Nigeria’s Foreign Debt Crisis, 1976-2009

Abstract

Debt Crisis which arises where the debtor country, fails to promptly pay back her debts became pronounced in the international economic arena in 1982 when the Mexican Central Bank made it public that it had ran out of foreign exchange reserve with which to pay back her foreign debts. Nigeria’s foreign debt crisis was occasioned by operation of mono-cultural economy, corruption, squander-mania of 1980s, implementation of bad macroeconomic policy and some external factors like hike in prices, rising interest rates and other policies by the developed countries and their banks. However, to exit herself from debts and the associated crisis, various regimes in Nigeria starting from General Olusegun Obasanjo’s military led administration of 1970s {which towards the end of regime contracted a ‘jumbo loan’ which was to be the foundation of un-repayable Nigeria’s foreign loan} to the civilian rule of Alhaji Shehu Shagari; General Mohamadu Buhari’s led military regime; General Ibrahim Badamosi Babangida’s led military regime; adopted so many economic measures. These measures included debt rescheduling, debt buy back, placing of ceiling on the amount of foreign loan to be borrowed annually, outright ban on taking foreign loan, introduction of second tier foreign exchange market policy, among others. All these efforts made little but not much impact as the crisis persisted. However, the more vigorous approach adopted by Chief Olusegun Obasanjo’s led civilian administration made a difference as it was able not only obtained debt relief but cancellation of Nigeria’s foreign debts. Historical method which sourced data from published materials was used in the analysis of the causes of Nigeria’s foreign debt crisis as well as attempts made to exit Nigeria from the foreign debt. The finding reveals that Chief Olusegun Obasanjo’s civilian administration combined diplomatic overture with other economic policies which helped it to exit Nigeria from her foreign debt crisis.