Henry Boyo, economist and industrialist, tells FUNSHO BALOGUN in this interview that Okonjo-Iweala, the Minister of Finance and Coordinating Minister of the Economy, has damaged the Nigerian economy

In terms of performance, can the Finance Minister, Okonjo Iweala justify her statement that the outgoing administration is leaving behind a solid economic legacy?

The truth of the matter is that Nigerians are gullible and to a very large extent unfortunately ignorant about the operations of an economy. Because even the expectation of extraordinary or excellent performance from Okonjo Iweala ab initio was totally misplaced. Misplaced in the sense that the failure of her first term in office was promoted as success. Consequently, you find that because that failure of her first term in office was not recognised, expectations became so high. Unfortunately, you cannot build on falsehood. You cannot give what you don’t have.

I recall two articles which I wrote at the end of Iweala’s first tenure in office, when I said that it is impossible to judge her performance based on debt forgiveness. In the first place, no country pays every debt it owes when its people are suffering. In addition, there was evidence that we had paid the initial debt owed several times over and yet we were told to pay 12 billion dollars to be able to get a reprieve of God knows what, at a time when poverty in the country was deepening. A Finance Minister in any country is generally judged on the basis of certain indices. For example, what was the level of inflation when the Finance Minister came in, and what is the level of inflation when she is leaving? What was the level of consumption spending when the Finance Minister came in, and what is the level of consumption spending when she left? What is the level of capital accumulation in terms of fiscal discipline, directing more resources towards capital formation and infrastructure?

Did consumption expenditure (recurrent expenditure) continue to exceed capital expenditure such that recurrent expenditure constantly edged around 70 percent while capital expenditure was 30 percent? You cannot cover failure forever. Those were indices of failure. What about the exchange rate at the time the Minister came and the exchange rate when she left and what level of employment did the Minister meet? We should also consider her policies about generating more employment. In all these critical indices, Okonjo Iweala failed. So, with such failure, it was totally baffling for anyone to consider her return based on good performance in the first instance.

the first place, no country pays every debt it owes when its people are suffering. In addition, there was evidence that we had paid the initial debt owed several times over and yet we were told to pay 12 billion dollars to be able to get a reprieve of God knows what, at a time when poverty in the country was deepening. A Finance Minister in any country is generally judged on the basis of certain indices. For example, what was the level of inflation when the Finance Minister came in, and what is the level of inflation when she is leaving? What was the level of consumption spending when the Finance Minister came in, and what is the level of consumption spending when she left? What is the level of capital accumulation in terms of fiscal discipline, directing more resources towards capital formation and infrastructure?

Did consumption expenditure (recurrent expenditure) continue to exceed capital expenditure such that recurrent expenditure constantly edged around 70 percent while capital expenditure was 30 percent? You cannot cover failure forever. Those were indices of failure. What about the exchange rate at the time the Minister came and the exchange rate when she left and what level of employment did the Minister meet? We should also consider her policies about generating more employment. In all these critical indices, Okonjo Iweala failed. So, with such failure, it was totally baffling for anyone to consider her return based on good performance in the first instance.


Because Nigerians were gullible and did not really understand what was happening, they were bamboozled by the razzmatazz of this lady president from the world Bank. We were totally fooled. It is totally inapplicable to expect the same person to come back and suddenly change over a new leaf.

There is the issue about those indices I mentioned initially with inflation at eight percent running to 10 per cent and cost of funds to the real sector at over 20 per cent. The Minister of Finance and Coordinating Minister of the Economy was asked a question by a ThisDay Newspaper reporter at an interview less than two years ago that “madam, why is it that the cost of funds is well over 20 per cent? And the Minister of Finance, this so-called exalted personality in the area of economics management said, “ In fact that has been bothering me, I don’t really know, it is something that I must discuss with the banks.” If she did not know after she had been there for a long time, is it the question by the reporter that has now prompted her interest, When she knows that no economy can thrive or succeed when cost of funds to the real sector is over 20 per cent?

No economy can also succeed, especially with a population like ours, when the ratio between recurrent and capital expenditure has even risen from 70:30 the last time she was there to a recurrent of over 90 percent now. Is that not alarming? After she dashed out our money for debt relief, she came back and reaccumulated the debts under the guise of good economic management. In what way can you congratulate her for the four or five years she has now spent in office? If anything, she has damaged the economy. She came up with all kinds of things. There’s YouWin for instance. Have you ever seen anybody’s character being built on just being given money without discipline or any sustainable control attached to it?

Yes, young people are doing business. But why should you throw as much as N8million or even N10million to them and you say “go and continue doing the business and employ people,” without the proviso that this money being given belongs to the people and that they have a responsibility to repay it. Any business done using people’s money, and the persons doing the business are not made to know that there is a schedule for repayment is money thrown down the drain. How she can exalt herself and her performance by referring to that as an index of superior economic management is baffling.

[b]You find also that the same debt that she said she cleared, is what we are again almost back into. In addition to that, debt is being aquired at rates which even a standard six person as Minister of Finance should not accept. Why would you borrow to fund government activities at 12 to 15 per cent? How could you be Minister of Finance at a time that your President is going to China as President Jonathan did about 18 months ago or so to borrow $1.5billion from the Chinese for transport and other infrastructural development, and simultaneously on the same trip to China, your Central Bank Governor on the trip was asked, “what are you doing in China,” and he said he was looking for ways to invest the CBN’s foreign reserves. How could you have a Finance Minister and the Coordinating Minister of the Economy who cannot put the two together? How could you have a Finance Minister who, during the fuel subsidy upheaval of early 2012, did not know the level of rot in the subsidy business? She is not just the Finance Minister, but also the coordinating Minister of the Economy![/b]

When Sanusi Lamido Sanusi came up and said people were submitting papers which were being stamped, approved and money paid, who paid it? Why didn’t the Finance Minister and the Coordinating Minister show any interest in that. Why must it deserve attention only when it became a crisis issue. Would you be satisfied and congratulate a Finance Minister when you suddenly find that apart from the huge disparity between capital expenditure and recurrent expenditure, the Minister has been sitting on a process that allows the payment of well over a trillion Naira on fuel subsidy, using over 20-25 per cent of our annual budget on fuel subsidy. And you call that a superior Finance Minister and Coordinating Minister of the Economy?

