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Nigeria: Caught in the OPEC Crunch
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10866 |
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CURRENT ISSUES
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| Issue
Date : |
7 / 1986 |
2,371 Words |
| Author
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Jerry Funk
Jerry Funk heads a new consulting firm, Jerry Funk &
Associates, Washington, D.C. He was a senior staff member
(Africa) on the National Security Council in the Carter White
House, and later a vice president for political-risk analysis
at Bankers Trust Company in New York. He served as full-time
political media adviser to President Shehu Shagari's
reelection campaign in Nigeria in 1983. |
Nigeria owes the world a lot of money - nearly $13 billion in direct government and guaranteed debt (mostly to the international banks and to national export-guarantee agencies), plus probably another $5 billion of "suppliers credits," owned by various Nigerian importers to foreign companies, large and small, for an endless variety of capital and consumer goods purchased on open account, much of it before 1983 (cement and machine tools, rice and wheat, electronic gadgetry, insecticides and Rolex watches).
In 1983, the government, in order to shore up Nigeria's sagging credit rating, invited thousands of suppliers to submit claims for goods shipped and unpaid. This was an open invitation to a $10 billion paper blizzard, and the Nigerians, with professional help from an international banking agent, have been trying to sort it out ever since.
Many of the claims are valid, some are technically flawed, others are erroneously double-billed, and all too many are shamelessly over-billed and often patently fraudulent. But much progress has been made; about $2 billion has been converted to Nigerian guaranteed bonds, and most of the rest of the validated claims will probably be converted this year, including interest. In all, perhaps another $5 billion will thus have been added to Nigeria's official foreign debt, bringing the total to about $18 billion.
How much is $18 billion to Nigeria?
Nigeria's debt burden is clearly a heavy one at present, but relatively short-term in nature (three to five years) and probably quite manageable, with a little help from its friends.
Total Third World debt is approaching $1,000 billion and the top seven debtors, led by Mexico, owe 40 percent of that. Nigeria's per capita debt is about $150, while that of Mexico is over $1,000. Nigerian debt as a percentage of gross domestic product is about 15 percent, a figure that most Third World debtors envy.
Nigeria's immediate problem is that its otherwise manageable debt is "ballooning" during the next four years, 1986-1989, with an average debt service of $4.2 billion per year, before dropping sharply to $1.8 billion in 1990 and below $1 billion thereafter. Based on oil sales for the first quarter of 1986 ($2.27 billion) and a projected flat sales curve at the present 1.3 million barrels a day, and a $15-per-barrel price, Nigeria can expect total foreign exchange (FX)
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