[stop-imf] Nigeria: The Dangerous Strings to Debt Relief

[Robert Weissman]

*The Dangerous Strings to Debt Relief*

*This Day* (Lagos)
OPINION
August 8, 2005
Posted to the web August 9, 2005

By Femi Falana
Lagos

/Opinion is still sharply divided as to whether Nigeria has any cause to
rejoice over the $18 Billion debt cancellation recently announced. As
the cacophony of euphoria rages Femi Falana views the issue with
circumspection and believes it is not yet uhuru for Nigeria/

As part of the build up to the just concluded G8 Meeting in Scotland
huge demonstrations and live concerts were held in 10 major cities of
the world. To our utter embarrassment Johannesburg was the only African
country that featured in the global protest against poverty in Africa.
Although the G8 Meeting recently held amidst the London blasts its
decision have continued to reverberate in all parts of the world.
Indeed, we have been assembled here today by some patriotic
organizations to examine the implication of the alleged $18 billion Debt
Relief for Nigeria. The organizers of this event deserve to be commended
for their initiative. It is hoped that other progressive forces will
join the debt relief debate in interest of the marginalized peoples of
Africa.

*THE DEATH TRAP*

The new World Bank President, Mr. Paul Wolfowitz visited Nigeria a few
weeks ago. Apart from holding consultations with Government officials
Mr. Wolfowitz held an interactive session with representatives of the
civil society. In my written presentation to the august visitor I said
inter alia:

"Beyond the economics of computing them compound interests on external
debts, I find the moral socio-political dimensions of the problem rather
intriguing. About two decades ago, progressive voices in the world such
as those of the late Tanzanian statesman, Julius Nyerere, as well as the
Cuban leader, Fidel Castro concluded that the "third world debts are
unpayable and uncollectable". This was based on a scientific reading of
the political economy of debts. They were dismissed to be unrealistic as
creditor issued threats of unpleasant consequence that could follow debt
repudiation. It is great relief, therefore, that without pushing the
poor countries to the extremism of debt repudiation, the rich countries
are bowing to the moral pressure of easing the debt burden, albeit
gradually begining with the relief granted those 18 lucky countries at
the weekend."

Instead of joining the Obasanjo regime in pleading for debt forgiveness
I challenged the demand of the creditor for full payment of the capital
and accrued interest on the external debt. In particular I had argued thus:

"Besides, the history of Nigeria and other African countries with the
West makes the insistence of debt payment and servicing more morally
untenable. Capital flight from Africa began with centuries of slave
trade followed by those colonialism. Those were centuries of plunder and
brutal exploitation. There is a historical continuum between the present
structures of the economies that benefited froms such exploitation and
those of the creditor-nations sucking interests repayments on the debts
of the poor countries. If the accounting is done properly with history
as the guide, the credit balance should be in favour of Nigeria and
other African countries that were victims of slavery and colonial plunder.

Apart from profiting from the slave trade inherited wealth from
colonialism rich countries have continued to derive maximum benefits
from the unjust international economic order designed by them. By
insisting on the servicing and payment of dubious debts with resources
that could have been spent on education, health and infrastructural
facilities in the underdeveloped countries poverty has been on the
increase in the world. Hence, some Africans have rightly demanded for
the payment of trillions of dollars as reparation for slavery and
colonialism instead of begging, cap in hand, for debt repudiation. This
moral question cannot be wished away. While this does not absolve our
government of the responsibility for good governance and sound economic
management, it is morally and historically valid point all the same."

In his matured reaction to my presentation the World Bank President did
assure me that Nigeria had become qualified for debt relief. I was
therefore not taken aback when a few weeks after the visit the Paris
Club announced it readiness to commence negotiations with the Government
on debt relief. In view of the controversy which has trailed the
so-called debt relief it is pertinent to reproduce the terse statement
issued by the Paris Club on June 29, 2005.

"The representatives of the Paris Club creditor countries met in Paris
on 29 June 2005 and expressed their readiness, consistent with their
national laws and regulations, to enter into negotiations with the
Nigerian authorities in the months to come on a comprehensive debt
treatment.

They took note of the economic reform program implementation by the
Nigerian authorities since 2003 and of their willingness to take
advantage of exceptional revenues in order to finance an exit treatement
from theParis Club.

His announcement takes place after Nigeria has recently been declared
eligible to IDA only borrowing status and at a time when Nigeria has
decided to renew relations with the International Financial Institutions.

Creditors welcome Nigeria's willingness to conclude a policy support
instrument (PSI) as soon as this new instrument is approved by the board
of the IMF, to pay all its arrears towards Paris Club creditors and to
treat them equitably. On this basis, this debt treatment would include
debt reduction up to Naples terms on eligible debts and a buy back at a
market related discount on the remaining eligible debts after reductions.

This Agreement would be phased in relation with appropriate IMF review
under the PSI. This exceptional treatment of Nigeria's debt would offer
a fair, sustainable and definite solution to Paris Club creditors and
Nigeria. The significant debt relief would ensure long term debt
sustainability and would represent an important contribution by
Nigeria's Paris Club creditors to its economic development. It would
also help Nigeria in its fight against poverty.