These are realities. These things are not made up. [b]How did we get to that point. How did we get from paying N200billion for subsidy to over N1 trillion in her own tenure? [/b]This information is in the public domain. And why should we be discussing Okonjo Iweala in terms of performance if not because people believe the lies of the first term. These are the realities.

The Finance Minister often mentions the creation of about 1.5 millions jobs annually as part of the outgoing administration’s achievements, but the real sector that should be providing jobs is not thriving. Do you agree with her claim concerning job creation?

The National Bureau of statistics is permitted to produce figures on rising or falling rates of unemployment or employment. But, fortunately, economics is not rocket science. And fortunately also, you can compare the performance in your country with the performance in those countries which have adopted sincere and basic economic truths.

In all countries where employment is not an issue, you will find out that the conditions which prevail are the same, and that they have minimal levels of unemployment. In other words, their unemployment level is about 1 percent or 2 per cent, or a maximum of 5 percent, but not over 20 percent. In those countries with low-rate of unemployment, there are certain indices that you will see, and these indices are very clear because unemployment does not exist in a vacuum. [b]Unemployment is created by a process. If the real sector has to borrow at over 20 percent, it is unlikely that unemployment will fall, because most industrialists and businessmen would not borrow to expand activities when the cost of funds is so high. That already gives “k-leg” to any claim by anybody to say “I have boosted the rate of employment.” Because in countries that have an optimal employment ratio, you won’t find cost of funds to the real sector to be over 20 per cent. It could be even two or three percent, and they may even give agriculture zero percent interest rate. In countries that have successfully managed their rate of employment to a level that is conducive for economic growth and inclusive social growth, you don’t find inflation running at 8 or 9 percent, because it means that the purchasing power of all income earners is depreciating by 8 percent every year. In five years, it means that the depreciation would have taken out about 50 percent of everybody’s income, unless you have been earning 8 to 10 percent increase in your income. And if that happens, the reality of that impact is that people will be able to buy less and less goods.

Because if you have N18,000 minimum wage today, which can buy what $150 can buy, and five years later you have the same N18,000 minimum wage which has not changed but inflation and exchange rate has taken away over 50 percent of it, what happens to the individual? You buy less garri, less yams, less bread and when you cut down on your expenses and consumption in that manner, the people producing those things also cut down. If they cut down, they also lay off people

.[/b]

In countries where employment grows sustainably, such that the level of unemployment is low, the indices you get are different from what we are getting in Nigeria.

With exchange rate totally and arbitrarily determined by the whims and caprices of government, you will find that you are creating a rent-seeking state in most areas. For example, in the area of subsidy where we are told that we are paying about 20 percent of total income and where we are also told that the chances are that over 50 percent of total budget may suddenly go for the same subsidy. Because if truly as it happened three or four years ago when subsidy was touted to have touched about N2 trillion – (that amount is almost 40 percent of our N5trillion budget) – you are spending that kind of money and also spending 50 per cent of all your foreign exchange earnings to pay for petrol, then that is madness.

That 50 per cent of all your foreign exchange is more than what you are using to pay for all your infrastructural imports-bringing in companies to build roads, ports and so on. That is happening in a country where you have an IMF expert controlling the waves of the economy. With the background of high cost of funds, galloping inflation, very weak exchange rate, and mounting debts that is being serviced – cost of debt service is over N900billion this year, meaning over 20 percent of total budget is for servicing debts – with no indication that there is a let up in the pace of accumulating debt, would you say the management skills of such a Finance Minister is commendable and should be applauded?

But as I said, her performance now is in no way different from her performance in her first coming, but the razzmatazz, glitz and hype around this IMF President candidate straightened us out, and in the end, she opened the roads for our foreign exchange to be carried away. Because the IMF conditionalities that were attached to the writing off of those debts at that time included opening our gates for free flow of our foreign exchange earnings. That was why suddenly bureaux de change were being officially licensed all over the place and then Central Bank started formally allocating dollars to bureaux de change.

It all started under her first coming. And suddenly you can buy dollars here to buy shares in places abroad. This is while our economy is crying out for this thing here and you are opening such gates. And finally it dovetailed into a system whereby every Nigerian can carry a card and without any protocol of application, go to America, London and places like that to go and spend dollars in Nigeria denominated card.

It is happening all under her purview. Let us be charitable to her and just ask her to kindly, please go.

What should be the focus of a Minister of Finance that wants to salvage the economy?

[b]An economy, anywhere in the world is driven by these indices of interest rate, inflation, exchange rate. Those are the tripod on which any economy can stand. If the interest rate is too high, you can’t have rising productivity or rising employment. If inflation is too high, you can’t have rising productivity and consumer demand, so you cannot have a good industrial base. If your exchange rate keeps fluctuating also, you will continue to have problems like this fuel price which keeps galloping all the time. Those three indices are your ignition key to making the process work. If those three indices are harmonious – and don’t let anybody tell you they are the ‘unholy trinity’ or ‘unholy trilemma’- because that is a lie to deceive you. There are countries where the interest rate or monetary policy rate is 1 or 2 percent. These same countries have inflation below 2 percent and they have their exchange rate stable. So, why should anybody deceive you that in Nigeria it is impossible to have the three together.[/b]

In reality, those are the things that drive any economy.

In the Nigerian case, everybody talks of diversification and I look at them and smile, because diversification does not come as a result of wishful thinking. All governments before this time have talked about diversification and made moves towards it. But they all failed and will continue to fail because they do not recognise those three indices as the legs that must hold the table of diversification.

