[stop-imf] Oped on Nigerian debt deal

[Robert Weissman]

http://allafrica.com/stories/200507111130.html

Is This What They Call Debt Relief?

This Day (Lagos)

OPINION
July 11, 2005
Posted to the web July 11, 2005

Simon Kolawole
Lagos

Poor me. While everybody is popping champagne and shouting halleluyah over
the reported intention of the Paris Club to generously cancel 60% of our
debts, here I am asking questions.

Initially, I too joined the frenzy - to be honest - because when I
calculated 60% of the $30 billion we owe the Paris Club, it came to an
amazing $18 billion. I was drunk, not with champagne, but with joy. My
first reaction was that, at last, all the monthly deductions from federal
allocations would cease and then we can begin to think of more money for
more developmental projects.

Suddenly, my jubilation began to weaken. Why would our creditors write off
$18 billion just like that? Are they Father Christmas? Is it that they have
now fallen in love with us? Is it that they are afraid we might one day
repudiate the debts, as we have been threatening since January, so they
quickly decided to pull a stunt on us? Is it that they have come to realise
that we may never finish paying the debts, so they are trying to salvage as
much as possible as soon as possible?

Reading the papers the following day, I got the answers to most of my
questions. The highly cerebral and hardworking minister of finance, Dr.
Ngozi Okonjo-Iweala, told journalists in Abuja that under the debt
forgiveness terms, Nigeria would immediately pay $6 billion in debt service
arrears and another $6 billion through debt buy-back at a date to be agreed
upon later in the year. This means, essentially, that we would part with
$12 billion to get a relief of $18 billion. Dear Nigerians, this is the
rip-off of the century. Nigerians are generally regarded as 419 experts all
over the world, but the Paris Club has just given us a sound beating in our
own game. And instead of shedding tears that we have just been mugged, we
are busy rolling out the drums. Everybody is dancing on the streets. The
creditors must be having a good laugh.

Before I am butchered, let me explain myself. Under the current
circumstances, we normally service our debts with about $1 billion (or N130
billion) yearly. When President Olusegun Obasanjo presented the
Appropriation Bill to the National Assembly this year, the legislators were
very furious. "How can we be paying $1 billion a year to service our
debts?" they screamed. "Let's repudiate the debts!" But what are we about
to do? We will soon part with $12 billion, not even $1 billion. It would
have taken the Paris Club, under the current arrangement, at least 10 years
to get $12 billion from us. Now they will get it in less than one year.

Indeed, the creditors should be very grateful to Okonjo-Iweala, formerly of
the World Bank, for her commendable and tireless role in their debt
recovery efforts. They could not have wished for a better bargain. What
businessman in the world will not write off an $18 billion debt when he is
sure he will collect $12 billion in six months, having already made a cool
profit of about $20 billion on the original loan of $19 billion? What
businessman will not collect $12 billion and run when he knows that the
debtor may never finish paying $30 billion in the next 100 years at the
slow rate he is servicing the debts?

Let's take another look at the unfolding scenario. According to government
statistics, the principal amount we owe is $19 billion. Over the years, we
have paid $42 billion, mostly interests and penalties, and despite that, we
are still owing about $35 billion - with the Paris Club alone accounting
for $30 billion. Shouldn't we be glad, then, that we'll pay only $12
billion and get $18 billion written off forever and ever?

I'm sorry to say this: I am not glad. By simple arithmetic, our creditors
have used a $19 billion loan to make $23 billion "profit" from us so far
(that is $42 billion minus $19 billion). If we still owe $35 billion then,
it means they would be making a "cool profit" of $58 billion on the $19
billion principal. We have re-paid the original loan over and over again.
They have already recovered the debts and it is just interests we are
dealing with now, as far as I am concerned. This, to my mind, is the
mindset with which we must approach the debt issue.

To the economists, my argument is ridiculous and simplistic. To the
financial experts, my argument is stupid and outrageous. I should know that
when you take a loan, you must pay the principal and the interest, and when
you default, you must pay penalties. How the money was utilised is not your
creditors' business. It is so simple! I should also know that the creditors
did not beg us to take those loans. We willingly walked into the debt trap
and we must pay for it, literally. This is capitalism and you must play by
the rules, hmm? Can anything be simpler than this?

But as THISDAY's respected columnist, Kayode Komolafe, has argued over and
over again, the foreign debt issue is beyond mere book keeping. It is not
as simple as you took a loan and you must pay. When Tsunami occurred last
December, the debts of the affected countries were cancelled instantly.
Dear economists and financial experts, what became of book keeping and
international financial order? What happened to capitalism and
creditworthiness? By the way, who said the lenders didn't beg us to take
loans? That is a lie. They were openly peddling loans in the 70s when we
started making money from oil. They even accused us of under-borrowing. I'm
sure they've achieved their aim, now that we've been trapped. But to say
they didn't beg or encourage us to take those loans recklessly is, in fact,
not true.

