Nigeria pays off Paris Club this month

[fw12]

Olusegun Obasanjo said yesterday in Abuja that Nigeria would pay off its balance of debt owed to the Paris Club by the end of this month. He spoke at the National Assembly roundtable on Fiscal Responsibility Legislation in Nigeria.

He said IMF’s condition on the country Policy Support Instrument (PSI) had fully been met and that all members of the club had signed a clean bill for the country.
The president said Denmark, Austria and Russia were initially the three countries that delayed their signatures consenting to the PSI, but that the three had now signed the document, paving the way for the country to pay off the club.

He said the IMF board of directors would meet on April 17, after which the country would clear the balance it is owing the Paris club “and by the end of this month, we will not be paying the Paris Club any Kobo.�
Obasanjo said after the final payment of the Paris Club debt, under which Nigeria was granted a relief of about $18 billion, the country’s foreign reserve would still remain buoyant. He explained that the foreign reserve would still be in the region of between $33 billion and $34 billion.

Noting that it would be difficult to completely eradicate poverty in the country, President Obasanjo said concerted efforts must continue to be made by governments at all levels to eliminate “abject poverty.�
He said the Fiscal Responsibility Bill constituted “a cornerstone� of his reforms and that the bill would go a long way towards widening “our focus and our horizon with respect to institutionalising the culture of transparency and probity.�
He noted that although the bill might not be as deep as what obtained in Brazil, it was nonetheless, a good beginning, because, it sought to extend reforms to all branches and tiers of government.
The president said the bill would also provide a landmark opportunity for “locking in the economic reforms and ensuring continuity.�

The Senate President, Chief Ken Nnamani, in an address of welcome said it would be “a tragedy if democracy was rolled back because of fiscal imprudence,� noting that the past was dominated by fiscal recklessness. He said the future must be that of fiscal responsibility as against the recklessness of the past, when the country spent its revenues “as if everything it had was profit,�
Nnamani said the bill would also ensure transparency and accountability.

Finance minister appeals

Also speaking, Finance Minister, Dr Ngozi Okonjo-Iweala, appealed to the National Assembly
to ensure quick passage of the Fiscal Responsibility Bill into law. She said if the legislature passed the bill into law, Nigeria would be transformed into a better society.
The bill, which is currently before the National Assembly, was crafted by the executive to curb fiscal irresponsibility in the three tiers of government.

Speaking on the imperatives of the law, Okonjo-Iweala explained that it would ensure sound fiscal management by all tiers of government. According to her, the law will commit them (the three tiers of government) to a set of efficient rules for economic management. “It will standardise the planning and control of public expenditure and encourage stable prices and exchange rate, as well as a sustainable growth,� she said.


She expressed regrets that the country had grossly under utilised over $300 billion earned from oil since independence as a result of the absence of tight fiscal controls.

Implementation of the law, the minister said, would help minimise risk and fluctuations in government fiscal operations and would bring harmony between fiscal and monetary policy.

Commenting on some key features of the bill, Okonjo-Iweala said its passage would help ensure that budgeting was conducted with the Medium Term Expenditure Framework (MTEF). “This process efficiently reconciles needs with available resources and gives agencies more consistent source of funding,� she said.
She said if the bill was passed by the legislature, an 11-member Fiscal Responsibility Council (FRC) would be constituted to monitor its implementation. According to her, the council, will comprise of representatives of the Federal Government, the six geo-political zones, as well as civil society and the private sector.

http://www.vanguardngr.com/articles/200 ... 42006.html

[Richard Akindele]

Nigeria ordered a final debt repayment to rich lending nations on Friday, completing Africa's biggest debt relief deal that will free up billions of dollars in coming years to fight poverty.

Under an agreement reached last June, nations belonging to the Paris Club of creditors wrote off $18 billion they were owed by Nigeria, which is using windfall earnings from high oil prices to pay off $12.4 billion in arrears and debts.

On Friday, Nigeria's central bank arranged for a final installment of $4.5 billion to be transferred to creditors' accounts, the head of the Debt Management Office (DMO) said.

"The central bank has converted the currencies in advance so it's procedural now. All the necessary instructions have been sent," Mansur Muhtar told Reuters.

Nigeria is the world's eighth biggest exporter of crude oil and its earnings have soared thanks to high prices on world markets, allowing it to build up $36 billion of foreign reserves.

