Since the collapse of the oil boom in 1981 and the most recent dwindling oil revenue export, the Nigerian economy has undergone considerable strains and stresses. The pressure has been evident in the persistent deficits in the balance of payments, low external reserves, deficit in government finances, mounting external debt etc. the inherent weakness in the structure of the economy as reflected in the over-dependence on foreign exchange earnings from oil, under dependence on imports for its productive base in the face of declining foreign exchange earnings and weak terms of trade led to a situation which government sought to bridge the domestic financial resources gap with external debt. In the 1950s, Nigeria did not have the need to borrow much from abroad and so the outstanding external debt was small at the same time substantial earnings from export of agricultural produce coupled with grants from the United Kingdom made external borrowing unnecessary. Besides the scope for economic growth was limited and there was relatively little demand for investment goods. Since attaining independence in 1960, Nigeria has had cause at one time or the other considerable strains and stress. The production and consumption patterns that emerged in the area of oil boom could not be sustained in the faces of declining foreign exchange earnings. Both the federal and state governments of the Second Republic breached decree 30 of 1978 which fixed the maximum external loans of the country at $5 billion. They embarked on imprudent and massive external borrowings, particularly from international capital market to finance project of doubtful viability. Thus, pressure soon mounted on the various sector of the economy resulting in huge imbalances in Government finances, low external reserves and deficit in the balance of payments, among others.
Nigeria’s external debt stock was less than one billion dollars by the second half of the 1980’s the debt profile had deteriorated seriously due to persistent inability of the country to meet its external debt services obligations. This resulted in mounting arrears and unmanageable growth of the debt stock relatives to avoidable 1980, grew to nearly 19 billion dollars by 1985.
The term debts management refers to the information and implementation of a debt policy designed to achieve certain objectives. According to the traditional philosophy, debt management consisted of keeping its interest cost to the minimum possible, and paying it off as early as possible.
The Nigeria’s external debt management was faced with so many problems due to the following factors; in accurate debt data, poor loan sourcing utilization and monitoring, lack of skilled manpower, lack of conducive environment for the inflow of foreign capital and fall in foreign exchange earnings.
The implication of Nigeria’s external debt was that government did not use its external borrowings productivity but there are indication that a sizeable proportion in flow of foreign loans was used for purposes of other than what the loan were taken for. Nigeria has come a long way in evolving an enduring debt management policy and strategies particularly in the area of making debt management decisions and its servicing.
Aminu Umar Sheka, Kano.