The legs that will carry the diversification include low interest rates, so that more industries can grow and spring up as people can take a risk. And with low rate of inflation people will have more money to spend. With more money to spend more industrialists will come into play. Also, we need stable exchange rate. Since we are import dependent for raw materials, the cost of our raw materials must be low, it must not be galloping. And we cannot continue to borrow that we don’t use at 12 to 15 per cent. And you will find that these three indices I have talked about are all underscored by the problem of excess liquidity. It is excess liquidity that makes cost of funds high.

Excess liquidity is the cause of high interest rates, high rate of inflation and a weak exchange rate that also gives rise to subsidy component in fuel pricing. So, if you are a sensible person, you will look for the root cause of excess liquidity. And excess liquidity is caused every time the CBN captures the dollar earnings of the country and substitutes Naira. The Naira substituted by the CBN is what instigates excess liquidity within the system. It makes it necessary for government to borrow money it doesn’t need.

And when it wants to mop up the money, it does not take it to go and use it. It is taken and locked up, because the idea is that there is too much money and it cannot be taken out and brought back into the system. The money is taken out of the system and locked up, but the government is still prepared to pay up to 15 percent for money it does not need, when the real sector that really needs the money is crying out for it but is debarred from getting the it.

http://thenewsnigeria.com.ng/2015/05/okonjo-iweala-a-failure-henry-boyo/

This would make front page I guess

Perfect write up. Madam puff puff paper minister failed Nigerians apart from the wailing wailers that cannot or failed to read in between the lines. She came to play the bid of her pay slave masters from the world bank and IMF which gullible Nigerians did not see way back then when GEJ failed administration recalled her back to assume the role of the country's prime minister to hide his lazziness, lack of leadership and incompetencies

"Who's henry boyo?" Quote me anywhere.

OZAOEKPE:
"Who's henry boyo?" Quote me anywhere.

Well if you can read, your question is already answered in the first 1-2 lines of the article.

. . . waiting for your "too long can't read" cousins to be here soon.

An economist who does not know the true debt service ratio in the country from 1960-2007 is no economist. Imagine an economist saying that we had paid our debts several times over before 2007. Henry Boyo is nothing but a fraud. As at 1997, our official external debt stock, stood at $27.012 billion. How in gods name, Mr boyo said we have serviced all our debts, with a sober mind is puzzling. He is in no way of NOI's standard. Why doesn't he go and get an appointment in world bank. If he could not see the brilliance behind, Madam NOI's economic strategy, then he should ask for a refund from his alma mata. What a joke.

A

Fact is that you can't discountenance what true leadership can do to brilliant lieutenants like okonjo-iweala

Was it not the same woman that performed wonders during obasanjo's time?

No matter how good you are, if your oga who calls the shots is a mumu, there's nothing you can do about it.

By the way, I dont believe okonjo-iweala failed under obasanjo

I don't think your Mr. henry boyo understood what he wrote about the economy and the actions of Ngozi Okonjo Iweala as regards The State of the economy!



Op! Change the topic of your thread because it has no corollation to the objective of measuring Mrs Okonjo RATHER IT JUSTIFIES AND REFLECTS IN CERTAINTY THAT OKONJO WAS A WORLD CLASS AND A SUCCESSFUL ONE.


Let us say you change the topic to
"Suggestions on tackling Nigeria Liquidity problems"

hinwazaka:
An economist who does not know the true debt service ratio in the country from 1960-2007 is no economist. Imagine an economist saying that we had paid our debts several times over before 2007. Henry Boyo is nothing but a fraud. As at 1997, external debt stock, stood at $27.012 billion. How in gods name, Mr boyo said this, with a sober mind is puzzling. He is in no way of NOI's standard. Why doesn't he go and get an appointment in world bank. If he could not see the brilliance behind, Madam NOI's economic strategy, then he should ask for a refund from his alma mata. What a joke.

"In the first place, no country pays every debt it owes when its people are suffering. In addition, there was evidence that we had paid the initial debt owed several times over and yet we were told to pay 12 billion dollars to be able to get a reprieve of God knows what, at a time when poverty in the country was deepening." --Boyo.

The above was what he said, the right question you should be asking is: what evidence?

The rest assumptions and comments you made (while you are entitled to your opinions), are just what they are . . .

Same way I can relate to Soludo's take on NOI's pedigree as VP admin at the world bank, does not make her qualified for the job.


BTW, Mr. Boyo mentioned a whole lof indisputable points; maybe if you read again with an open mind, you might agree with quite a good number of them.

989900:


"In the first place, no country pays every debt it owes when its people are suffering. In addition, there was evidence that we had paid the initial debt owed several times over and yet we were told to pay 12 billion dollars to be able to get a reprieve of God knows what, at a time when poverty in the country was deepening." --Boyo.

The above was what he said, the right question you should be asking is: what evidence?

The rest assumptions and comments you made (while you are entitled to your opinions), are just what they are . . .

Same way I can relate to Soludo's take on NOI's pedigree as VP admin at the world bank, does not make her qualified for the job.


BTW, Mr. Boyo mentioned a whole lof indisputable points; maybe if you read again with an open mind, you might agree with quite a good number of them.

APC and ignorance are one and the same. Mr Boyo said that nonsensical rubbish for people like you. Even in economic text books on Nigerian economy, that treat the external debt and debt management policy, it clearly indicated the stock of our external debt. Mr Boyo and soludo know how lazy and ignorant Nigerians are. I used that as a standard to judge the trash Mr Boyo said in his entire interview. I read the entire article, and I can tell you that it is equivalent to nursery rhymes. it was complete BALDERDASH.

989900:


You have said nothing man.

The only points you've made so far is, trying to attack me, Soludo, and Boyo, while saying nothing of substance yourself -- I do that too when I've got nothing tangible to offer.

Make your points in favour of madam respectfully, and in a civilized manner.

BTW, Boyo and I are basically non-partisan (we've both criticized everybody) -- get off the assumption kool-aid.

Is it that you can not understand simple English. In his interview, he made a ridiculous assertion about the state of our debt management prior to 2007. How can Economist make that kind of statement. If you can't understand what it is for a doctor to say that Malaria is airborne, then you can't understand anything.

hinwazaka:

Is it that you can not understand simple English. In his interview, he made a ridiculous assertion about the state of our debt management prior to 2007. How can Economist make that kind of statement. If you can't understand what it is for a doctor to say that Malaria is airborne, then you can't understand anything.

