Federal Government Moves to beat Debt Relief Deadline
ThisDay Newspaper
Abuja , 31.10.2005

The Federal Government has initiated moves to ensure that Nigeria keeps faith with her promise to the Paris Club of creditors to pay the first tranche of $6.4 billion as part of the debt relief package which it signed on October 19.

THISDAY yesterday confirmed that though Finance Minister, Dr. Ngozi Okonjo-Iweala had promised that the money would be paid by today, but the National Assembly which has to appropriate money for the payment has not concluded its work on the supplementary bill President Olusegun Obasanjo forwarded to it. Senate leader, Senator Dalhatu Sarki Tafida yesterday confirmed that the supplementary budget bill that would enable the executive to pay the $6.4 billion is already before the Senate.

Tafida who disclosed this while responding to questions from THISDAY on whether the money has been appropriated said "this is in process". "We already have the supplementary budget bill which will enable the executive to pay the money but as you know we are on break.”President Obasanjo is doing things right. He has written us on the supplementary budget. Don't forget that we are also part of the entire debt relief process. So we are in the know," he said.

Also, sources close to Okonjo-Iweala told THISDAY that the minister had been authorized by President Obasanjo not allow the events of the death of the First Lady, Stella, and the Bellview aircraft crash, which had thrown the nation into mourning to affect the government's plan to fulfill its agreements with the Paris Club. The source also said President Obasanjo had met with the leadership of the National Assembly on how the monies needed to offset the remaining Paris Club debt was to be appropriated.

Okonjo-Iweala had after sealing the deal on the 60 per cent debt relief in Paris , France on October 19, disclosed that Nigeria will pay the remaining 40 per cent of the Paris Club debt in three tranches. “In the first tranche, Nigeria will clear arrears by paying about $6.4 billion. About $1.3 billion will be paid in the second tranche. The balance of about $4.4 billion will be paid in the last tranche,” she had said. The finance minister who said the meeting, which led to the signing of the deal lasted for 48 hours without interval disclosed that after the first tranche of $6.4 billion is paid, the nation will immediately be granted $9 billion debt relief by the Paris Club representing 50 per cent of the total debt agreed to be forgiven by the club.

“This exceptional deal represents a huge vote of confidence by OECD countries in the new Nigeria . Governments across the world have backed President Obasanjo and the country's economic reforms, and backed us with real money. Now it is time for each and every Nigerian to pick up the baton and play their part in transforming Nigeria into the prosperous, peaceful, hard-working and dynamic society that all Nigerians deserve. This event sets us free to begin to realize our vast potential as a nation”, she said. But a member of the House of Representatives, Sadiq Sanusi at the weekend warned that there was need for legal backing for the Federal Government to pay the money which was agreed as part of the debt relief deal with the Paris Club. Sanusi, Chairman of the House committee on Loan, Aid and Debts Management, said the legal backing was necessary even though a promise to pay had been made by the Federal Government and that the money wan not the first tranche of $6.4 billion by today appropriated for in the 2005 budget. He said though it was difficult to raise the money, but it could be sourced from the nation's excess oil revenue.

He warned that if Nigeria failed to meet the obligation as agreed at the final signing of the debt relief deal with Paris Club, it could attract interest again. Sanusi, who was part of the delegation to the signing of the final debt relief deal in Paris on Oct. 19 and 20, said Nigeria would sign bilateral deals with member-nations of the club. He explained that on October 19, the debt relief deal was signed on behalf of Nigeria by Okonjo-Iweala, and that the lawmakers were there as observers. He said of the 30 billion dollars debt, state government owed about 25 per cent.

Okonjo-Iweala, had said that under the terms of the agreement signed with the Paris Club, the country was expected immediately to clear arrears of about six billion on   the 30 billion dollars owed to the club. She had also said after paying the arrears, ”there would be stock reduction on  Naples Terms and a buyback of the  remainder so as to provide an exit from  the Paris club." "The whole package is such that we can expect debt relief of about 60 per cent on our current Paris club debt. We expect to pay off the balance of about 40 per cent through buyback operation," she said. A statement by the Paris Club after the signing of the debt deal on October 19 stated that the deal "include a debt reduction under Naples terms on eligible debts and a buy back at a market - related discount on the remaining eligible debts after reduction."

The agreement was reached after the International Monetary Fund (IMF) approved that a Policy Support Instrument (PSI), will be implemented in two phases. "In the first phase, Nigeria undertakes to pay arrears on all categories of debts and Paris Club creditors grant a 33% cancellation of eligible debt.”In the second phase, after the approval of the first review of the PSI by the Executive Board of the IMF, planned for March 2006, the Nigerian government will pay amounts due under post-cut off date debt," the statement added.
Thereafter, "Paris Club will grant a further tranche of cancellation of 34% on eligible debts, and Nigeria will buy back the remaining eligible debts."

In real terms, the Paris Club will cancel $18 billion of Nigeria 's debt, or 60 per cent of the $30 billion owed to the Club. But the Club will be paid "an amount of $12.4 billion." Of this, $6.3 billion will be paid to regularize arrears owed and another $6.1 billion "to complete the exit strategy."