medium- and long-term (MLT)
maturities, US$0.5 billion in letters of credit (LCs), and US$2.8
billion in arrears on insured trade credits dating back to 1982-83.
In early 1989, Government approached the Paris Club for a new
rescheduling. In March 1989, a second agreement was reached with 17
creditor countries covering US$6.4 billion in payments. Of this
amount, approximately US$2.9 billion was due to arrears on long- and
short-term debt. The total amount of debt relief for 1989 and the
first four months of 1990 is estimated at about US$3.5 billion, on
conventional rescheduling terms, with a 10-year repayment period and
a 5-year grace period.
7.29 A third rescheduling agreement was signed with the Paris Club
in January 1991. The repayment terms for the amount rescheduled wree
those granted to heavily indebed lower- and middle-income countries.
These terms included 15-year maturities for debt service owed to
export credit agencies (ECA) and 20-year maturities for debt services
owed to official development aid (ODA). In addition, all ODA debt
(and 10 percent of ECA debt) was to be eligible for debt-equity
swaps, which must be approved by individual creditors. Under the
new agreement, arrears and maturities on previously nonrescheduled
debt (falling due from January 1991 through March 1992) plus
maturities due in accordance with the 1986 rescheduling agreement
will be rescheduled. The actual amount rescheduled has been
estimated at approximately US$3 billion. All arrears that wer not
rescheduled were to be repaid by May 1991.
7.30 Promissory Notes. Fifteen percent of Nigeria's debt is in form
of promissory notes. [SEE NOTE 4] These debts originated in 1982 and
1983 in trade arrears to uninsured suppliers. Under the terms of the
rescheduling agreement signed with these creditors in January 1988,
all claims (including late interest) were converted into promissory
notes. Amortization is payable over a period of 23 years beginning
in 1988 at an interest rate of 5 per cent. Nigeria's new foreign
investment law has made these notes eligible for debt-equity swaps.
7.31 London Club. There have been three agreements with the London
Club, the first two for reschedulings in 1986 and 1989, and the third
for a debt-reduction operation in 1992. IN Novemeber 1986, Nigeria
reached an agreement with the Steering Committee of the London Club
to reschedule US$1.7 billion in MLT maturies falling due between
April 1986 and December 1987, and US$3 billion in arrears on letters
of credit. (The agreement involved US$320 million in new money,
although this part was never implemented because, in late 1987 when
it was signned, Nigeria was out of compliance with the IMF.) In
early 1988, the Nigerians reopened the agreement with a request for
rescheduling on more favorable terms. In April 1989, a new
rescheduling agreement was signed after lengthy negotiations. Under
this agreement, the entire stock of debt - excluding interest in
arrears, also known as payable debt - was rescheduled over a 20 year
period - 15 years for the letters of credit - with a 3-year grace
period.
7.32 In 1992, Nigeria reached a third agreement with the Steering
COmittee of the London Club. It included a buyback of $3.4 billion
of commercial debt at a 60-percent discount and a swap of US$2
billion for par bonds backed by US Government securities. The cost
of the operation, including collateral, total approximately US$1.7
billion and was financed entirely from Nigerian resources. The
stotck of debt owed to London Club creditors was reducted to US$2.2
billion, while debt service was reduced by US$700 million in 1992,
and by about US$500 per annum in subsequent years.
7.33 The Price Evolution of Nigeria's Commercial Debt
The Announcement of the Brady Plan in March 1989 and the prospect of
a future debt reduction operation prompted a rise in the price for
Nigeria's commercial debt on the secondary market. From US$0.21, it
levelled off at the eventual buy-back price of US$0.40 in June 1991.
WHile this is broadly consistent with the experience of other
countreis, such exogenous factors as the windfall effect of the Gulf
crisis and the subsequent decrease in world interest rates, also
helped to push up the price. Follwing the announcement of the 1994
budget, the secondary market price has fallen sharply.
Table 7.4 Total External Debt Outstanding and Disbursed, 1986 - 1992
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1986 1987 1988 1989 1990 1991 1992
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(US dollars million)
A. Public 19,156 28,464 29,058 30,944 32,586 33,245 29,336
& Publ.
Guar. LT
Debt
B. Private 600 552 537 406 391 343 339
Non-Guar.