Origin of Nigeria's Debt
Nigeria's External and Domestic Debt
EXTERNAL DEBTS
Nigeria’s external indebtedness dates back to pre-independence period. However, the quantum of the debt was small until 1978. The debts incurred before 1978 were mainly long-term loans from multilateral and official sources such as the World Bank and the country’s major trading partners. The debts were not much of a burden on the economy because the loans were obtained on soft terms. Moreover, the country had abundant revenue receipts from oil, especially during the oil boom of 1973-1976.
However, the fall in oil prices and hence oil receipts in 1977/78 forced the country to raise the first jumbo loan of more than $1.0 billion from the international capital market. The loan, which had a grace period of three years, was used to finance various medium and long-term infrastructural projects, which did not directly yield returns for its amortization.
The recovery of the oil market from 1979, with oil prices rising to an all-time high of US$39.00 per barrel in 1980/81, led to the notion that the economy was buoyant. Consequently, some deflationary measures put in place in 1978 were relaxed. A consumption pattern that favoured imported goods emerged which was aggravated and sustained by the import substitution industrialization strategy that depended heavily on imported raw materials and machinery as well as overvalued exchange rate regime.
Many of the projects included in the Fourth National Development Plan (1981-1985) had high import content. The plan was based on an estimated foreign exchange inflow of US$30 billion per annum but between 1981 and 1982 monthly imports bills averaged US$2 billion (or US$24 billion per annum) while monthly export receipts sank drastically to an average of US$1.5 billion (or US$18 billion per annum).
Besides indiscriminate and excessive importation, there were cases of over-invoicing of imports and under-invoicing of exports. Predictably, the euphoria of the oil boom was short-lived and when oil prices collapsed in 1982, the economy immediately suffered considerable strains. The production and consumption patterns that emerged during the oil boom could not be sustained in the face of declining foreign exchange earnings. Rather than address the problem of declining foreign exchange revenue both the Federal and state governments embarked on massive external borrowings from the international capital market (ICM).
Unfortunately, that was also the period of excess loanable funds in the Western World. The International commercial banks with idle “petro-dollars” in their vaults went out selling loans to unsuspecting developing countries in the guise of assisting their economic development, a phenomenon usually referred to as the recycling of petro-dollars. Thus, pressure soon mounted on the various sectors of the economy resulting in huge imbalances in government finance, low international reserves, deficits in the balance of payments, and the accumulation of trade arrears in respect of insured and uninsured trade credits. That led Nigeria to the refinancing agreement of 1983 in respect of letters of credit amounting to $2.1 billion. Trade debts contracted through open account and bills for collection, which were outstanding as at 31st December 1983 were refinanced through issuance of promissory notes. As trade arrears continued to mount the country could not also service her external debts.
A critical point was reached in 1986 when creditors refused to open new credit lines for imports to Nigeria. Therefore, the government approached the creditors for debt relief leading to the restructuring arrangements with the Paris Club in 1986, 1989, 1991 and 2000. The arrangement provided for the capitalization and restructuring of accumulated debt service arrears, their penalties, late and moratorium interests as well as maturities within the consolidated periods.
The debt stock therefore increased with leaps and jumps, even when no new loans were contracted. Nigeria’s external debt stock till 1977 was less than US$0.8 billion. Beginning from 1978, the external debt stock began to grow astronomically, rising from US$0.763 billion in 1977 to US$5.09 billion in 1978 and U$8.855 billion in 1980, an increase of over 73.96 percent between 1978 and 1980.
By 1985 the debt profile had deteriorated seriously due to persistent inability of the country to meet its external debt service obligations. This resulted in mounting arrears and unmanageable growth of the debt stock relative to available resources. The external debt stock, which was about US$8.855 billion in 1980, grew to nearly US$19 billion by 1985. Correspondingly, the debt stock as a percentage of total export earnings and GDP rose to uncomfortable levels of 154% and 24 %, respectively.
In that year, the debt service payment due was a little above US$4 billion, which was about 33% of the total export earnings. However, the actual debt service payment for the year was about US$1.5 billion. As at December 31st, 2001, the country’s external debt stock amounted to US$28.35 billion, which was about 59.4% of the GDP and 153.9 % of export earnings.
The total external debt outstanding as at 31st December, 2002 stood at US$30.99 billion as against US$28.34 billion in 2001 indicating an increase of US$2.64 billion or 9.33 per cent. The increase was largely a result of the interest component of payment arrears that accumulated during the year and the sharp depreciation of the US dollar against other currencies in which the debts are denominated. The interest component was made up of contractual interest of US$1.41 billion and late/penalty interest of US$0.049 billion, while the increase due to the effect of the depreciation of the US Dollar was US$1.75 billion. Some debts, which were accepted after further reconciliation with the creditors and drawdown on some multilateral and post cut-off loans also contributed to the increase. The combined effect of the above factors was however mitigated by the buyback of London Club Par Bonds of US$0.601 billion.
The debt stock as at 31st December, 2002 comprised US$25.38 billion or 81.89 per cent owed to the Paris Club, US$2.96 billion or 9.55 per cent to the Multilateral Institutions, US$1.44 billion or 4.65 per cent to the London Club, US$1.15 billion or 3.72 per cent to the Promissory Note holders while the sum of US$0.056 billion or 0.18 per cent was owed to non-Paris Club creditors.
The growth in the stock of debts owed to the Paris Club creditors (official debts) since the mid-1980s was accounted for partly by unpaid new maturities falling due and the outcomes of non-concessional rescheduling. To address its debt problem, Nigeria had four rescheduling agreements with the Paris Club (in December 1986, March 1989, January 1991 and 2000 respectively), which provided for traditional rescheduling terms with market-related interest rates. Nigeria defaulted on these agreements due to high debt service obligations and adverse cash flow position, which contributed to the build up of its debt profile. Private debt arrears were consolidated in 1991 under the Brady Plan. The stocks amounted to US$5.8 billion. 62 percent of it was bought back at 40 cents per dollar while the remaining US$2.043 billion or 38 percent was collateralized with the United States Treasury zero-coupon bonds maturing in November 15, 2002. The official creditors rose from 20.8 percent in 1985 to about 78 percent in 2001.
The total external debt outstanding as at 31st December 2004 stood at US$35.94 billion as against US$32.92 billion in December 2003, indicating an increase of US$3.03 billion or 9.20 percent.
As was the case in the year 2003, the increase in the debt stock was largely as a result of the interest component of additional payment arrears that accumulated, and continued depreciation of the US dollar against other currencies in which the debts were denominated. The additional interest of US$1.54 billion was made up of contractual interest of US$1.30 billion and late/penalty interest of US$0.233 billion, while the increase due to the effect of the depreciation of the US dollar was approximately US$1.49 billion.
A further breakdown of the total debt outstanding showed that the principal balance was US$30.29 billion; principal arrears amounted to US$1.94 billion, interest arrears and late interest were US$3.36 billion and US$0.357 billion respectively. The increase in the external debt stock was due primarily to arrears that were incurred as a result of non-servicing of the non-ODA (non-official development assistance) bilateral debt: arrears on this debt accounted for 96.6 percent of total arrears.
DEBT SERVICING
The total external debt service payment for the year 2004 was US$1.75 billion compared to US$1.81 billion in 2003, reflecting a decrease of US$0.054 billion or 3.01 percent. The external debt service payments of US$1.75 billion comprised of principal repayments of US$1.17 billion, and interest payments and commitment charges of US$0.589 billion.
Payments to the Paris Club creditors took the lion’s share amounting to US$0.994 billion or 56.67 percent. The sum of US$0.487 billion or 27.77 percent was paid to multilateral institutions, US$0.090 billion or 5.14 percent to London Club, US$0.171 billion or 9.76 percent to the Promissory Note holders and US$0.012 billion or 0.66 percent to non-Paris Club Bilateral creditors.
It is important to note that the US$1.75 billion debt service paid in 2004 is actually well below the debt service due for the year of US$2.99 billion. This arises from the fact that Nigeria has not fully serviced its Paris Club debts, as an amount of US$2.23 billion was due while only US$0.99 billion was paid. The shortfall transforms into arrears and attracts severe penalty interest. This very process has contributed to the explosion in Nigeria’s external debt stock over the years.
DOMESTIC DEBTS
Domestic debt is defined as debt denominated in local currency.

