Nigeria’s President, Muhammadu Buhari, on Wednesday at the United Nations General Assembly made a call for the cancellation of debts owed by developing countries.
He noted that most developing countries are faced with multifaceted challenges with a “debilitating chokehold on their fiscal space.”
Hence the “need to address the burden of unsustainable external debt by a global commitment to the expansion and extension of the Debt Service Suspension Initiative to countries facing fiscal and liquidity challenges as well as outright cancellation for countries facing the most severe challenges.”
Although Mr Buhari did not spell out details of his debt cancellation proposal, it appears to be an interest of his administration as his deputy, Yemi Osinbajo, made a similar proposal during his recent visit to the US.
Nigeria’s external debt is considered to be the biggest in sub-Saharan Africa and has already been rescheduled several times. In spite of this rescheduling and refinancing by creditors who were either members of the Paris Club (governments), London Club (banks) or independent creditors, arrears of this debt keep accumulating over time.
Nigeria’s public debt has risen the most under the Buhari administration when compared to previous governments since 1999, and foreign debt has grown three times more than the combined figure recorded by the past three administrations.
While the Obasanjo administration met $28 billion as foreign debt in 1999, it left $2.11 billion in 2007 after successfully securing a write-off by the London and Paris clubs of foreign creditors.
The Yar’adua/Jonathan administration added $1.39 billion to what they met, and the Jonathan administration incurred an additional $3.8 billion, taking the country’s total foreign debt to $7.3 billion when that administration came to an end in 2015.
Nigeria’s external loan reached $33.3 billion by December 2020, meaning an extra $26 billion had been accumulated under the Buhari administration, three times the combined amount by past governments since 1999.
As of 30 June 2022, Nigeria’s external debt stock according to Debt Management Office, stood at $40.06 billion. The government also plans to borrow a large chunk of its 2023 budget.
The West African country’s external debt remained low until the mid-1970s. It was $1.5 billion in 1970 and $2.5 billion in 1975. The debt began to spiral around 1977; the outstanding debt reached $7.5 billion in 1979 and $8.9 billion by 1980.
By 2005, Nigeria owed $30 billion in debt to the Paris Club but eventually reached an agreement for debt relief worth $18 billion. The creditors had cancelled $18 billion and Nigeria repaid $12 billion. Most of the $18 billion were registered as aid.
Chiamaka Okafor is a reporter at Premium Times in partnership with Report for the World, which matches local newsrooms with talented emerging journalists to report on under-covered issues around the globe.