But it is also one of the world's poorest countries, with the majority of its 140 million inhabitants getting by on less than $1 a day.

Nigeria was passed over for debt relief in the 1980s and 1990s because it was ruled by corrupt military dictators and it did not have an agreement with the International Monetary Fund.

President Olusegun Obasanjo, who came to power in a 1999 transition to democracy, launched a programme of free-market reforms that drew praise from the IMF and helped persuade Paris Club members that Nigeria had changed its ways.

Obasanjo has pledged that funds that would have gone towards repaying Paris Club debts would now be used for education, health, infrastructure and other poverty-alleviating measures.

INVESTOR CONFIDENCE

Analysts said the successful completion of the deal and its endorsement by the IMF through a new kind of agreement called a Policy Support Instrument would help redeem Nigeria's reputation in international financial circles.

It has already helped Nigeria achieve an unexpectedly favourable BB- rating, on a par with Turkey and Ukraine, from two leading international credit rating agencies.

This means Nigerian banks will be able to get loans from abroad and it will be easier and safer for foreign investors to put money into Nigerian equities.

Combined with a reform of the banking and insurance sectors, the improved rating has already attracted new portfolio investors and credit lines to the Nigerian economy.

However, analysts said problems such as corruption, militant attacks in the oil-producing south, ethnic and religious violence across the country and poor infrastructure would still weigh heavily on the minds of some investors.

"The debt relief deal is certainly useful as part of a wider package, but I don't think it will persuade investors to rush in," said Alex Vines, head of the African department at Britain's Royal Institute for International Affairs.

"Abductions of foreign nationals, violence, riots, issues of corruption, all of this makes business timid," he added.

A four-month campaign of attacks on the oil industry and kidnappings of foreign oil workers by militants demanding more rights for the Niger Delta has cut Nigeria's exports of crude by a quarter and forced foreign firms to abandon several oilfields.

Political tensions are also on the rise across the country because of a campaign by the ruling party to change the constitution so Obasanjo can stand for a third term in elections next year.
http://za.today.reuters.com/news/NewsAr ... 060421.XML

[Richard Akindele]

Nigeria said Friday that it had paid the last of its multibillion-dollar debt to the Paris Club of creditor nations.

"Nigeria will not owe anybody in the Paris Club one kobo," President Olusegun Obasanjo said in a statement earlier this week, referring to a Nigerian unit of currency much like the penny.

Nigeria reached a deal last October with the Paris Club, which includes the United States, Germany, France and other wealthy nations, that allowed it to pay off about $30 billion in accumulated debt for about $12 billion, an overall discount of about 60 percent.

The government said it paid a final installment of $4.5 billion on Friday, Reuters reported. It plans to use the money it saves to develop the country and reduce poverty.

Nigeria committed to using foreign reserves, salted away as oil prices soared, to cancel its debt, which had been racked up during decades of military rule.

The repayment is the latest sign that Nigeria's economy, long hobbled by corruption and dominated by a single product — oil — is on the rebound. The banking sector, which was crowded with small banks of questionable reliability, was recently consolidated to form about two dozen banks with stronger capitalization.

Earlier this year, two credit-rating agencies rated Nigeria's credit as BB-, which is below investment grade but puts it on a par with developing nations like Turkey, Ukraine and Brazil.

Debt relief has become a central issue in the fight against poverty. Nigeria, which owed about $36 billion in overall debt, is one of the most indebted nations in the world. With a population of about 130 million, it has more impoverished citizens than any other African nation; per capita gross domestic product stands at roughly $1,000 a year.

Yet Nigeria had not been among the nations that have received write-offs or discounts on their debts, as several poor countries have. In part that is because of its reputation for corruption, earned by a succession of military governments that plundered the state treasury, and because Nigeria, with its oil wealth, is seen as being able to pay.

Groups that have campaigned for debt cancellation said that the debt Nigeria owed was accumulated under military rulers, and that the current Nigerian government, which was democratically elected and has made fighting corruption a priority, should not be forced to pay. But Nigeria's debt was largely accumulated under civilian governments, and left unpaid by military rulers.

Nigeria's vast oil reserves make it one of the world's largest oil producers and the fifth biggest supplier to the United States. Recent political violence in the Niger Delta, an oil-rich region where militants are fighting for greater autonomy, has reduced output by 20 percent.

The group, the Movement for the Emancipation of the Niger Delta, claimed responsibility for a car bombing that killed two soldiers on Wednesday.