989900:


You have said nothing man.

The only points you've made so far is, trying to attack me, Soludo, and Boyo, while saying nothing of substance yourself -- I do that too when I've got nothing tangible to offer.

Make your points in favour of madam, respectfully and in a civilized manner.

BTW, Boyo and I are basically non-partisan (we've both criticized everybody) -- get off the assumption kool-aid.

Origin of Nigeria's Debt
Nigeria's External and Domestic Debt
EXTERNAL DEBTS
Nigeria’s external indebtedness dates back to pre-independence period. However, the quantum of the debt was small until 1978. The debts incurred before 1978 were mainly long-term loans from multilateral and official sources such as the World Bank and the country’s major trading partners. The debts were not much of a burden on the economy because the loans were obtained on soft terms. Moreover, the country had abundant revenue receipts from oil, especially during the oil boom of 1973-1976.
However, the fall in oil prices and hence oil receipts in 1977/78 forced the country to raise the first jumbo loan of more than $1.0 billion from the international capital market. The loan, which had a grace period of three years, was used to finance various medium and long-term infrastructural projects, which did not directly yield returns for its amortization.
The recovery of the oil market from 1979, with oil prices rising to an all-time high of US$39.00 per barrel in 1980/81, led to the notion that the economy was buoyant. Consequently, some deflationary measures put in place in 1978 were relaxed. A consumption pattern that favoured imported goods emerged which was aggravated and sustained by the import substitution industrialization strategy that depended heavily on imported raw materials and machinery as well as overvalued exchange rate regime.
Many of the projects included in the Fourth National Development Plan (1981-1985) had high import content. The plan was based on an estimated foreign exchange inflow of US$30 billion per annum but between 1981 and 1982 monthly imports bills averaged US$2 billion (or US$24 billion per annum) while monthly export receipts sank drastically to an average of US$1.5 billion (or US$18 billion per annum).
Besides indiscriminate and excessive importation, there were cases of over-invoicing of imports and under-invoicing of exports. Predictably, the euphoria of the oil boom was short-lived and when oil prices collapsed in 1982, the economy immediately suffered considerable strains. The production and consumption patterns that emerged during the oil boom could not be sustained in the face of declining foreign exchange earnings. Rather than address the problem of declining foreign exchange revenue both the Federal and state governments embarked on massive external borrowings from the international capital market (ICM).
Unfortunately, that was also the period of excess loanable funds in the Western World. The International commercial banks with idle “petro-dollars” in their vaults went out selling loans to unsuspecting developing countries in the guise of assisting their economic development, a phenomenon usually referred to as the recycling of petro-dollars. Thus, pressure soon mounted on the various sectors of the economy resulting in huge imbalances in government finance, low international reserves, deficits in the balance of payments, and the accumulation of trade arrears in respect of insured and uninsured trade credits. That led Nigeria to the refinancing agreement of 1983 in respect of letters of credit amounting to $2.1 billion. Trade debts contracted through open account and bills for collection, which were outstanding as at 31st December 1983 were refinanced through issuance of promissory notes. As trade arrears continued to mount the country could not also service her external debts.
A critical point was reached in 1986 when creditors refused to open new credit lines for imports to Nigeria. Therefore, the government approached the creditors for debt relief leading to the restructuring arrangements with the Paris Club in 1986, 1989, 1991 and 2000. The arrangement provided for the capitalization and restructuring of accumulated debt service arrears, their penalties, late and moratorium interests as well as maturities within the consolidated periods.
The debt stock therefore increased with leaps and jumps, even when no new loans were contracted. Nigeria’s external debt stock till 1977 was less than US$0.8 billion. Beginning from 1978, the external debt stock began to grow astronomically, rising from US$0.763 billion in 1977 to US$5.09 billion in 1978 and U$8.855 billion in 1980, an increase of over 73.96 percent between 1978 and 1980.
By 1985 the debt profile had deteriorated seriously due to persistent inability of the country to meet its external debt service obligations. This resulted in mounting arrears and unmanageable growth of the debt stock relative to available resources. The external debt stock, which was about US$8.855 billion in 1980, grew to nearly US$19 billion by 1985. Correspondingly, the debt stock as a percentage of total export earnings and GDP rose to uncomfortable levels of 154% and 24 %, respectively.
