The recently released Transparency International report, which ranked Nigeria the world’s third most corrupt nation, will make it difficult for the country to secure debt relief from creditors, Nigeria’s Debt Management Office has said.

Abuja: Director General of the Debt Management Office (DMO), Dr. Mansur Mukhtar, has said the recently released report of Transparency International (TI), which ranked Nigeria the world’s third most corrupt nation would make it difficult for the country to secure debt relief from creditors.

Speaking over the weekend in Abuja, Mukhtar who described the TI rating as “disappointing” said the DMO would need to work extra-hard towards getting debt relief for Nigeria, given the negative impact the report has made on the international scene.

“I must say that I am very disappointed at the report and I think that the methodology is mainly backward-looking. It attaches a lot of importance to past history of a country and does not take into account sufficient evidence of current initiatives. It takes a while for this to manifest.

“This is an issue I can confirm to you that even in TI itself there has been some debate about the subject and even some of the initiators of the body are now asking for the review of some of its methodology.

“Having said that, yes, as I said it is disappointing and certainly it will continue to shape the perception of the outside (world) and will make it a little difficult for us to convince our creditors to give us debt relief. What it means is that we will need more efforts to convince our creditors that things are changing in Nigeria, today,” he said. Mukhtar noted that, “to the extent that government is making concerted efforts to address this problem, we have come a long way. To understand that corruption, mismanagement is something that has been going on for several years before this government came into power and it becomes basic and endemic to the system.”

“It has become a structural problem. It has become systemic, if you like so even if you have new institutions in place it will take a while for things to start happening. This is a thing that affects our value system. But I think that the efforts [. . .] are being made, the institutions [. . .] are being put in place. The legislation, the procedures, the Due Process, for example, the EFCC works, the ICPC, although, I know many people are saying it is not what it should be yet.

“It is like introducing a foreign body in your system. The first reaction is rejection. It takes a while to acclimatize and adapt to the situation. Given what has happened, the extent of decay. It is not really going to be an easy task to transform Nigeria but the signal is clear that things are happening. The budget, the reforms, the public expenditure management, the transparency that have taken place in the last year.

“For the first time, we had a budget published and the details available to everybody and we have a monitoring and tracking system, and for the first time government has not gone to Ways and Means to get money to spend in terms of deficit. And we have managed to save excess crude oil money and it is there for everyone to see. . . . these are significant and symbolic issues that cannot be ignored in the context of Nigeria. Anybody who says we are not doing anything, no changes in Nigeria, I think it is an unfair characterization,” he noted.

However, Mukhtar disclosed that the decision by the federal government to return to the capital market through its bonds, which was scheduled for the second quarter of this year, has been shelved because of the rush to the market by banks to achieve the N25 capital base requirement as directed by the Central Bank of Nigeria (CBN).

He explained that given that banks were the highest investors in the 2003 bond, it was considered unwise to go to the capital market at a time when the banks were struggling to raise funds from the capital market to meet the new minimum capital requirement.

According to him, “we have finalized arrangements to go to the capital market in August and were at the verge of starting the exercise when we basically had to take stock of the situation, essentially arising from the feedback we were getting from the financial system to the CBN directive to the banks to recapitalise which had sent jitters to the market.”

“There were concerns that at the time it was not the best time to float federal government bonds in the market. Many banks felt that their boards would not be able to consider this to the extent that they were major subscribers (in the first exercise last year).

“The other consideration was that some of them would be going back to the market to raise funds and we had to be cautious to make sure we don’t go and crowd out the market or heat up the system in terms of interest rates because the more demand you have there, the more it reflects in terms of how much the market rate would be,” he said.

But he added that the office was not downgrading or abandoning the bonds issue.

“We will continue to explore ways of making government bonds major securities in the capital market.

“The other point I would like to explain on why we did not return to the market at the time was that there was no compelling need because government was able to keep its deficit low and was looking at bridging the deficit with funds from other sources, such as the looted funds.

“It is still, however, in our work programme to return to the capital market. Even if we are not going to raise money to finance deficit, we feel that the government maintains a presence in the market even if it is for a small amount, so that we can foster the development of the capital market.

“You know, the countries that have succeeded in developing their capital markets, and allowed the private sector to take over the financing, the government had had to play a lead role by going in first and testing the market showing this works and setting benchmarks for other issuers of bonds,” he said.

The director-general stated that the DMO would have to re-verify and negotiate some of the debt owed to local contractors during Gen. Ibrahim Babangida’s administration and pay them off.

He said, “One strategy which the government is considering is that once we have the verification/reconciliation completed, to identify some of the small creditors that could be paid off. For the big creditors, we will try to sit around the table to negotiate some arrangement towards discounting some of these debts and then to issue securities instruments so that they become liquid trade instruments and then those that really want to go and get some liquidity can go and trade the securities.

“This would be done so that the maturities of the securities could [be] matched with resource availability and given the amount involved, we could be talking of tenures of anywhere from five years upward. We could have different tenures and ask them to take a mix of them. But this is something that has to be worked out and obviously you have to sit around the table with the contractors to make them understand that this is the most realistic solution.

“We feel we have to resolve this in order to restore confidence of the private sector in government that you would work and get paid. Two, it is also important in order to re-build the financial risk in the economy. We know that a lot of money was taken from the banking system and is causing a serious problem for the banks in terms of the qualities of their portfolios.

“We also know that we have to get this settled quickly because many of these businesses, especially the construction firms also employ much labour and they drive the growth processes and linkages in other parts of the economy. So we want to make sure that they continue to operate. Instead of folding up to continue to recruit people,” he said.

Kunle Aderinokun, This Day News, October 24, 2004