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Origin of Nigeria's Debt
Origin of Nigeria's Debt

Origin of Nigeria's Debts
The causes of Nigeria’s external debt burden could be grouped into six areas and these are:

  • Inefficient trade and exchange rate policies.
  • Adverse exchange rate movements.
  • Adverse interest rate movements.
  • Poor lending and inefficient loan utilization.
  • Poor debt management practices.
  • Accumulation of arrears and penalties.

The diagram below shows the reasons and causes of Nigeria"s external debt burden:


Reckless and Inefficient Borrowing…
  • Massive external borrowing took place in the 1980s, largely to offset the collapse in oil prices; crucially:
  • Borrowing was not linked to future growth or exports
  • Insufficient regard given to economic viability of projects
  • Poor implementation due to weak absorptive capacity and governance problems
  • Mismatch between loan terms and project profiles
  • Interest rate risk as LIBOR rates escalated
  • Leakages associated with governance problems


Devastating Impact of Arrears, interest and penalties…

  • Huge Arrears, penalties and interests accumulated over the years between 1985-1998
  • Payments to creditors unilaterally curtailed
  • In December 2000 rescheduling agreement made, debt profile:
  • Principal balance=1.48 bil.
  • Principal arrears=$10.31 bil.
  • Interest arrears=$4.45 bil.
  • Late interest=$5.18 bil.
  • Debt stock affected recently by US$ depreciation – over $6 billion increase recorded between 2002-2004
  • Further arrears build up since rescheduling in 2000
  • Payments to creditors not fully met due to budget constraint


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