Posted by By Emma Ujah on
FINANCE Minister, Dr Ngozi Okonjo-Iweala, warned, yesterday, that Nigeria risked another Paris Club debt burden, should it fail to pay-off the balance of the current debt stock, following the 60 per cent recent debt relief. The balance, she said, could generate another $8 billion over the next 20 years.
LAGOS - FINANCE Minister, Dr Ngozi Okonjo-Iweala, warned, yesterday, that Nigeria risked another Paris Club debt burden, should it fail to pay-off the balance of the current debt stock, following the 60 per cent recent debt relief. The balance, she said, could generate another $8 billion over the next 20 years.
She spoke in Abuja, weekend, against the backdrop of criticisms of Federal Government's plan to pay-off the balance of the 60 per cent debt relief granted by the Paris Club to exit the cartel completely.
Some critics have argued for a rescheduling of the balance and urged the Federal Government to, instead, invest such funds in infrastructure development to accelerate economic development and then service the rest debt annually.
But Dr. Okonjo-Iweala insisted that there was no wisdom in refusing to take advantage of the present window of opportunity to completely free the nation from external debt burden. Her words: 'If we reject it, and we say thank you, take your debt relief we don't want it, we will end up paying $1 billion a year for the next 23 years. There is the other aspect. Some people are saying they have given us debt relief, the remaining balance of $12 billion, let's leave it, let's not pay it, let's reschedule and continue to pay.
'If we do that, instead of using the opportunity we have now to pay it, which is what the president will like to do and set us free.What it means is that we reschedule it over 23 years at 5.25 per cent, which is the interest rate, we will pay $20 billion. By the time we pay, the $12 billion will become $20 billion, if we reschedule it over 23 years.
'So you would have ended up paying another $8 billion when you should have paid $12 billion. What you are doing is paying an additional $8 billion and that is just chicken feed, you are just giving them in interest. But the people are giving the option of paying when you don't have any interest. If you pay it now, there will be no interest. If we reschedule it again, we will end up paying interest and paying $8 billion.
According to Dr. Okonjo-Iweala, for the Paris Club to agree for Nigeria to buy-back the debt and pay-off whatever would remain after the 60 per cent debt relief followed an intense negotiations and interventions of many world leaders. She explained that ordinarily, the club of creditors never liked debtors to pay-off their debts even those debtors could do so, adding that the usual thing was to reschedule and then the debtors continued to pay.
'If somebody say to you: I will give you debt reduction, you pay this up-front, we will allow you. Do you know that allowing us to pay it up now is a big privilege. They did not want to do that because your creditors never wanted to do that.
'Your creditors will prefer you to leave the debt and reschedule as long as you like and just be paying them. By the time you finish, you would have paid two or three times the amount. We got some very big break here, she said..