I feel honoured to be at this great institution, the University of Ibadan today. This iconic university excites me for many reasons especially as a great lover of education. On this momentous occasion, I bask in the euphoria of history, standing on the podium of Nigeria’s first university. It is indeed fulfilling to walk on the citadel of pioneering scholarship in Africa’s most populous nation. The lofty dream of this pacesetting university in many respects aligns profoundly with that of Stars University, the first sports-oriented university in sub Saharan Africa which I envisioned and am currently building in my Idumuje – Ugboko hometown, Delta State. My special thanks therefore go to the University of Ibadan for showing the light towards my dream.

Coming to the University of Ibadan on this occasion is life-long honour. For me, this is an epochal pilgrimage of knowledge, rejuvenation and glory. Let me state that the intensity of my emotion as I behold this premier university, surpasses the immediate fascination of the legendary British colonial explorer, Mungo Park when he ‘discovered’ the famous River Niger in all her grandeur and majesty for the colonialists. I am enthused not just as your august visitor but guest speaker. I thank the organizers, the University of Ibadan Alumni Association for this worthy invitation and the opportunity to share my perspective of the topic of the day.

While I accept your call wholeheartedly, let me first and foremost confess that I am not an economist, financial expert or a banking guru. I am simply and squarely a lawyer and entrepreneur. Therefore, this discussion will not venture into the deep micro and macro economic matters. I stand as a passionate stakeholder drawn to patriotism and service to my country, given my modest but central role in the London/ Paris club loan refunds. I will hence endeavour to offer some pieces of advice and tips here and there as they relate to the topic of the day.


Without prejudice to the general title, I would prefer to adjust this lecture topic slightly to ‘managing foreign debt or external debt’ as opposed to ‘managing foreign loans’. Oftentimes, foreign loans or debt are used interchangeably but for this lecture I will stick with usage of foreign debt because the word ‘debt’ is like a judgment on the debtor be it government, corporation or citizen of a country.

In simple terms, foreign debt means the aggregate of credit facilities owed foreign creditors. They comprise loans sourced by an entity in a country from foreign individuals, agencies, banks, international financial institutions like IMF and World Bank or other governments.

It is expected that entities facing scarcity of funds will borrow externally to supplement domestic savings. Foreign loans are also necessary to achieve a balanced debt portfolio and take advantage of low international interest rates available on concessional loans.

In Nigeria before 1978, when the first jumbo loan of $1billion was taken, the country’s external debt portfolio was very sustainable because it borrowed mainly from concessional sources such as the International Development Association [IDA] for developmental purposes.

However, that scenario changed from the early 1980s when there was much funds from the Western Countries to lend to developing nations. This led to massive acquisition of all kinds of International Capital Market [ICM] loans with high interest rates and unfavourable terms by Nigeria and the subsequent restructurings. The fallout was unsustainable debt regimes between 1980 and 2006.

It is fair to note that foreign loans contribute positively to the economic growth of a country but can also stall the growth of any economy depending on some variables. The conditionality plus the way and manner a foreign loan is sourced, negotiated and or managed determines whether it would contribute positively or negatively to the economy of a country.

After series of restructuring in 1986, 1989, 1991, 2000, Nigeria was able to negotiate the Paris Club exit Agreement in 2005. That was followed by the London Club exit Agreement of 2006.

Currently, Nigeria’s External Debt Portfolio consists of loans from the multilaterals such as the International Bank for Reconstruction and Development [IBRD], IDA, the African Development Bank [ADB], etc, bilateral creditors such as China as well as commercial creditors like the Eurobonds, Diaspora bonds, etc .(See tables 1 & 2 showing Nigeria’s external debt stock as at March 31, 2019 [in USD].

Having dealt with the definition of foreign loans and the historical background of foreign debt management in Nigeria, permit me to touch some preliminary aspects before proceeding to address the bare topic of the day which is management of foreign loans or debt.


I wish to make it clear that foreign loans in some provable cases are necessary pills for achieving top notch infrastructure provision or upgrade. Nobody denies the fact that most developing countries such as Nigeria are faced with the hurdle of scarcity of funds to finance major infrastructure projects in their countries thereby making resort to foreign loans inevitable.

Foreign loans can be valuable in augmenting internally generated revenues including earnings from local resources, taxes and other means for Nigeria. In comparison with the advanced nations, developing countries like Nigeria usually have low revenue base thereby making it imperative for them to seek foreign sources of revenue to make up the shortfall.

