By Emma Ujah
Posted to the Web: Monday, October 31, 2005

Minister of Finance, Dr Ngozi Okonjo-Iweala, who toiled to secure the $18 billion debt relief from the club of creditors gave this indication in Abuja. According to the minister who admitted that last week was a trying one for President Olusegun Obasanjo and Nigerians said in spite of the difficult situation the nation was going through, the president still wanted work on the debt issue to continue.

Her words: “We are mourning with the rest of the nation. There is no doubt that the tragedies of last weekend have really shaken the nation but it is the President’s wish that work continues. He is leading by example to demonstrate that we should march on and that is why we are continuing with the implementation of the debt deal with the Paris Club. We have done the necessary work before hand and the October 31 date for the first payment is still very much on.”

Meanwhile, officials of the Federal Ministry of Finance said President Obasanjo had sent a Bill to the National Assembly to seek its approval for the payment. The Senate Chief Whip, Mr Udo Udoma and three other federal legislators, Mr Bob Effiong, Alhaji Farouk Lawal, Chairman of the House Committee on Appropriation, and Mr Sadiq Sanusi, Chairman of the House Committee on Loans, Aid and Debt Management who witnessed the signing of the agreement in Paris, promised to ensure the National Assembly worked with the executive to meet the terms of the agreement.

Under the agreement signed between the Federal Government and the Paris Club at the group’s headquarters in Paris on October 20, Nigeria was expected to pay the $6 billion arrears upfront, as a first step towards the cancellation of the $18 billion debt under the Naples Terms.

Under the Naples Terms, Nigeria would be required to settle arrears owed to the club. Arrears here refer to amounts of principal, interests and late interests that have fallen due, but have not been paid.

Under a standard practice of the Paris Club, debtors must clear arrears prior to commencement of debt relief negotiations. Nigeria’s case was, therefore, special in that the club gave its words on the relief even before the arrears are cleared.

Once the arrears have been cleared, there would be a reduction of the stock in favour of Nigeria on Naples Terms. This means that the club will write-off up to 67 per cent of the total debt stock. “Naples Terms” is derived from the fact that terms was used for the first time in Naples, Italy, in 1994.
What remains of Nigeria’s debt stock after the cancellation on Naples Terms would then qualify for a buy-back arrangement at a discount rate. It means that Nigeria would be able to pay less than the face value of the remaining debt, thereby making buy-back savings.