Posted by By Ayodele Aminu just back from Washington D.C., on
Following the persistent rise in oil prices at the international markets, creditor nations have started wooing the Nigerian government into securing more loans.
Following the persistent rise in oil prices at the international markets, creditor nations have started wooing the Nigerian government into securing more loans.
Finance Minister, Mrs. Ngozi Okonjo-Iweala, confirmed this in an interview in Washington D.C. a fortnight ago.
'You can be sure that there are many people running after us (Nigeria) - trying to lend us money now just as they did when oil prices were high and you (need to) see some of the agreements we (previous administrations) signed with our creditors … ," she lamented while responding to some of the questions posed to her.
She said that measures have however been put in place to prevent future administrations from embarking on frivolous borrowings.
'All I can say to you is that we have put in place strong measures. We have sent the social responsibility bill where it was explicitly stated that no loan of more than 3 per cent interest rate should be taken by the government.
'We have also stated that no state government can borrow without the Federal Government being invol-ved because a lot of our debts owed by state government are being paid by the Federal Government because they guaranteed the debt.
'If we start disaggregating these debts you would find out that the Federal Government is bearing a lot of burden and that is why we need to handle the debt deal as a joint national endeavour," she said.
Nigeria's debt, which has been controversial, presently stands at about $30 billion. External creditors making up the Paris Club account for 75 per cent of the debt profile while the London Club and the World Bank Group account for 7.2 and 17.8 per cents respectively.
Nigeria recently struck a deal with her creditors. The deal requires this country to first pay its $6 billion arrears and later pay another $6 billion, while the remaining $18 billion is expected to by paid through debt buy-back over a period of time.
Commenting on the development, the Finance Minster said one of the requirements of the Paris Club is that before entering into any kind of deals whatsoever with any country, such country must first pay its arrears.
'Again Nigeria was considered without paying its $6 billion arrears. So, even after they had rescheduled our loans, we were still not able to keep up with the payment. So the arrears accumulated to the tune of $6 billion. So, that had to be paid.
'Some people have been saying there is a hidden condition in the debt deal. There is nothing hidden at all. Payment of the $6 billion arrears is part of the standard rule. That's the first payment we would make.
'The sentiment that we've had in the country is that people are tired of this debt - tired of the thing accumulating endlessly, tired of the uncertainty because we borrowed in currencies that are very hard vis-à-vis the dollar. From currency movements alone, $5 billion has been added to our debt stock.
Then you have interest rates at which you reschedule. We were able to get better rate in year 2000, when we negotiated it down from about 8 to 5 per cent. Of course, that's high. Again that means that it (our debt) would continue to accumulate.
'Within 5-6 years it would be about $40 -$50 billion. So, we (the present government) felt the best thing to do was to get Nigeria completely away from this debt issue. Normally, when the Paris Club does the deal (debt relief), what they do is that after the write-off, whatever is left for rescheduling over another 18 years to 20 years, sometimes 23 years at the prevailing interest rate you negotiate and continue paying again.
'They (the creditors) do not even allow developing countries to exit; they don't normally allow it. So, after the write-off, you would again have had about $8 billion that would have been rescheduled over another 18-20 years. By the time we finish paying that at the prevailing interest rate, we would have paid them not $8 billion but another $12 billion which would have been calculated on top. We would have paid $20 billion with a rescheduled $8 billion," she explained.
The Finance Minister further explained why the payments have to be made.
'But the point is if we do not use what we have available to pay up, we would then leave ourselves and children with $20 billion to repay, and this is also something which could possibly multiply into more because you don't know the trajectory of world interest rates, you don't know the trajectory of world oil prices which we would depend on.
'We are all riding high now and everybody is really telling us oil prices will never go down. You remember when oil prices were up in the 80's; do you remember they said the same thing? What happened? It fell down to $10, at that time nobody remembered we had loan to service. That was when we could not service the debt. So, having been through that experience, should we not learn and say, Look, if we can get the Paris Club people not just to have the $8 billion rescheduled but to allow us to pay them an exit - such things they don't normally allow.
'They allowed us and even gave us some discount on that remaining part to exit. So that's what we are doing and it's a judgment call of this government that we should get this country out of this endless Paris Club business. And I think the majority of Nigerians support that without any doubts," she stressed.