Provision of critical infrastructures such as modern road and rail networks, tertiary or referral hospitals, housing, international airports, standard security architectures and other related needs often proves daunting tasks that can hardly be surmounted efficiently by using wholly local funding. For example, a $500 million was sourced in 2009 via the Chinese EXIM Bank for the execution of Abuja light rail transport project. Such projects are vital for achievement of critical infrastructure developments that are relevant to the wellbeing of the people. The desire to achieve or fast-track infrastructure development is therefore a leading factor behind the accumulation of foreign debts by developing countries.


In Nigeria, there are steps or measures we need to take to ensure that our debts are effectively managed to avoid falling into bigger economic problems. I have sub-divided these steps as follows:

First we must ensure that the loans are properly negotiated and secured on favourable terms and condition.

Second, all necessary agreements need to be signed, properly documented, catalogued and preserved for future references.

Third, the terms and conditions for the loans must be properly understood. If the terms and conditions are shrouded in secrecy or are nebulous and unnecessarily complex for the beneficiary to comprehend, then the risk of walking into booby trap becomes higher.

Fourth, the process or procedure of securing the foreign loans and their application should not only be transparent but also overseen by officials or consultants with requisite technical and professional know how as they concern such transactions. That is the safer route and method prior to accessing foreign loans.

Fifth, it is advised that foreign debts should be contracted only when they become absolutely necessary. It is not enough to join the fray simply because other countries are taking loans. The maxim that even the superpowers are big debtors and that accelerated growth can only be possible through resort to foreign loans is not a wholesale truth. That may be plausible to some extent when some conditions are complied with.

Sixth, it is safer for a country like Nigeria to fall back on her accumulated external foreign reserves and other savings rather than rush into incurring avoidable foreign debts. If this procedure is followed, it will enable the country to record increase in real economic growth and reduce capital flights through servicing or repayment of foreign loans. This is just to underscore the need for caution, not an advice to reject or to incur foreign debt.

Seventh, utmost care should be taken by the borrower country and her regulatory agencies to ensure that foreign loans are channeled into productive or profit generating ventures to ease their repayment. The essence of foreign loans is to engender the economic growth and development of the debtor country and boost the welfare and standard of living of her citizens. We should provide safety guards in the country to ensure that foreign loans are not channeled into white elephant projects, election financing or recurrent expenditure that make repayment very difficult.

Eighth, the Debt Management Office [DMO] as Nigeria’s frontline regulatory agency should remain pivotal in policing the way and manner foreign loans are sourced, negotiated and incurred. The DMO should further ensure that foreign loans are taken only when genuinely needed and that they are ploughed into essential or relevant capital areas. The office should follow up by strictly monitoring the processes of utilizing the loans. The last aspect of this task may seem somewhat cumbersome and unrealizable for the DMO but it is worth attempting.

Ninth, there is need to have a good strategy for managing the external debts of the country. This is because the external debts of a country expose her to global influence and attention. External loans for private and public sector projects that can generate enough returns to repay the principal and pay interest should be sourced from the ICM while loans for social infrastructure should be sourced from the concessional windows.

That takes me to the number ten suggestion – Nigeria should limit or avoid going for bailouts from multinational organizations, like the World Bank or IMF which insist on harsh conditionality and policy reforms that give scanty consideration to local economic conditions, cultures, and environments in the countries they are requiring policy reforms. The assistance or economic recipes given under such conditions do not always take into consideration the difference between the theoretical appraisal and the practical realities on ground in terms of how such policies and programmes being recommended would affect the citizens especially the common people.

Such generalist approaches which relegate local dynamics and peculiarities were evidently behind the austerity measures and budgetary belt tightening recipes recommended or imposed on Nigeria’s government in the late 1980s and the early 19990s which proved too harsh for the majority of the people especially the poor and ended up inflicting damage on the country’s economy.

Against that backdrop, the managers of our national economy should be very circumspect when dealing with or considering some recipes recommended by foreign debt management agents and international organizations.

But I must quickly add that some multinational agencies such as the World Bank or IMF saddled with managing global financial stability amongst others also perform important roles like helping to ensure debt sustainability of countries by carrying out regular Debt Sustainability Analysis [DSA] using its own template. This is in addition to the Fund’s policy of regularly designing national or corporate debt strategies to enhance cost/risk evaluation of the debt portfolio.