Paris Club creditors are ready to invite Nigeria to negotiate in Paris
as soon as it has concluded a policy support instrument with the IMF"

 From the foregoing, there is no basis for celebration yet. As a matter
of fact the decision of the Paris Club to re-open negotiations with
Nigeria is achored on the conclusion of "a policy support instrument
with the IMF". In other words the agreement on debt relief "would be
phased in relation with appropriate IMF review under the PSI". But the
Obasanjo regime has interpreted the decision of the Paris Club to
negotiate with Nigeria in principle to outright cancellation of 60% of
the debt burden. Consequently, it has been celebration galore in the
corridors of power in Abuja. In fact, President Obasanjo was so
impressed with the feat recorded by his regime that he congratulated
Nigerians in a national broadcast that greeted the official statement of
the Paris Club. On her own part Ngozi Okonjo-Iweala,the Minister of
Finance has confidently asked Nigeria to expect a debt relief of about
$18-20 billion on the condition that Nigeria would immediately pay $6
billion in debt service arrears and additional $6 billion through debt
-back later in the year.

Curiously, Mrs. Okonjo-Iweala, the immediate past Vice President of the
World Bank has not addressed the degrading conditionality of obtaining a
policy support instrument from the International Monetary Fund - which
Nigeria does not owe a single cent. Before examining the overall
implicaitons of the dangerous strings attached to the so-called debt
relief for Nigeria it is germane to review the genesis of the debt trap.

It would be recalled that the military junta headed by General Olusegun
Obasanjo had in 1978 been deceived by imperialism and its local lackeys
to secure over $5 billion jumbo loan from some multilateral institutions
in the Western countries in 1978. Under the Shehu Shagari administration
Nigeria was further entrapped when more loans were allegedly obtained to
finance a number of projects in several parts of the country. Apart from
the unfair terms of the loans they were either channeled to finance
bogus projects or diverted to private accounts of some public officers
in the vaults of western banks.

The Debt Management Office recently disclosed that Nigeria obtained
loans totalling $13.5 billion in the 70s and 80s. It should be noted
that the exchange rate at the materia time was 60k to $1. But following
the reckless devaluation of the national currency by the Ibrahim
Babangida junta at the behest of the IMF/World Bank the debt crisis
became unmanageable. To make matter worse the era witnessed an
unprecedented degree of officials corruption. With such rapacious
looting of the treasury by the parasites in power Nigeria defaulted in
the payment and servicing of the debts. In those years of the holocaust
neither the Federal Ministry of Finance nor the Central Bank of Nigeria
kept reliable records on the debt portfolio.

The Abacha junta was so scandalized that he had to set up the Pius
Okigbo Panel to the Re-organization and Reform of the Central Bank.
While submitting the report of its starting findings the Panel was of
the firm view that the $12.2 billion illegally removed from the
Dedicated Account and squandered by the IBB junta could have been wisely
invested to bail Nigeria out of the debt trap and shore up the value of
the Naira. It is common knowledge that the Obasanjo regime has taken
decisive action on the recovery of the $5 billion stolen by the late
maximum dictator, General Sani Abacha. But the other rulers who engaged
in worse economic crimes have been allowed to keep their loot. Hence the
campaign of the Government for debt cancellation has fallen on deaf ears.

But the arguments of the creditors that Nigeria is not entitled to
unconditional debt relief cannot be sustained on rational grounds. In
the first place the military regime that led Nigeria to the death trap
did not have the legitimate mandate of the Nigerian people. Secondly,
the loans have not benefited Nigerians as the funds were either wasted
or stolen with the connivance of the creditors and their collaborators
in the international finance system. Thirdly, the argument that Nigeria
is a rich country because she realises about $10billion from oil revenue
annually has not taken cognizance of the huge population of the country.
Professor Jeffrey Sachs, the Special Adviser to the United
Nations-Secretary General on Millenium Develpment Goals has faulted
these spurious conditions when he said:

"The creditors are saying that Nigeria is a rich country that has wasted
its oil wealth. But I say no, Nigeria is a poor country that has wasted
its oil resources. Nigeria is getting too little per person because
there are so many people here. It is just 60 cents per day with all the
oil money. The United Arab Emirates (UAE) produces about the same mount
of oil as Nigeria with a far lower population.

"They should now stop seeing Nigeria in terms of oil wells (wealth) and
start seeing the country in terms of peoples' needs. Eight million
people die yearly around the world because they are too poor to stay
alive... I do not believe Africa is getting ahead of the curve right
now. I do not believe that Nigeria is on its own getting ahead of the
curve either" (THE GUARDIAN July 14, 2005)

*THE WAY OUT OF THE DEBT BURDEN*

No doubt, President Obasanjo has been embarrassed for taking Nigeria to
the debt trap when he was a military head of state. As events have since
shown that there was no justification whatsoever for the colossal error
he has been desirous to resolve the debt crisis. Regrettably, the
proposal which is being celebrated by government has been packaged to
further enslave Nigeria. In its editorial comment of July 14, 2005
titled "Debt exit, not colonization" The Guardian Newspaper had this to
say:

"Since the news of the debt treatment broke, the "Nigeria authorities"
(The Club prefers that designation) have been so enraptured that they
have failed to read between the lines and, like in 1978, are itching to
sign along the dotted lines in September, 2005. a veritable
recolonization document whose clauses would be "consistent with their
(Paris Club members) national laws and regulations".

/Mr. Falana is the President of West African Bar Association (WABA)/