Earlier this week, Mr. Obasanjo announced a huge development project to provide jobs for Niger Delta youths and build a $1.6 billion highway in the region.

Wolfowitz Says Debt Deal Is Close

By The New York Times

WASHINGTON, April 21 — The World Bank president, Paul D. Wolfowitz, announced on Friday an important step toward providing $37 billion in debt relief to 17 of the poorest countries, most of them in Africa. He said he had enough votes from donor countries on the board of the International Development Association, the bank arm that provides very low interest loans, to approve the measure.

The 17 countries will begin receiving the relief, worth close to $1 billion a year over 40 years, on July 1. They are Benin, Bolivia, Burkina Faso, Ethiopia, Ghana, Guyana, Honduras, Madagascar, Mali, Mozambique, Nicaragua, Niger, Rwanda, Senegal, Tanzania, Uganda and Zambia.
http://www.nytimes.com/2006/04/22/world/22nigeria.html

[Richard Akindele]

Nigeria has completed the payment of $30-billion it owed Paris Club debt. This makes Nigeria the only debt free African country when it comes to Paris Club. “All the creditors need is to confirm receipt and automatically that will trigger the terms of the deal,� the head of Nigeria's Debt Management Office, Mansur Muhtar said.

Nigeria's last payment comprised $4.5 billion. This follows a pact between Nigeria and Paris Club to pay $12.4 billion for the cancellation of $18 billion, the totat debt Nigeria owed the Club.

The debt mostly came from the loans Nigeria accumulated in the 1980's. However, Nigeria needs to pay a sum of $5-billion it owes other nations to be declared completely debt free.
http://somalinet.com/news/world/English/2361

[Richard Akindele]

Nigeria recently paid off a mountain of debt it owed to a group of governments belonging to the Paris Club and is no longer indebted to the creditor association, according to President Olusegun Obasanjo.

Due to compound interest on loans received from Paris Club members in the 1980s, Nigeria's total debt owed to all creditors spiraled to $36 billion in 2004. All the while, Nigeria paid off loans owed to other groups such as the World Bank, but the Paris Club debt continued to grow.

Since 1992, the Paris Club stopped making new loans to Nigeria because they disliked the West African nation's military dictatorship, according to global economic think-tank The Brookings Institution. Foreign banks found that money loaned was flowing straight to corrupt dictators.

The country has also been known to have squandered its oil wealth and missed earlier chances to pay back the Paris Club, according the think-tank.

Nigeria is one of the world's largest exporters of oil and Africa's most populated nation, but also one of its most poorest. The nation reachieved democracy in 1999, ending more than 30 years of rule by a series of dictators.

The Paris Club, formed in 1956, is an informal group of creditor governments from major industrialized nations that meets on a monthly basis in Paris with third-world debtor countries to agree with them on restructuring their debts, according to the group's Web site.

Members of the club which participated in the reorganization of Nigeria's debt were representatives from Austria, Belgium, Brazil, Denmark, Finland, France, Germany, Italy, Japan, the Netherlands, the Russian Federation, Spain, Switzerland, the United Kingdom and the United States.

The club agreed to drop $18 billion of the $30 billion in debt owed by Nigeria if the nation met certain conditions.

Obasanjo said the Paris Club's exit actually cost the nation $12.12 billion instead of the projected $12.4 billion, and attributed the reduction to foreign exchange gains, interest income, transaction costs as well as administrative charges by the Central Bank of Nigeria (CBN).

"This represents net savings amounting to $276.3 million, in relation to the $12.4 billion payment negotiated with the Paris Club creditors," Obasanjo said.

The president instructed his minister of finance to return these savings to the excess crude account, saying, "I am happy to say that we have now put the Paris Club debt behind us."

Economic reforms Nigeria implemented in 2003 and its healthy track record of paying off debt to non-Paris Club groups encouraged the club to try a new radical idea -- letting Nigeria buy back its debt at a discount rate.

Also, member nations of the Paris Club were encouraged to provide relief to African countries during last summer's G-8 meeting.

The International Monetary Fund (IMF) paved the way for the deal after it endorsed Nigeria's economic management in October, according to a report from the BBC.

Obasanjo said the nation would now focus on paying the London Club its owed debts, made up of promissory notes, par bonds and associated oil warrants, currently standing at about $2.15 billion.
Source: OhmyNews