Another immoral aspect of this debt trap is that most of the lenders knew
very well that the loans they were giving us were being misapplied or
embezzled. It's very amusing that we keep our oil money with these people
and they lend us out of it and we send the money back to them to develop
their own economies. That was their aim in the first instance when they
were persuading us to borrow. It is an instrument of neo-colonialism. Our
rulers were na=C3=ADve and greedy. And the creditors took full advantage of=
 us.
It is a case of the strong exploiting the weaknesses of the weak and
justifying it by saying it was the weak that came for help, like a man
taking advantage of his househelp and claiming the girl willingly undressed=
.

Our creditors knew what they were doing. They capitalised on the greed of
our rulers, but, today, over 100 million Nigerians are suffering the
consequences of this criminal collaboration between the creditors and our
rulers. The creditors had their eyes on our oil, and they kept lending us
money and kept saying we had the capacity to pay back. This is a political
and moral issue, beyond book keeping. And, my goodness, we are about to
part with our excess crude sales as we have now agreed to pay $12 billion.
They've got us at last! And we're ignorantly jubilating all over the place.

What does paying $12 billion to Paris Club mean to the development of
Nigeria? Nothing positive. Absolutely nothing good. The government said we
would soon pay $6 billion and divert the $1 billion we budgeted for debt
servicing to "infrastructural development". Hey, why don't we spend that $6
billion to develop infrastructure and pay Paris Club the budgeted $1
billion? Why the other way round? Which is more beneficial to 135 million
Nigerians? Is there any law banning us from spending excess crude oil
earnings on schools, hospitals, water and general infrastructure? What
exactly are we going to achieve by parting with a whopping $12 billion?
What do we stand to gain by rushing to liquidate these debts? What do we
stand to lose if we don't?

We've been told settling the "debts" would improve our creditworthiness in
the international financial conclave and I laugh. When have we ever not
been creditworthy? When Gen. Sani Abacha refused to service the debts, did
they stop giving us more loans? When our debts were climbing from $3
billion to $6 billion to $10 billion to $20 billion, did we stop being
creditworthy? Now that we've hit $35 billion, have we stopped being
creditworthy? In fact, the World Bank is giving us another loan to retrench
75,000 federal workers. I thought our debt burden was too much to entitle
us to another loan! How ridiculous.

This $12 billion will make more sense to me if it is sensibly injected into
the economy in the next three years. Nigeria would be a better place. We
could inject it into specific areas in instalments of $4 billion yearly
over the next three years. We could spend a substantial part of it on
infrastructural development, since that is the major obstacle to our
development. We could invest part of it in Dr. Ezekiel Izuogu's
made-in-Nigeria car. We could embark on massive housing projects. We could
open up new industrial areas. These would mean a lot for this country,
instead of giving $12 billion to shylock creditors who have been ripping us
off for years without conscience, without a sense of social justice and
without any compassion for the poverty-stricken citizens of Nigeria.

I know the argument of the world-renowned experts. If you inject $12
billion into the economy between now and 2007, there will be inflation. Yet
we know that Nigeria does not have the infrastructural base for sustainable
economic development. That is why I like the Chief Economic Adviser to the
President, Professor Ode Ojowu. He is not an academic economist. He said,
sometime last year, that we should not be too obsessed with this
single-digit inflation thing because in a country where infrastructure is
next to nil, there is no way we can keep inflation to single digit as we
have to spend to lay a solid base for investment and industrialisation. We
must focus on our long-term goals. To me, this is the most realistic view
on inflation. The World Bank that says we should not spend money on capital
projects is the same World Bank that says we have poor infrastructure. Will
the infrastructure grow from the ground if we don't embark on capital
projects? I don't know who is confused between World Bank and me.

We owe local contractors in excess of one trillion naira. Instead of giving
$12 billion to the shylock creditors, we could settle 40% of our internal
debts. This would mean a lot for the economy. It would bring many
businesses back to life, take thousands out of unemployment, improve
economic productivity and make Nigeria a better place. Why on earth should
we give $12 billion to the Paris Club when it would not have any
significant and direct impact on our economy?

What then should we do to our debts? Instead of this deceptive 60%
cancellation, I think we should campaing for the cancellation of all
interests and penalties. This will reduce the debts to about $15 billion,
which is more realistic and manageable. We should then plead to pay $2
billion or so yearly until we liquidate everything. Even the financial
order they are talking about recognises bad debts. There is nothing strange
in that. We need a realistic approach to this issue.

I hereby implore President Olusegun Obasanjo, the governors and other
members of the National Council of State to RESIST Paris Club's attempt to
extort $12 billion from us. It is NOT in our interest. Nigerians stand to
benefit NOTHING from it. Let's re-negotiate it. It is outrageous to part
with $12 billion just like that. If the creditors refuse to agree, let's
continue to pay them the regular $1 billion yearly until they come to their
senses and accept the reality that something has to give. Let them
blacklist us from taking more loans. That will serve us better. We can
utilise the $12 billion in place of their loans. For God's sake, who needs
more loans from Paris Club or London Club when we've got billion of dollars
in excess crude sales account? Why can't we finance our projects from this
account which currently stands at $8 billion with a potential of rising to
about $20 billion before the end of the year?

Is somebody listening to me?


For his follow up column, Still, This is No Debt Relief, see:
http://allafrica.com/stories/200507181514.html.