In that year, the debt service payment due was a little above US$4 billion, which was about 33% of the total export earnings. However, the actual debt service payment for the year was about US$1.5 billion. As at December 31st, 2001, the country’s external debt stock amounted to US$28.35 billion, which was about 59.4% of the GDP and 153.9 % of export earnings.
The total external debt outstanding as at 31st December, 2002 stood at US$30.99 billion as against US$28.34 billion in 2001 indicating an increase of US$2.64 billion or 9.33 per cent. The increase was largely a result of the interest component of payment arrears that accumulated during the year and the sharp depreciation of the US dollar against other currencies in which the debts are denominated. The interest component was made up of contractual interest of US$1.41 billion and late/penalty interest of US$0.049 billion, while the increase due to the effect of the depreciation of the US Dollar was US$1.75 billion. Some debts, which were accepted after further reconciliation with the creditors and drawdown on some multilateral and post cut-off loans also contributed to the increase. The combined effect of the above factors was however mitigated by the buyback of London Club Par Bonds of US$0.601 billion.
The debt stock as at 31st December, 2002 comprised US$25.38 billion or 81.89 per cent owed to the Paris Club, US$2.96 billion or 9.55 per cent to the Multilateral Institutions, US$1.44 billion or 4.65 per cent to the London Club, US$1.15 billion or 3.72 per cent to the Promissory Note holders while the sum of US$0.056 billion or 0.18 per cent was owed to non-Paris Club creditors.
The growth in the stock of debts owed to the Paris Club creditors (official debts) since the mid-1980s was accounted for partly by unpaid new maturities falling due and the outcomes of non-concessional rescheduling. To address its debt problem, Nigeria had four rescheduling agreements with the Paris Club (in December 1986, March 1989, January 1991 and 2000 respectively), which provided for traditional rescheduling terms with market-related interest rates. Nigeria defaulted on these agreements due to high debt service obligations and adverse cash flow position, which contributed to the build up of its debt profile. Private debt arrears were consolidated in 1991 under the Brady Plan. The stocks amounted to US$5.8 billion. 62 percent of it was bought back at 40 cents per dollar while the remaining US$2.043 billion or 38 percent was collateralized with the United States Treasury zero-coupon bonds maturing in November 15, 2002. The official creditors rose from 20.8 percent in 1985 to about 78 percent in 2001.
The total external debt outstanding as at 31st December 2004 stood at US$35.94 billion as against US$32.92 billion in December 2003, indicating an increase of US$3.03 billion or 9.20 percent.
As was the case in the year 2003, the increase in the debt stock was largely as a result of the interest component of additional payment arrears that accumulated, and continued depreciation of the US dollar against other currencies in which the debts were denominated. The additional interest of US$1.54 billion was made up of contractual interest of US$1.30 billion and late/penalty interest of US$0.233 billion, while the increase due to the effect of the depreciation of the US dollar was approximately US$1.49 billion.
A further breakdown of the total debt outstanding showed that the principal balance was US$30.29 billion; principal arrears amounted to US$1.94 billion, interest arrears and late interest were US$3.36 billion and US$0.357 billion respectively. The increase in the external debt stock was due primarily to arrears that were incurred as a result of non-servicing of the non-ODA (non-official development assistance) bilateral debt: arrears on this debt accounted for 96.6 percent of total arrears.
DEBT SERVICING
The total external debt service payment for the year 2004 was US$1.75 billion compared to US$1.81 billion in 2003, reflecting a decrease of US$0.054 billion or 3.01 percent. The external debt service payments of US$1.75 billion comprised of principal repayments of US$1.17 billion, and interest payments and commitment charges of US$0.589 billion.
Payments to the Paris Club creditors took the lion’s share amounting to US$0.994 billion or 56.67 percent. The sum of US$0.487 billion or 27.77 percent was paid to multilateral institutions, US$0.090 billion or 5.14 percent to London Club, US$0.171 billion or 9.76 percent to the Promissory Note holders and US$0.012 billion or 0.66 percent to non-Paris Club Bilateral creditors.
It is important to note that the US$1.75 billion debt service paid in 2004 is actually well below the debt service due for the year of US$2.99 billion. This arises from the fact that Nigeria has not fully serviced its Paris Club debts, as an amount of US$2.23 billion was due while only US$0.99 billion was paid. The shortfall transforms into arrears and attracts severe penalty interest. This very process has contributed to the explosion in Nigeria’s external debt stock over the years.
DOMESTIC DEBTS
Domestic debt is defined as debt denominated in local currency.

Before u call her a failure let us see ur success henry.

