Nigeria Successfully Repays Creditors as Paris Club Cancels 99% of Debt of an African Country

• The Paris Club of Creditors has reportedly granted debt cancellations to Somalia to the tune of $2 billion.
• Somalia had been on the Heavily Indebted Poor Countries (HIPC) list and became eligible after being removed from the global financial system for 30 years
• The development came after Nigeria announced successful servicing of its debts with creditors in January 2024

Legit.ng’s Pascal Oparada has reported on tech, energy, stocks, investment and the economy for over a decade.

The Paris Club of Creditors has agreed with the Somalia government to cancel 99% of the country’s debt, currently at $2 billion.

The group disclosed this in a statement on Wednesday, March 13, 2024, saying it would forgive the country’s nominal debt of $1.2 billion under the Enhanced HIPC Initiative scheme.

Read also

Tinubu’s govt set to borrow from foreign investors, hires 3 top banks as advisers

Somalia meets key criteria

The move follows Somalia’s completion of the HIPC Initiative of the IMF after being removed from the international financial system for almost three decades.

The statement said:

“To contribute to restoring the debt sustainability of the Federal Republic of Somalia, Paris Club creditors committed to cancel USD 1.2 billion in nominal terms under the Enhanced HIPC Initiative framework. Creditors welcomed and supported the commitment of the Federal Republic of Somalia to seek treatment at least as favourable from all its other official bilateral and external commercial creditors.”

Also, the club accepted Somalia’s commitment to end poverty, enhance education and embark on health reforms to create a foundation for sustainable economic growth.

According to reports, the Heavily Indebted Poor Countries (HIPC) initiative was in 1996 and has cancelled about $120 billion in debts for about 36 of the 39 eligible countries. Somalia ranks 37th on the list of those who benefit from the scheme.

Read also

Nigerian company secures licence to begin telecom services, moves to rival MTN, Airtel, others

The recent $2 billion debt cancellation for Somalia represents over 50% of the country’s public external debt of $3.8 billion.

Nigeria successfully services its debts

The development comes as Nigeria successfully serviced its loans with $560 million to service its external debt in January 2024.

Compared to the $112 million paid on debt service in January of 2023, the amount spent in January was 339% greater, according to a ThisDay analysis of the Central Bank of Nigeria's (CBN) Weekly International Payments.

Nigeria paid $3.5 billion in 2023 as repayment for its external debt, a substantial rise above the $2.4 billion spent in 2021.

The monthly analysis of Nigeria's debt service in 2023 shows dynamic patterns that provide insight into the nation's economic climate. Debt servicing totalled $112 million at the start of the year, while there was a significant increase in February, hitting $288 million.

Read also

Nigeria successfully pays back China, India, IMF, others $560m debt in 2024, more to be paid

The debt servicing escalates to $400 million as the pace continues throughout March. Debt servicing records a decrease in April of $93 million but increases in May to $221 million.

July stands out as a peak month, exceeding $641 million, while June exhibits a notable adjustment at $54 million. In August, the amount falls precipitously to $310 million but rises to $439 million in September.

Reports for October and November show $509 million and $368 million, respectively. After reaching $65 million at year-end adjustments, there is a noticeable decline towards the end of 2023, and in January 2024, there is another peak of $560 million.

In a recent report, Legit.ng reported that data from the Debt Management Office (DMO) shows that Nigeria's total public debt stands at N87.91 trillion as of September 2023.

The increased debt profile comes four months after President Tinubu and 18 new governors came into office in May 2023.

Read also

Reps probe alleged fraud at NCDMB as Tinubu signs order to boost oil gas industry

Tinubu makes a big move on the CBN loan

Legit.ng earlier reported that the official data on Nigeria's public debt profile revealed a notable surge, surpassing an eightfold increase in the last ten years.

This substantial growth becomes even more evident when considering the inclusion of the central bank loan recently authorised for securitisation by President Bola Tinubu.

The Senate approved President Bola Tinubu's proposal to securitise the outstanding N7.3 trillion Ways and Means.

Source: Legit.ng