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Attempts to Redeem Nigeria's Debt Fail Again
By Ayodele Aminu
Efforts to reduce Nigeria's debt stock through the Federal Government's Debt Conversion Programme (DCP) suffered another set-back at the weekend as foreign investors offered unattractive discount rates to purchase part of the nation's debts. This brings to three the number of times investors have shunned DCP this year.
Debt conversion is an arrangement between creditors and debtor nations to exchange eligible foreign debt instruments at a discount into the debtor country's local currency for execution of some specified programmes in a debtor nation.
It was introduced in Nigeria in 1988 as a means of prunning down the nation's debt profile.
Investors are expected to buy Nigeria's debt coupon at the international market and trade it for equity investment in Nigeria while funds are gradually released by the Central Bank of Nigeria (CBN) in line with the investors funding requirement and liquidity situation in the economy.
At the 130th debt auction which took place last Friday at the Bankers Committee Room of the Lagos office of the apex bank, only one investor pledged to redeem $536,160 or N59.5 million, but the deal could not sail through because of the unattractive discount rate (3.9500 per cent) offered to the CBN by the investor. A similar scenaro was also experienced three months ago (September) when investors offered a discount of 14.5100 per cent.
Following the inactivity of the DCP in the last couple of months, the total amount of the nation's debt redeemed this year stood at N1.71 billion. From November 1988 when the programme was established till date, a total debt of $1.43 billion or N44.5 billion has been redeemed.
A fornight ago, the CBN embarked on a tour of the DCP beneficiary companies with some financial journalists with a view to seeing "how Nigeria has turned its adversity into advantage''as well as popularising the programme via reports on the beneficiary companies.
While addressing the press at briefing preceding the facility visits to DCP beneficiary companies, the secretary of the DCP secretariat, Mrs. Fehintola Yemi-Dale stated that about $5.4 billion out of the nations debt is yet to be redeemed through the programme.
She gave a breakdown of the debt stock available for conversion to include $1.44 billion CBN promisory notes, $2.04 billion Par Bonds, and $2 billion Paris Club debt.
She explained that the redeemable debt stock was enough to bring significant relief to Nigeria if excluded from the Stock of outstanding external debts which she put at $27.7 billion.
quote: "It is rich in mineral resources, moreover, the oil prices that have gone up doesn't seem to have gone to the people in Nigeria.
"Until we get that link that the money is going to the poorest people, there isn't a great willingness to get help, but I think if we're sure the money is going to support the poor, we can get more help because Nigeria is key to Africa.
Need I say more than that? I don't think so.
Nigerian Guadian: Why Nigeria will not get debt forgiveness, by British MP From Tunde Oyedoyin, London
NIGERIA may have to kiss hopes of debt forgiveness from the British and western governments goodbye unless it is able to guarantee the possession of the political will and assurance that debts forgiven are channelled into productive sectors to benefit the masses.
At a meeting conveyed by Julia Drown, a Member of the Parliament (MP), in Westminster, the seat of government, recently The Guardian was told that the Obasanjo administration might get little or nothing from the West if the issues of corruption and poverty alleviation are not properly dealt with.
In an exclusive interview with The Guardian, Julia Drown said: "Within the House of Commons in Britain, there is a big interest in debt owed by third world countries. We want to do more to tackle the poverty and there're so many countries in Africa and one way we feel we can do that is by looking at the debts owed by the countries to the West.One of the biggest motions being considered in early day motions is that most MPs are pushing for debt relief for some of the poorest countries of the world."
On what extent the British government is willing to go and who are the likely beneficiaries of the gesture, Drown said: "At the moment, my impression is that the government is not willing to give more debt relief to Nigeria because Nigeria is relatively well off compared to the poorest countries of the world.
"It is rich in mineral resources, moreover, the oil prices that have gone up doesn't seem to have gone to the people in Nigeria.
"Until we get that link that the money is going to the poorest people, there isn't a great willingness to get help, but I think if we're sure the money is going to support the poor, we can get more help because Nigeria is key to Africa.
"There's a huge amount of African population in Nigeria and if we're going to reach the Millennium Development goal, Nigeria must be considered. But there's going to be a dual track approach, Nigeria must deliver more to the poorest people to get the West to do more in terms of debt relief and other support, and that's what we want to achieve and I think the government will be willing to go along with that if we can see the money going to the poorest people."
Another area the MP wants to see development is information sharing. Not much is available on Nigeria and where they are, they are sometimes misleading and distorted. For instance, it was thought in certain quarters that there is no income tax in Nigeria until The Guardian corrected the impression that it is operative, even though it might not be as effective as what obtains in Europe.
To correct this, Drown stated that: "There isn't enough information on Nigeria getting to the House of Commons. We certainly need to get better information flow between Nigerian senators and British MPs so that we can get more information which will help Nigeria's case, but both ways round, it will also help the West put more pressure on Nigerian elites to make more changes, but more information will only help that process. There's no enough information getting through."
Arguing along the same line, both the President of African Network for Environmental and Economic Justice, Rev. David Ugolor and Rev. Omorodion Eguavoen, believe Nigeria needs to be considered for debt relief because both the multinational oil companies that do business in the country and the creditors should not be exonerated in the accumulation of Nigeria's debt.
According to them, the creditors did not put enough control mechanism in place while granting credit facilities to the past governments.
The duo flew to London on Monday with the aim of getting the West to do more for Nigeri
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