Let’s now move to the number eleven step which presupposes that Nigeria and other African countries should be wary of syndicated loans and bilateral debts which are mostly tied to medium or big construction projects. A curious observation will show that most of the foreign companies that execute such projects apart from being owned by the ‘benefactor countries’ also bring their citizens as engineers and even artisans to execute such projects. That way a large chunk of the funds is repatriated back to such countries while the debtor countries are made to bear the weight of loan repayment. It is like giving with the right hand and taking back with the left. China is particularly guilty of this practice. Chinese loans look juicy on the surface but beneath the veneer are coated bitter pills that may choke in future.

Nigeria should be more careful in accessing this kind of loans to avoid mortgaging her economy or creating a situation where public debts would increase to more than 50% of her GDP as is the case in many other countries in sub-Saharan AfricaHere, we can consider the case of Zambia as an example. As recently as 2012, Zambia could borrow more cheaply than some European countries.

In 2005, Zambia along with 29 other African countries had many of its debts written off under the IMF’s “heavily indebted poor countries” (HIPC) scheme. The measure attracted instant criticism from some economists such as William Easterly who cautioned that debt relief would simply encourage more reckless borrowings by corrupt governments unless it was accompanied by reforms to speed up economic growth, improve governance, internal security and human rights observation.

Today, where is Zambia? The country is turning to China for lifeline but it is like a case of jumping from frying pan to fire. In less than a decade and half after the 2005 windfall, Zambia’s economy has continued to nosedive with potential investors fearing that it would default in loan deals. Zambia’s fall from grace to grass offers enough food for thought for Nigeria and other countries.


I cannot end this discussion without stressing the need for proper synergy between departments and officials who source, negotiate and secure foreign loans for governments be it at national or state level. Those in charge of superintending Nigeria’s external loans must develop capacity and define coherent realistic strategies for negotiating the terms of Nigeria’s external debts.

Nigeria and indeed developing nations must exercise caution when negotiating or rescheduling loans with multilateral organizations like the IMF that are under perennial remote control of few capitalist superpowers whose interests and goals are often at variance with those of developing countries like Nigeria.

Improper utilization of foreign loans remains a major factor that makes repayment of the debt a herculean task. Once that happens, it becomes extremely difficult if not impossible to keep pace with repayment schedule and the accruing interest begins to rise and rise with repayment becoming a major problem. The interest may increase to a level where it may equal or even surpass the initial amount borrowed.

I also submit that in avoiding or being cautious over loans with harsh conditionality from powerful Western cartels, Nigeria should equally be wary of the neo-colonialist push of the emerging Eastern superpower, China. China’s so-called concessional loans sometimes end up as damning as the coated bitter pills from the Western powers and their groups.

As pointed out earlier, most China loan deals are tied to projects and in executing the selected projects the recipient countries are often compelled to use materials, consultants and workers recommended or provided by the creditor country. That way a very large chunk of the ‘concessional funds’ released are ploughed back to the creditor country.

My suggestion is that citizens should be more patriotic by defending the interest of their country, her institutions, economy and even fellow countrymen and women. Situations where our own people collude with foreigners and their institutions to defraud Nigeria and Nigerians cannot augur well for the development of the country. Those managing our foreign debts should be on permanent alert to protect the interest the country and prevent corrupt foreigners and their Nigerian collaborators from defrauding the country.

There should be continuity and seamless transitions with regard to management of our foreign debts so even when there is transfer of government from one individual or group to another the policies would continue.

There is the need for governance continuity anchored on transparent and seamless transitions especially with regard to management of our foreign debts and other related financial or contract transactions. The ideal system should be such that even when there is transfer of power from one individual, government or ruling political party to another all relevant policies, programmes, decisions and agreements should be appropriately captured and understood. At all times, the implications, terms, risks and processes should be taken into account on both short and long term bases.

Perhaps, if such process had been followed or adhered to, the kind of circumstance that led to the recent award of over $9billion against Nigeria with regard to the aborted gas deal between the Federal Government and the Process and Industrial Development [P&ID] Limited would not have arisen in the first place. And now that the country has found itself in this position, it has to act fast and correctly on the way forward – whether to assemble a team of experts to negotiate or explore any other option it may consider appropriate.

Distinguished ladies and gentlemen, remember that I urged you at the beginning of this interaction that I am a lawyer by training and orientation never an economist. You heard me speaking under the theme – TOWARDS EFFICIENT MANAGEMENT OF NIGERIA’S FOREIGN LOANS: The perspective of a passionate stakeholder. As we used to say in our secondary school debates yesteryears, I hope I have been able to convince you with my few points!

Thank you for your attention.