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Nigeria pays $42bn interest on $13bn loan

Posted by Oluyinka Akintunde, Abuja on 2005/03/02 | Views: 291 |

Nigeria pays $42bn interest on $13bn loan

The Debt Management Office on Tuesday said that about $42billion had been paid in the past 38 years to the Paris Club as interests and penalties on $13.5billion loans to Nigeria.

The Debt Management Office on Tuesday said that about $42billion had been paid in the past 38 years to the Paris Club as interests and penalties on $13.5billion loans to Nigeria.

But the country still owes the club $25billion, mainly as a result of accrued interests.

The loans were obtained between 1965 and 2003.

The Director, Portfolio Management, in the DMO, Dr. Abraham Nwankwo, made this known at a forum on “Debt Burden and Poverty Reduction Strategies: The Role of African Union,” in Abuja.

Nwankwo, who lamented that other African countries had had similar experiences like Nigeria, said the Paris Club had become a debt enhancing rather than debt reduction association.

He said, “The Paris Club has emerged as a cartel of official creditors for negotiations over debts owed by a number of developing countries, including African countries.

“The experience of Nigeria with the Paris Club arrangement, which is predicated mainly on debt rescheduling, clearly demonstrates the jeopardy faced by African debtor countries- a trap of endless cycle of debt burden.

“Agreement with Paris Club provides rescheduling as a way of providing debt relief for debtors but experience has shown that it only succeeds in keeping debtors in a vicious circle of heavy burden.”

According to him, debt service payments by Nigeria and other African countries had deprived them of the resources needed for socioeconomic development and poverty reduction.

He maintained that debt relief remained cardinal for African countries to achieve the Millennium Development Goals.

“The African Union faces the historic challenge of taking initiatives at both the external and domestic fronts towards securing substantial debt relief and attracting massive capital inflow to stimulate growth, development and poverty reduction,” Nwankwo said.

He said that good governance should be cultivated and sustained across the continent as an inevitable foundation for Africa’s recovery from debt problem and growth.

Nwankwo said, “Adequate regulatory framework and transparency in public administration are essential ingredients in the turnaround process. African leaders should re-dedicate themselves to selfless service.

“Without a rebirth in selfless service by political leadership, economic turnaround and poverty reduction will remain a mirage.”

The Paris Club is an informal group of official creditors whose role is to find co-ordinated and sustainable solutions to payment difficulties experienced by debtor nations.

The name comes from the fact that the meetings are often chaired by an official from the French Treasury Department.

Nigeria’s external debt rose from $32.916 billion in December 2003 to $34 billion in December 2004.

The Federal Government paid $1.8 billion out of a debt obligation of $6.3 billion in 2004.

The government’s debt obligation in 2005 is $7.8 billion.

The government intends to pay $1.7 billion in 2005.

The Paris Club is to receive $1billion; multilateral financial institutions, $432.8 million; Promissory Notes, $170.8 million; Par Bonds, $90.1 million; and Non-Paris Club, $11.2 million.

Nigeria signed bilateral agreements with the 15 member-countries of Paris Club, thereby spreading debt service payments over 18 to 20 years.

Creditor countries have rebuffed efforts by President Olusegun Obasanjo to get them to write down Nigeria’s debts.

They claim that Nigeria makes enough money from oil to pay its debts and still have enough to achieve significant growth and development, if it prudently manages its resources.

The PUNCH, Wednesday, March 2, 2005

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Fay(Katy, Texas, US)says...

Actually translates to bravehearted.