I do hope 98900 CAN READ or at least READ the posts attached and now Analyze the best solution and not Follow A GENERALIZED STATEMENT THAT CANNOT BE VERIFIED!

if anyone UNDERSTOOD the STATE of The NIGERIAN ECONOMY.
1,To IGNORE YOUR DEBT PROFILE as then is the MOST SUICIDAL MISSION ECONOMICALLY.So For Mr.Soludo and Mr. Boyo to state that Nigeria to Actually pursue debt cancellation was wrong is ABSOLUTE ODDITY!
the other option is to either MAGICALLY HAVE INCREASED EARNING IN DOLLARS Or YOU SERVICE THAT DEBt.





so basically Mr.Henry Boyo WENT Completely Waaaay off the Issue of "SOLVING THE PROBLEMS OF LIQUIDITY" by not not ADDRESSING THE PROBLEM But ATTACKING the PERSONALITY ADDRESSING THE PROBLEM

I've seen him on Channels, TVC, and AIT speaking economics...I really wish Henry Boyo becomes the Finance Minister...I want to see all the magic he has up his sleeves

Zuria:
I've see him on Channels, TVC, and AIT speaking economics...I really wish Henry Boyo becomes the Finance Minister...I want to see all the magic he has up his sleeves

God Forbid!

sammyj:
Perfect write up. Madam puff puff paper minister failed Nigerians apart from the wailing wailers that cannot or failed to read in between the lines.

Why not call your Madam Kpekere mother to redeem our economy or isn't Madam Puff Puff her mate

Jonathan is to be blamed for this JP Morgan issue. They looted Nigeria till there was nothing left now some Igbos are now turning it against Buhari.

Tell me why Jonathan will not be jailed

(i'm surprised to see flat - heads are now censored to be Igbos - This is condescending )

baralatie:

God Forbid!

After the Edo state Governor was making series of allegations on Madam Okonjo-Iweala, Henry Boyo said we all should be wary what a politician says...I think he's non-partisan.

I don't know how to speak "economics", just want to see how he would do a better job than Madam Iweala.

..........................................

Whynotthetruth:


Why not call your Madam Kpekere mother to redeem our economy or isn't Madam Puff Puff her mate

All these touts and political jobbers who feel they can rise by bringing others down or who vent their frustration by blackmailing others keep twisting facts and truths...Iweala is way ahead of you all to lick her butts always

989900:


Let's recall, at this juncture, that a few weeks ago, the New York Times called for the outright cancellation of the international debt owed by poor African countries. In making the call, the Times observes that "Right now, African countries spend four times as much on paying back their debts than they do on health care. They are trapped into making ever-escalating interest payments that never touch the principal." Citing Nigeria as a typical example, the New York Times recalls that "NigeriaŠborrowed $5 billion, has paid $16 billion and still owes $32 billion." It then concludes that "canceling these debts should wait no longer." The New York Times could not be more correct. Its advocacy of debt cancellation, rather than debt relief, falls in line with similar calls by international NGOs. It also rhymes with the voices of debt cancellation that have emanated from various Nigerian media.

"Banjo continues with the following details of how an original Paris club loan to Nigeria of only $8 billion (the New York Times reported a lower original loan of $6 billion) later ballooned to $31 billion even though the additional $23 billion was not real money that ever touched the hands or shores of Nigeria or ever entered Nigeria's treasury . . ."


https://www.utexas.edu/conferences/africa/ads/1284.html

"Coordinating Minister for the Economy (CME) and Minister of Finance, Dr. Ngozi Okonjo-Iweala, on Saturday put the nation’s total debt stock at $63.7 billion, which encompasses multilateral as well as domestic loans by successive federal and state governments since 1960. She said that of this figure, $21.8 billion was incurred under the outgoing government of President Goodluck Jonathan."

http://www.thisdaylive.com/articles/okonjo-iweala-jonathan-incurred-21bn-of-63bn-national-debts/210139/

Read both articles and tell me how does one justify, or applaud NOI's tenure?

BTW, trivial (relatively moot) is the debt issue in the original article, there are far substantial points made in that Boyo's interview that points to the disservice NOI did to her positions in the previous administration.

I guess all the brilliant minds (Boyo, Banjo, Sanusi, Soludo and e.t.c.) are just bitter, and you know more than them all -- just can't prove it.

