Nigeria Exits the London Club

Following Nigeria’s exit from the Paris Club, attention was focused on Nigeria’s London Club Debts. Consequently, about US$1.406 billion (N182.78 billion) was paid to exit the London Club debts, while a further US$1.487 billion, to redeem the par bonds between November and December 2006. An additional 1 per cent commission was paid to the Central Bank of Nigeria (CBN) amounting to US$14.868 million. The US$1.487 billion par bonds payments was made in three tranches of US$813 million on November 10, 2006; US$300 million on December 29, and US$373.849 million on December 29.

Other payments for the par bonds covered transaction costs of US$61,432 (paid on November 21, 2006) and collaterised interest payment by the CBN (US$91.922 million). Of the US$1.487 billion par bonds repaid, the London Club refunded US$747.82 million, being proceeds on collaterals, bringing the total exit payment for the par bonds to US$845.88 million. Holders of the promissory notes were paid US$476.595 million on February 26 through Merryl Lnych of the United States, while US$349,006.0 was paid as transaction costs. The government re-purchased 369,154 oil warrants at US$220.0 each on March 30, amounting to US$81.671 million. Other payments on the warrants included professional legal fee of US$695.721 to Gottlieb, dealer manager fee of US$260,326 to Citibank, and financial advisory fee of US$215,005 to Lazard. This brought the total transaction costs to US$$1.201 million, and total oil warrant exit payments to US$$82.872 million.

The composition of the debt is as follows:

Par Bonds:: These are mainly arrears of commercial bank term loans, plus some arrears of letters of credit, bills for collection, etc. accumulated during the 1980s.

• The par bonds were Issued in 1992, collateralized with US Treasury zero coupon bonds maturing in 2020

• Interest rate of 6.25% paid semi-annually amounting to $90 million a year

• Par Bond holders were issued with additional debt instruments-oil warrants

Oil Warrants: Issued along with the Par Bonds.

• Approximately 2 million oil warrants issued along with Par Bonds in 1992 maturing in 2020.

• Semi annual interest payment subject to rise in oil price above reference price of $28 consistently for 6 consecutive months, but capped at $15.

• Current payment liability amounts to $52.7 million per year

Promissory Notes: Issued through the CBN, resulting from uninsured short-term trade debt, accumulated in the early 1980s.

• Verification exercise carried out by Chase Manhattan in the mid-1980s.

• Original amount= $4,891.3million. Amount currently outstanding=$649.8million

• Quarterly payments totaling $170.85 million a year; to be fully amortized/paid off in 2010

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