Nigeria to exit London Club debt by Jan '07

[Richard Akindele]

LAGOS, Sept 16 (Reuters) - Nigeria will free itself of its $2.1 billion debt to an ad hoc group of banks known as the London Club by January of next year, Finance Minister Nenadi Usman said in an interview published on Saturday.

The London Club talks follow a landmark deal in which Nigeria payed back $12 billion in debts to the Paris Club of sovereign lenders in return for a write-off of a further $18 billion. That deal was concluded earlier this year.

"Just as we exited from the Paris Club, we intend to exit from the London Club in the not too distant future," Usman told Nigerian newspaper ThisDay.

"If I'm to estimate, I will say that by January 2007 we would be out of the London Club," she said.

Usman said last month that three investment banks had been chosen to help restructure the London Club debt but did not name them.

Oil exporting Nigeria, which is conducting a homegrown programme of free-market economic reforms, earned a BB- credit rating from both Standard and Poor's and Fitch Ratings in the first quarter of this year.

Usman told ThisDay the London Club debt was made up of $300 million in oil warrants, $515 million in promissory notes and the rest in bonds.

She said the next quarterly repayment on the promissory notes was due in January, when Nigeria would have a chance to call them in and negotiate.

The oil warrants come in trickles, Usman said, but she added that the aim was to collect them and pay them back within the next three to four months.

"For the bonds, we hope to resolve them by November," she said, giving no further details.

Nigeria has been considering issuing a new Eurobond as part of the debt restructuring, but the plan could meet resistance from local legislators, finance officials said last month.

The Debt Management Office said issuing a new bond was just one of several options and any decision would have to involve the National Assembly, state governments and the Nigerian public.

Nigerians are wary of incurring any new borrowing because of their experience with Paris Club debt, which more than doubled in size to $30 billion because of accumulated arrears and penalties.

Moreover, Nigeria is flush with windfall earnings from record oil prices and has no need to borrow at commercial terms. Its foreign currency reserves of $38.1 billion at the end of July mean it would not have trouble servicing its external debt.

Reuters