Senate Backs Debt Buy-Back to Reduce External Debts

July 2, 2000

THE Senate has approved the usage of debt buy back to reduce Nigeria's huge external debt just as it dismissed insinuations that all debt buy back deals entered into by the past governments on behalf of the country were fraudulent.

Specifically, the parliament said the debt buy back undertaken between 1988 and 1993 under the Babangida administration was beneficial to Nigeria but frowned at the unwholesome conduct of the 1996 Ajaokuta debt buy back scheme.

The Senate position is contained in the report of its committee on local and foreign debts on debt buy back transactions in Nigeria from 1983 to date with emphasis on the Ajaokuta debt buy back made available to Sunday Vanguard at the weekend.

The 1988 to 1993 debt buy back deals were handled by the Central Bank of Nigeria (CBN), using a subsidiary company, Greenland Holdings, while the Ajaokuta deal was handled by the Federal Ministry of Finance.

On the 1988 to 1993 deals, a London based Nigerian former football star, Mr. John Fashanu, early this year accused the Babangida administration of sharp practices.

But, a principal partner in the scheme, Bob Minton, alleged Fashanu was being used by the Church of Scientology with which he had a three-year battle over the church's alleged human rights violations and murder of certain persons which he was trying to expose.

The senate committee, in the report, described the debt buy back deals undertaken by Greenland Holdings as very transparent.

"There is no doubt that the London Club debt buy done by government {Babangida administration) through the instrumentality of the offshore company, Greenland Holdings, was transparent and enjoyed input from all concerned at all levels within the CBN who were responsible for the debt and therefore handled the debt buy back," the committee said. It added: "it was
covered by the CBN procedure for debt buy backs and attracted little or no controversy at least within the country. Possibly as a result of the openness with which it was done, it attracted the attention and ire of the government of US which advised in strong terms that the operation of the Nigerian government be closed down before it seriously embarrassed the nation."

The debt conversion programme of the CBN, according to the committee, also had a clearly defined procedure which included advertising the Nigerian debts available for purchase while open bids were conducted on regular basis.

The committee pointed out that the Greenland debt buy back resulted in a reduction of Nigeria's debt by $5,000,000,000.00 and a re-scheduling of the balance of the London Club debts "which will be wiped out by the year 2030."

It stated that the debts managed by the Ministry of Finance as illustrated by the Ajaokuta debt was a different kettle of fish.

"The Ministry of Finance (MOF) stated in the memo submitted that no procedure existed for the purchase of the debts managed by the MOF. Mr. Ani who testified as a representative of the Minister of Finance re-emphasised this position in his oral submission.

The submission of Chief Anthony Ani who was then the Minister of Finance also confirms this fact. Intense pressure from the committee could not produce any record of any completed debt buy back transaction in the MOF other than Ajaokuta Steel Complex Limited (ASCL). The committee did not therefore have
the benefit of any other completed transaction for it to draw any inferences to the procedure that should have been followed in the ASCL debt buy back," the committee stated.

It explained that so far as the debts managed by the MOF were concerned, no procedure existed for buying those debts back.

The committee observed that the full benefits of the debt conversion programme were yet to be fully achieved and asked the Obasanjo administration to, as a matter of deliberate policy, encourage, enhance and expand the scope of the debt conversion programme by all means at its disposal.

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