I agree that we probably can (and should) negotiate better terms for this "debt relief" assuming the terms as presently presented to the public will actually materialize. However once the country accepts these are legitimate debts, the question then becomes how do you payoff/refinance/reschedule the balance. There are two possible alternatives here:
1. Make a lump sum payment (as the government as agreed (proposed?) to do in this case. This assumes the debtor has the cash (or can get the cash) available to make the lump sum payment as it appears to be the case for Nigeria.

2. Reschedule the payment over a period of time at agreed upon interest rates, that could range from 0% (interest free) to a market rate. Of course, the closer the interest rate is to 0%, the better for the debtor. This is the option you are suggesting. I agree that this is probably the best option as long as the country can get an interest rate closer to zero (making it interest free). This will be the optimal solution (assuming we cannot get 100% relief) and in light of the country's developmental needs, amount of debt repayment that has occurred overtime and the questionable legitimacy of the value of the debt outstanding to start with.

As you correctly stated, this option will only be an economically viable option if the
government can get a higher return on investing the cash available than the implied
interest rate on the rescheduled loan. In your example, you used an implied interest rate of 8% on the loan and a return of investment of 20-25% (based on suggestions from some investment advisers). The problem with this example lies with the assumption on the minimum rate of return that the country can get by investing the $12 billion as opposed to "emitting" the funds to the creditors as the government plans to do. An assumption of a minimum 20-25% is grossly unrealistic for a number of reasons. Using the US and other developed countries as an example, the real rate of return on the stock market has averaged about 6.5% over the last 200 years. Even the most risky investment instruments available (e.g. hedge funds) cannot guarantee this kind of return. Since there seems to be a consensus that rather than "emit" the funds, the funds should be used to fund infrastructure development in Nigeria, a more realistic return on investment will be the growth rate in GDP for the country that will result from these investments. Unless the work ethic and productivity levels in the country changes exponentially, a GDP growth in Nigeria
greater than 8% will be a welcome miracle.

On a lighter note, I think these investment advisers suggesting a minimum 20-25% return must be smoking something (or drinking some strong #1's), if not, we all need to give them our life savings if they can guarantee us a 20% annual return over 25 years. Please note that at 20% rate of return, a lump sum investment of $100,000 will be worth $47 million plus change in 25 years. Better yet, a $10,000 (about the cost of a good "Sowambe" naming ceremony) investment today (at 20% rate of return) will be worth $1.28 million in 18 years (more than enough to pay for an ivy league education for 4 years for a new born child).