LT
C. Total LT 19,756 29,016 29,595 31,400 32,977 33,588 29,676
DOD
D. Use of IMF 0 0 0 0 0 0 0
Credit
E. Short-term 3,717 1,640 1,652 576 1,580 909 974
Debt
F. Total Ex. 23,473 30,656 31,247 31,977 34,557 34,497 30,650
Debt
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Debt Stock/GDP 56 113 98 102 98 101 102
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Table 7.5 Net Transfers, 1986 to 1992
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1986 1987 1988 1989 1990 1991 1992
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(US dollars million)
New disbursements of 845 736 618 1,217 927 715 560
project loans
Total Debt Serv. Pd. 3,011 1,865 1,852 2,752 3,643 3,316 3,953
(a)
Net transfers -2,166 -1,129 -1,234 -1,535 -2,716 -2,601 -3,393
(b)
Net Transfers/GDP -5 -4 -4 -5 -8 -8 -11
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Source: Central Bank of Nigeria, and World Bank Staff Estimates
UNQUOTE
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ALUKO NOTES
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NOTE 1:
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London Club - A group of up to 300 commercial banks. Think
of them as being owed "commercial (bank) debt." Paris Club - a group
of major creditor countries that provides debt relief to developing
countries that have encountered financial difficulties. The Paris
Club members reschedule or, where needed, reduce debt service on
loans that had been extended by creditor sovereign governments.
(Paris Club Members: France, Germany, Australia, Austria, Belgium,
Norway, Netherlands, Untied Kingdom, Sweden, Switzerland. There are
a few additional ad hoc member countries.) Debt owed to the Paris
Club can be termed "official debt."
DOD - Debt Outstanding and Disbursed
NOTE 2: Some definitions
-------------------------
External debt is that owed to nonresidents and repayable in foreign
currency, goods or services. Long-term debt - with maturity debts
from 10 years and above. Medium-term debt - with maturity dates
ranging between one year and ten years. Short-term debts - with a
maturity date of up to one year arising from trade arrears,
suppliers' credits, contractor finance and guaranteed private
investment. Public debt - external obligation of a public debtor,
including the national government, a political subdivision or an
agency of either, and autonomous public bodies. Publicly guaranteed
debt - an external obligation of a private debtor that is guaranteed
for repayment by a public entity. Private nonguaranteed external
debt - external obligation of a private debtor that is not guaranteed
by a public entity. Debt outstanding - includes the undrawn or
undisbursed portion of total commitments. Commitments refer to debt
contracted during the year. Flows - consist of drawings
(disbursements) on loans and the debt service (amortization and
interest) paid on the obligations arising from them. [S.B. Falegan -
"Nigeria's External Debt Burden", Fountain Publications, Ibadan,
Nigeria (1992)]
NOTE 3
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This was the John Fashanu/Bob Minton buy-back scheme imbroglio.
http://allafrica.com/stories/200004030269.html
$5b Debt Buy Back Fraud Obasanjo Freezes Babangida's Accounts
P.M. News (Lagos) April 3, 2000
http://allafrica.com/stories/200004100236.html
Tracking The Fashanu Report
The News (Lagos) April 10, 2000
http://www.gamji.com/NEWS69.htm
NIGERIAN DEMOCRATIC MOVEMENT
NDM INFORMATION RELEASE
The Fashanu Report & The Nigeria Debt Buy-Back Scam Issue Come to the
US
April 28, 2000
http://allafrica.com/stories/200005170219.html
Out To Recover IBB's Loot
The News (Lagos) May 17, 2000
http://allafrica.com/stories/200005310253.html
I'm Ready For Probe -IBB
Vanguard (Lagos) May 31, 2000
http://allafrica.com/stories/200007030192.html
Central Bank Linked with Greenland Holdings of Panama
This Day (Lagos) July 2, 2000
http://allafrica.com/stories/200007030508.html
Senate backs debt buy-back to reduce external debts
Vanguard (Lagos) July 2, 2000
http://allafrica.com/stories/200007240400.html
$6 Billion Debt Buy-back Becoming Scandal
The News (Lagos) July 24, 2000
NOTE 4
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An international promissory note is a promissory note which specifies
at least two of the following places and indicates that any two so
specified are situated in different States:
(i) The place where the note is made;
(ii) The place indicated next to the signature of the maker;
(iii) The place indicated next to the name of the payee;
(iv) The place of payment, provided that the place of payment
(v) The place of payment, provided that the place of payment
is specified on the note and that such place is situated
in a Contracting State.
