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Nigeria suspends debt payments
BBC World Service, August 29th 2002
Nigeria has said it can no longer afford to service its $33bn foreign debts because of plunging oil revenues and the failure of some of its privatisation plans. Consequently, the country has suspended payments on its debts, said Central Bank govener Joesph Sanusi.
Last month Nigeria - one of the world's largest oil-producing nations - held foreign exchange reserves of only slightly more than $8bn, down about a fifth since December. Mr Sanusi said he had decided to halt all debt repayments rather than to eat further into the reserves. Most of Nigeria's debt is owed to foreign governments, members of the Paris Club of official creditors.
Earlier this year, Nigeria parted company with the International Monetary Fund about how best to achieve a turn-around in its economic fortunes. Limited Funds Nigeria's finance minister Adamu Ciroma told the BBC that the country was unable to pay because parliament had only approved a limited amount of funding for the current financial year.
The country's outstanding debt stands at around $300bn, but this it the first time it has completely halted its payments. Nigeria has been asking official creditors for substantial debt relief, but apart form a modest amount of debt rescheduling, has not had much success, says the BBC's Dan Isaacs in the commercial capital Lagos. This is because it has failed to demonstrate the required track record of sound economic management, our correspondent says. Put simply, Nigeria is spending faster that it is earning and therefor falling deeper into deficit. But with national elections only a few months away, there's little sign that the government is tightening it purse strings.
The Central Bank governor Mr Sanusi said: "The external sector of the economy was under pressure during the period under review". He added: "The deficit was financed through the draw down of external reserves. " Officials said Nigeria's inability to recover money which a previous regime has stolen was making matters worse.
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