[Last July], Jeffrey Sachs, a senior United Nations economic adviser, suggested that African Countries should refuse to pay their foreign debt. His argument was premised on the ground that the debts are unaffordable and that it is morally wrong for the rich countries to collect debts from the people of Africa, who are dying of hunger, disease and poverty.

This article is designed to explain to the Nigerian people why we should look at the legal angle for repudiating our foreign debts. Many Nigerians, especially those outside government, are only aware that Nigeria is indebted to countries of the West but know little of how each of these debts were incurred, who incurred them and for what purpose. The money used to service this foreign debt has negatively impacted on our development and, to a large extent, worsens the living standard of our people. What then can we do?

In this paper, we will see how we can legally avoid these debts based on current international law. However, before we proceed it may be necessary to ask, how did the debt crisis start in the first place? Record has it that at the end of the ’70’s many Third World oil-exploring countries had extra money to spare.

This money was lodged in western banks. The Western banks thereafter loaned this money to the Third World countries for development projects. Due to a global recession, these debts grew [so much] that many Third World countries, [including] Nigeria, were unable to pay. The loans became difficult to pay because Third World currencies and exports went down in value. The refinancing of these debts became worse due to conditions attached by creditors, such as reduction in public spending, which adversely affected the people’s welfare.

Assume we forget for a minute the legal issues involved in Nigeria’s foreign debt crisis. There are, however, some factual and moral arguments for the cancellation of Nigerian debt:

• The loans have in actuality been repaid many times over in interest payments.
• The interest that has been paid is more than the creditor nations have given in aid.Some time ago, the president started a campaign for the cancellation of the Nigerian debt. [He said:] “The people who gave these loans knew that the money was not being spent wisely. Perhaps they even took their own cut. Yet the ordinary people of Nigeria have to pay back the loan … This is the injustice of it all.” (Reported by Jubilee 2000).So many efforts have been made to address the Nigerian debt problem, arguments have been advanced for total cancellation, and some have argued for repudiation of the debt.

  The president’s statement, which is bold and commendable, is the bedrock of what is known in international law as the “odious debt” of nations. The doctrine of odious debts allows indebted nations to legally repudiate their foreign debt under certain conditions.

  What are odious debts and under what conditions can they be exercised?

  The legal doctrine of odious debts was propounded by Alexander Nahum Sack in 1927 after the Spanish-American war. The Americans at that time repudiated the Spanish claim that the American Government being the holder of Cuban sovereignty should be responsible for the payment of Cuban debt to Spain.

  Alexander Sack was a former minister in the Tsarist regime of Russia and later became a professor of law in Paris. The doctrine of odious debts he propounded, which is now part of international law, is as follows:

  If a despotic power incurs a debt not for the needs or in the interest of the State, but to strengthen its despotic regime, to repress the population that fights against it, etc., this debt is odious for the population of all the State. This debt is not an obligation for the nation; it is a regime’s debt, a personal debt of the power that has incurred it, consequently it falls with the fall of this power.”Odious” debts, incurred and used for ends which, to the knowledge of the creditors, are contrary to the interests of the nation, do not compromise the latter — in the case that the nation succeeds in getting rid of the government which incurs them — except to the extent that real advantages were obtained from these debts. The creditors have committed a hostile act with regard to the people; they can’t therefore expect that a nation freed from a despotic power assume the “odious” debts, which are personal debts of that power.

  Debts arising from loans incurred by members of a despotic government, their family, relations, associates or friends are [personal debts] and should not be [considered debts] of the state. For example, some of the import debts and other debts of Nigeria that can be traced to these categories of people should qualify for repudiation.

  The doctrine of odious debts has been applied in some instances in the world. Classic examples are:

  1. The repudiation of the Tsarist debts by the Bolsheviks after the 1917 Soviet revolution.

  2. The repudiation of Costa Rica’s debts incurred by the Tinoco regime to Great Britain.

  Incidentally, Nigeria’s creditors are aware of this doctrine that once a loan is classified as odious it becomes uncollectable. In 1982, the First National Bank of Chicago, a prominent western bank, issued a report warning all commercial banks of the consequences of odious debt.

  Lenders who finance rulers have no protection under international law. For example, if the following debts are repudiated today, they may be considered odious and uncollectable:

• Debts incurred by the Ferdinand Marcos regime of the Philippines.
• Debts incurred by the Jean-Claude Duvalier regime of Haiti.
• Debts incurred by the apartheid government of South Africa.
• Debts incurred by the Mobutu Sese Seko regime of Zaire.
• Debts incurred by the Saddam Hussein government (which are already being cancelled by creditor nations).
• Debts incurred by successive military regimes in Nigeria.Way forward for NigeriaNigeria under the current administration has approached the debt crisis professionally. It has organised international conferences, seminars, pressure and work groups to bring the issue of cancelling Nigeria’s debt to the international domain. For example, three years ago Nigeria’s debt management office organised an international conference on the Nigerian debt crisis where the following resolutions were made:
• The rules of international finance encourages odious debt and international corruption. 
• The debt crisis is a shared responsibility between Nigeria and its creditors and creditors are as guilty as Nigerians in the accumulation of the debt. 
• The international community [should move to] cancel Nigeria’s debt. 
• The international community [should move to] reform the global finance structures. 
• The government of Nigeria [should] undertake a broad audit of each of the programmes for which loans were incurred to verify the legitimacy of the debts.Looking critically at the doctrine of odious debts, which is recognised in international law [as a mechanism] for repudiating a nation’s debt, we can adduce the following for the repudiation of Nigeria’s debt: 
• Nigeria [was ruled by] despotic regimes from 1966 to 1979 and from 1983 to 1999. These governments were undemocratic and used the force of arms to terminate and suppress democratic institutions and values in Nigeria. 
• A government that rose to power through seizure of the state, using the force of arms and repression of the citizenry, cannot legitimate debt on behalf of its people.I may be wrong but I am not aware of the finalisation of the audit report of Nigeria’s debts. In fact, only recently it was reported that Nigeria’s debt is to be audited. Looking at what happened in Nigeria in the past, it may be reasonable to suspect that many of our debts may be classified as odious upon review.If these debts are odious and not truly incurred for the benefit of the Nigerian people, why should we pay? Why are we afraid to repudiate these debts using the applicable international law? Our priority is to critically [assess] each of these debts as early as possible.

  Arguments have been raised that if we repudiate these debts, the creditor nations may block our access to international credits, aid, foreign investment, etc., some even argued that Nigeria’s foreign assets may be seized.

  Western nations are not foolish. Western businesses are structured on rule and respect for the Law. Westerners do not discountenance actions that are founded on law, a law they are fully aware of which guides transactions between nations.

  It is without gainsaying that it is in the interest of the western nations to defend international law and order, and to do otherwise will open the door to abuse and disorder in international transactions, which may ultimately hurt their interests worldwide.

  In conclusion, it is time for us to be much bolder and fight this debt crisis [using the] law, rather than rely solely on moral suasion, as currently being witnessed. We should fight the battle [using a] combination of both.

  I strongly belief that it is a battle that must be won to improve the welfare of our people.

  Mr. Ogunmefun is a Lagos-based business and financial lawyer.

Remi Ogunmefun, This Day (Lagos), June 13, 2005