From: wsargeant@igc.apc.org (Winslow L. Sargeant)
Newsgroups: soc.culture.african
Subject: IPS:Nigeria, managing the debt crisis
Date: 25 Jul 92 17:07:31 GMT

/* Written 12:03 am  Jul 24, 1992 by newsdesk in cdp:ips.englibrary */
/* ---------- "NIGERIA: MANAGING THE DEBT CRISIS" ---------- */
Copyright Inter Press Service 1992, all rights reserved.  Permission to re-
print within 7 days of original date only with permission from 'newsdesk'.

Area: Third World Dvpmnt
Reference: Trade & Finance
Title: NIGERIA: MANAGING THE DEBT CRISIS


an inter press service feature

by kole babalola

lagos, july 21 (ips) -- with the transition to civilian rule
organised by the military government of president ibrahim
babangida in its last lap, there are fears that nigeria's debt
burden may sink january's incoming civilian administration.

an external debt of 33.3 billion dollars hangs over the 89
million people of this west african country like the sword of
damocles.

it represents 10 percent of africa's total debt of 300
billion dollars. the debt service ratio equals 60 percent of
nigeria's expected 9.5-billion-dollar export earnings this year.

former president gen. olusegun obasanjo recently re-opened
debate on the debt issue at a lecture he gave here on the
''politics of international debt'' at the nigerian institute of
international affairs.

''the only way out is to press for debt cancellations'', he
advised, saying debt management is now a ''political game
requiring great political and diplomatic skills in addition
to a strenuous economic initiative''.

to succeed, olukole akanle, law professor and chair of the
international debt lawyers association of nigeria, suggests
''nigeria must work in concert with other african nations''.

akanle, whose association organised the lecture, also advised
that democratisation of african governments would greatly assist
in influencing western creditors on the debt issue.

since 1985, when babangida's military government came to
power, nigeria's foreign debt of about 20 billion dollars, has
risen by 66.8 per cent. the country has been a net exporter of
four billion dollars worth of capital annually for the past
six-years'.

with an ailing oil-based economy which looses 500 million
dollars annually with each one dollar fall in the oil price,
nigeria is trapped in a debt-spiral.

the central bank of nigeria (cbn) recognises the enormity of
the problem in its latest report. (more/ips)


nigeria: managing (2)

''the nation's external debt continued to increase due to the
draw-down of fresh loans, capitalisation of unpaid interests,
charges on rescheduled debt obligations, depreciation of the
u.s. dollar against creditors' currencies and the depreciation
of the naira (local currency) exchange rate'', the report says.

ayo akinbobola, political economist at the university of
lagos insists ''the prevailing economic situation here does
not support committing so much resources to servicing
external debt''.

nigeria is ranked as the 13th poorest country in the world.

the government has embarked on three strategies - debt
refinancing, rescheduling to reduce debt pressure and debt
conversion.

debt refinancing enables a debtor to take a new loan under
better terms to pay off existing debts, while debt rescheduling
helps to extend the repayment period.

akanle is of the view that the first two strategies do not
actually reduce debt but while he agrees that the debt
conversion which began in 1988 has worked, the amount, about 689
million dollars or 1.2 per cent of total debt is insignificant.

if substancial debt cancellation is to be pursued, the
creditors do not appear of be convinced so far, although recent
agreements with the paris club of official creditors and the
london club of commercial banking creditors succeeded in
reducing the foreign debt by some two billion dollars.

during visits here u.s. vice president dan quayle, and french
foreign minister roland dumas said nigeria should simply pay its
debts.

u.s. ambassador lannon walker leaving last week after a
three-year tour, told journalists before departing, that nigeria
should take its destiny in its hands and stop asking for debt
cancellation.

indonesia, which like nigeria, was hit by declining oil
prices and rising debt service due to unfavourable exchange
rates, ''found the right solutions by adopting sound policies
and reasonable accountability for public funds'', he noted.

it was a reference to an un-published world bank report on
nigeria researched in 1991 which claims that two-billion dollars
of an oil price windfall, as a consequence of the gulf war in
1990, is unaccounted for.

apart from the obvious implication of corruption, the report
believes that much of the windfall was sunk into the grossly
expensive transition programme, white elephant capital projects,
and its disappearance also a product of shoddy book keeping.
(end/ips/kb/oa/92)