There are international conventions covering transactions involving
promissory notes.
NOTE 5 Some relevant news postings
-----------------------------------
http://allafrica.com/stories/200105170545.html
Abuja to Seek Further Debt Reduction from Paris Club
allAfrica.com May 17, 2001
http://allafrica.com/stories/200105150434.html
Nigeria Hosts International Conference On Debt Strategy
Panafrican News Agency (Dakar) May 15, 2001
http://nigeriaworld.com/news/source/2001/may/15/1.html
Tuesday, May 15 2001
U.S. bank faults Nigeria's debts
http://allafrica.com/stories/200105150035.html
External Debt Stands At $28b, Obasanjo Carpets Industrialised Nations
Vanguard (Lagos)
May 15, 2001
http://allafrica.com/stories/200105150390.html
Nigeria Secures N330.7m Penalty Waivers From Creditors
This Day (Lagos) May 15, 2001
http://allafrica.com/stories/200105150324.html
Country's Debt Stock Now $28bn
The Post Express (Lagos) May 15, 2001
http://allafrica.com/stories/200105110286.html
DMO to Take Over Local Debt Management, Says Dg
This Day (Lagos)
May 11, 2001
http://www.vanguardngr.com/07052001/f4110501.htm.
Germany to reschedule $3.39b Nigeria's debt
VANGUARD Cover Story FRIDAY 11TH MAY
http://allafrica.com/stories/200105100311.html
We Were Deceived to Borrow - Obasanjo
The Post Express (Lagos)
May 10, 2001
http://www.vanguardngr.com/30042001/f2040501.htm
FG reschedules $21.4bn Paris Club debt
VANGUARD Cover Story TUESDAY 1ST MAY 2001
http://www.vanguardngr.com/30042001/b6300401.htm
Nation's debt stock reduced further
VANGUARD Business MONDAY 30TH APRIL 2001
http://www.vanguardngr.com/01042001/b11010401.htm
N500m slashed from Nigeria's external debt through DCP
VANGUARD Business MONDAY 2nd APRIL 2001
http://allafrica.com/stories/200101260264.html
Debt Service Payment Fell To $223m In 2000, Says Martins Kuye
This Day (Lagos) January 26, 2001
http://www.postexpresswired.com/postexpress.nsf/24c35a000fe63779852569
1a0076c2cb/7d0174b83b596a28852568f100437a88
PostExpress Category: News
Date of Article: 06/02/2000
Topic: Hope Dims on Concellation of Nigeria's Debt
http://www.postexpresswired.com/postexpress.nsf/24c35a000fe63779852569
1a0076c2cb/e42a0eb9a2c1b3a7852568ea00505fd2
PostExpress Category: News
Date of Article: 05/26/2000
Topic: Nigeria Wont Get Debt Reprieve, Says World Bank Chief
http://nigeriaworld.com/feature/publication/maluko/loot_hearing.html
Debt Relief, Loot Recovery and Constitutional Reform in Nigeria -
Mobolaji E. Aluko
Friday, May 26, 2000
http://www.postexpresswired.com/postexpress.nsf/24c35a000fe63779852569
1a0076c2cb/d554cff2c1979fca852567e8003638e8
PostExpress Category: News
Date of Article: 09/10/99
Topic: Nigeria Loses N7.5 Trillion …Through ignorance of IMF ways
http://www.postexpresswired.com/postexpress.nsf/24c35a000fe63779852569
1a0076c2cb/735ba061b1bb6f438525658d0047532d
PostExpress Category: News Date of Article: 01/15/98
Topic: World Bank Team Expected in Nigeria over External Debt
•To reconcile figures with government
http://www.postexpresswired.com/postexpress.nsf/24c35a000fe63779852569
1a0076c2cb/575e6d696957cf318525658600451409
PostExpress Category: News
Date of Article: 01/08/98
Topic: FG Earmarks $2 Billion for Debt Servicing
http://www.postexpresswired.com/postexpress.nsf/24c35a000fe63779852569
1a0076c2cb/4a4215c03706416885256519005a7c70
PostExpress Category: News
Date of Article: 09/20/97
Topic: FG Reduces External Debt by N328b
http://www.postexpresswired.com/postexpress.nsf/24c35a000fe63779852569
1a0076c2cb/6dce04ced19a1ad58525649100729efa
PostExpress Category: News
Date of Article: 05/09/97
Topic: Nigeria's External Debt Put at $28b
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