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SUNDAY MUSINGS
About Nigeria's External Debt

By: Mobolaji E. Aluko, PhD , Burtonsville, MD, USA

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Sunday May 20, 2001

Introduction
During the period May 17-18, 2001, a major international conference on Sustainable Debt and Development Strategy was organized in Abuja, Nigeria, by the new Debt Management Office (DMO Director-General: Dr. Akin Arikawe).

Leading up to the conference was a flurry of news items on Nigeria's debt, viz:

From the titles of the above articles, apart from their contents, it is very clear that Nigeria is not very happy about its debt situation while seeking all means necesary to slash it.

There are conflicts in the actual amount of debt stock as well as their terms, and President Obasanjo goes as far as to assert that we were "conned" into taking on some of the debts!

Although I had been officially invited (as a non-debt armchair expert :-)) to participate in the DMO conference, for many private and professional reasons, I was not be able to attend, despite my "academic" preparation to make a presentation. Nevertheless, I was there in spirit.

However, in order to enable us to be able to even begin to understand what ideas might have come out of the conference, I will in several excerpts from various sources that I used in my own preparation provide information about Nigeria's historical and present debt situation. I shall annotate where necessary.

It will be clear from the excerpts that:

  1. The bulk of our debts from new loans was incurred in the period 1978 (during the first Obasanjo regime) through the Shagari regime (when most of it was really incurred in an outrageous manner) to the Buhari regime that ended in December 1983. In the fact the first two so-called jumbo loans totalling $1.75 billion dollars was incurred in 1978.

    During this 5-year period, of the new 90 or so new loans, 22 were under Obasanjo, 59 under Shagari and 8 under Buhari. One wonders whether any lessons have since been learnt.

  2. The bulk of total debts (new plus arrears plus particularly the effects of rescheduling) was incurred during the SAP years (July 1986 - December 1992) of General Babangida (who took over from Buhari August 27, 1985 and retained his head-of-state position till August 27, 1993)

      See:

    • About Nigeria's External Debt - Part 1
      Table 1: External Debt and Debt Services (1960 - 1989)
      Table 2: Reconciling the Debts (1977 - 1999)
      Table 3: Borrowing From International Capital Market By The Federal Government of Nigeria as at 31st December, 1985 (Projects, Loan Amounts, Debts Outstanding 1978 - 1985)
      Table 4: World Bank Loans to Nigeria (1982-1988)
      Table 5: Rescheduling of Nigeria's Debts (1983-89)

    • About Nigeria's External Debt - Part 2
      TABLE 1: Average Terms of External Loan Commitments (Interest Rate, Maturity and Grace Period) (1971-1989)
      TABLE 2 Selected Interest Rates (Percentages) of Domestic Banks (1986-1999) AN EXCERPT Pages 38-40 of SB Falegan's "Nigeria's External Debt Burden" (1992)

  3. The domestic debt situation is almost as bad as the external debt situation, with 65 - 80% of domestic debt being owed to our own Central Bank of Nigeria!

    See Table 3 of About Nigeria's External Debt - Part 3

    Why can we not ask our own CBN to CANCEL our own domestic debt if we are asking foreign banks and creditor nations to do the same?

  4. No new debts were incurred under the Abacha years (November 1993 - June 1998) due to a combination of international unfriendliness and apparently internal fiscal and monetary policy discipline, nor was there any rescheduling, but our total debt situation did not change by much.

  5. In any case, we have long arrived at a situation where our ability to service our debts appears way beyond our export earnings or government revenue, and needs to be managed carefully from here on:

    Such a management requires us to DETERMINE once and for all what mix of debt problem indicators that we wish to cap ourselves under in terms of numbers: that is what debt service ratio, interest service ratio, debt stock per GDP, etc., we can sustain, and hence what fiscal and monetary policies and project management regimes should be employed to enable us to stick to them.

  6. A major problem has been that past government-commissioned reports warning about the problems inherent in our project financing and debt management have been ignored:

Finally, our government needs to demonstrate a strong commitment to fiscal discipline if it is to be taken seriously in its debt relief campaigns. Bourgeoning salaries of public officials, enlarging domestic debts, multi-billion-dollar stadiums (for example as approved for Abuja by executive fiat) and purchase of executive jets do not assist us in this direction.

Happy reading - I think!

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Published with the permission of Dr. Bolaji Aluko
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