Origin of Nigeria's Debt
Nigeria's External and Domestic Debt
EXTERNAL DEBTS
Nigeria’s external indebtedness dates back to pre-independence period. However, the quantum of the debt was small until 1978. The debts incurred before 1978 were mainly long-term loans from multilateral and official sources such as the World Bank and the country’s major trading partners. The debts were not much of a burden on the economy because the loans were obtained on soft terms. Moreover, the country had abundant revenue receipts from oil, especially during the oil boom of 1973-1976.
However, the fall in oil prices and hence oil receipts in 1977/78 forced the country to raise the first jumbo loan of more than $1.0 billion from the international capital market. The loan, which had a grace period of three years, was used to finance various medium and long-term infrastructural projects, which did not directly yield returns for its amortization.
The recovery of the oil market from 1979, with oil prices rising to an all-time high of US$39.00 per barrel in 1980/81, led to the notion that the economy was buoyant. Consequently, some deflationary measures put in place in 1978 were relaxed. A consumption pattern that favoured imported goods emerged which was aggravated and sustained by the import substitution industrialization strategy that depended heavily on imported raw materials and machinery as well as overvalued exchange rate regime.
Many of the projects included in the Fourth National Development Plan (1981-1985) had high import content. The plan was based on an estimated foreign exchange inflow of US$30 billion per annum but between 1981 and 1982 monthly imports bills averaged US$2 billion (or US$24 billion per annum) while monthly export receipts sank drastically to an average of US$1.5 billion (or US$18 billion per annum).
Besides indiscriminate and excessive importation, there were cases of over-invoicing of imports and under-invoicing of exports. Predictably, the euphoria of the oil boom was short-lived and when oil prices collapsed in 1982, the economy immediately suffered considerable strains. The production and consumption patterns that emerged during the oil boom could not be sustained in the face of declining foreign exchange earnings. Rather than address the problem of declining foreign exchange revenue both the Federal and state governments embarked on massive external borrowings from the international capital market (ICM).
Unfortunately, that was also the period of excess loanable funds in the Western World. The International commercial banks with idle “petro-dollars” in their vaults went out selling loans to unsuspecting developing countries in the guise of assisting their economic development, a phenomenon usually referred to as the recycling of petro-dollars. Thus, pressure soon mounted on the various sectors of the economy resulting in huge imbalances in government finance, low international reserves, deficits in the balance of payments, and the accumulation of trade arrears in respect of insured and uninsured trade credits. That led Nigeria to the refinancing agreement of 1983 in respect of letters of credit amounting to $2.1 billion. Trade debts contracted through open account and bills for collection, which were outstanding as at 31st December 1983 were refinanced through issuance of promissory notes. As trade arrears continued to mount the country could not also service her external debts.
A critical point was reached in 1986 when creditors refused to open new credit lines for imports to Nigeria. Therefore, the government approached the creditors for debt relief leading to the restructuring arrangements with the Paris Club in 1986, 1989, 1991 and 2000. The arrangement provided for the capitalization and restructuring of accumulated debt service arrears, their penalties, late and moratorium interests as well as maturities within the consolidated periods.
The debt stock therefore increased with leaps and jumps, even when no new loans were contracted. Nigeria’s external debt stock till 1977 was less than US$0.8 billion. Beginning from 1978, the external debt stock began to grow astronomically, rising from US$0.763 billion in 1977 to US$5.09 billion in 1978 and U$8.855 billion in 1980, an increase of over 73.96 percent between 1978 and 1980.
By 1985 the debt profile had deteriorated seriously due to persistent inability of the country to meet its external debt service obligations. This resulted in mounting arrears and unmanageable growth of the debt stock relative to available resources. The external debt stock, which was about US$8.855 billion in 1980, grew to nearly US$19 billion by 1985. Correspondingly, the debt stock as a percentage of total export earnings and GDP rose to uncomfortable levels of 154% and 24 %, respectively.
In that year, the debt service payment due was a little above US$4 billion, which was about 33% of the total export earnings. However, the actual debt service payment for the year was about US$1.5 billion. As at December 31st, 2001, the country’s external debt stock amounted to US$28.35 billion, which was about 59.4% of the GDP and 153.9 % of export earnings.
The total external debt outstanding as at 31st December, 2002 stood at US$30.99 billion as against US$28.34 billion in 2001 indicating an increase of US$2.64 billion or 9.33 per cent. The increase was largely a result of the interest component of payment arrears that accumulated during the year and the sharp depreciation of the US dollar against other currencies in which the debts are denominated. The interest component was made up of contractual interest of US$1.41 billion and late/penalty interest of US$0.049 billion, while the increase due to the effect of the depreciation of the US Dollar was US$1.75 billion. Some debts, which were accepted after further reconciliation with the creditors and drawdown on some multilateral and post cut-off loans also contributed to the increase. The combined effect of the above factors was however mitigated by the buyback of London Club Par Bonds of US$0.601 billion.
The debt stock as at 31st December, 2002 comprised US$25.38 billion or 81.89 per cent owed to the Paris Club, US$2.96 billion or 9.55 per cent to the Multilateral Institutions, US$1.44 billion or 4.65 per cent to the London Club, US$1.15 billion or 3.72 per cent to the Promissory Note holders while the sum of US$0.056 billion or 0.18 per cent was owed to non-Paris Club creditors.
The growth in the stock of debts owed to the Paris Club creditors (official debts) since the mid-1980s was accounted for partly by unpaid new maturities falling due and the outcomes of non-concessional rescheduling. To address its debt problem, Nigeria had four rescheduling agreements with the Paris Club (in December 1986, March 1989, January 1991 and 2000 respectively), which provided for traditional rescheduling terms with market-related interest rates. Nigeria defaulted on these agreements due to high debt service obligations and adverse cash flow position, which contributed to the build up of its debt profile. Private debt arrears were consolidated in 1991 under the Brady Plan. The stocks amounted to US$5.8 billion. 62 percent of it was bought back at 40 cents per dollar while the remaining US$2.043 billion or 38 percent was collateralized with the United States Treasury zero-coupon bonds maturing in November 15, 2002. The official creditors rose from 20.8 percent in 1985 to about 78 percent in 2001.
The total external debt outstanding as at 31st December 2004 stood at US$35.94 billion as against US$32.92 billion in December 2003, indicating an increase of US$3.03 billion or 9.20 percent.
As was the case in the year 2003, the increase in the debt stock was largely as a result of the interest component of additional payment arrears that accumulated, and continued depreciation of the US dollar against other currencies in which the debts were denominated. The additional interest of US$1.54 billion was made up of contractual interest of US$1.30 billion and late/penalty interest of US$0.233 billion, while the increase due to the effect of the depreciation of the US dollar was approximately US$1.49 billion.
A further breakdown of the total debt outstanding showed that the principal balance was US$30.29 billion; principal arrears amounted to US$1.94 billion, interest arrears and late interest were US$3.36 billion and US$0.357 billion respectively. The increase in the external debt stock was due primarily to arrears that were incurred as a result of non-servicing of the non-ODA (non-official development assistance) bilateral debt: arrears on this debt accounted for 96.6 percent of total arrears.
DEBT SERVICING
The total external debt service payment for the year 2004 was US$1.75 billion compared to US$1.81 billion in 2003, reflecting a decrease of US$0.054 billion or 3.01 percent. The external debt service payments of US$1.75 billion comprised of principal repayments of US$1.17 billion, and interest payments and commitment charges of US$0.589 billion.
Payments to the Paris Club creditors took the lion’s share amounting to US$0.994 billion or 56.67 percent. The sum of US$0.487 billion or 27.77 percent was paid to multilateral institutions, US$0.090 billion or 5.14 percent to London Club, US$0.171 billion or 9.76 percent to the Promissory Note holders and US$0.012 billion or 0.66 percent to non-Paris Club Bilateral creditors.
It is important to note that the US$1.75 billion debt service paid in 2004 is actually well below the debt service due for the year of US$2.99 billion. This arises from the fact that Nigeria has not fully serviced its Paris Club debts, as an amount of US$2.23 billion was due while only US$0.99 billion was paid. The shortfall transforms into arrears and attracts severe penalty interest. This very process has contributed to the explosion in Nigeria’s external debt stock over the years.
DOMESTIC DEBTS
Domestic debt is defined as debt denominated in local currency.