Debt relief as tragedy

“What is beguiling about the debt forgiveness binge is that in order to have it, Nigeria’s debt managers had to unnecessarily put the noose of IMF conditionalities as holy writs and albatrosses around their own necks.”

When the President, quite unpresidentially, began to talk about having been given the names of those who took monies abroad, it was more than embarrassing because the demand for that list, although risky for a government generally believed to be steeped in loot-sharing, was supposed to be the beginning of wisdom. How come that what was an open secret in international banking circles before 1999, was only becoming news for Nigeria’s president in 2005? It is as if like the famed Okigbo report, the president was waiting for Nigerians on the streets to supply the names of those who owned the loot abroad. The more perturbing part – and what Nigeria’s policymakers in Abuja have not managed to grasp – is that Western creditors are not being charitable when they give lists of what Nigerians own abroad.

They are genuinely having a good laugh at Nigeria’s expense. The question is: how can people who are keeping loot money in their vaults insist that unless you are seen to be fighting corruption, they will not give you debt forgiveness? Why was it not the Nigerian president giving the Western creditors the unflappable condition that unless they disgorged the looted funds in their vaults, Nigeria would not pay one kobo more of the debts supposedly owed to the Paris Club? Or, let us even assume that Nigerian monies abroad are not stolen money, but money that was legitimately earned but hemorrhaged abroad by people who did not trust that their money would be safe in Nigeria.

Shouldn’t that have immediately suggested to the managers of the Nigerian economy that they need to come up with policies that would make Nigerians keep their money at home rather than send it abroad? Shouldn’t that have suggested a case of actually identifying the Nigerians who have their monies abroad, to plead with them to bring the money home? So far, instead of wooing Nigerians, our debt managers prefer to kneel before creditors who have no patriotic stake in whether the Nigerian economy crashes or climbs. They have opted for prostration before the gods of the international debt racket, taking it as grand strategy to kneel with begging bowl, demanding to be treated [the] same way as drought-stricken and famine-ravaged countries for debt-forgiveness? To hear Nigeria’s president saying that “even if we managed to pay the interest and charges alone, there was no way in which we could ever hope to pay the principal” proves to be such a howler. The statement is actually only correct because the president has not done the right thing and is doggedly pursuing the wrong thing.

To be sure, because Obasanjo did not adopt the bring-back-our-money strategy, he has not been able to see that his pursuit of debt-forgiveness is not only an expensive binge, but that his begging bowl approach is disruptive of genuine policymaking and a disquieting defacement of rational problem solution. The wasted years of pursuit, the sleepless nights and 160 days in the air, the mammoth man-hours that the President of the Republic has to devote to the whole exercise and the distraction that these bring to the process of genuine economic planning and governance, cannot be overemphasized. They must be accounted [for] in terms of opportunities that the president has missed to face Nigeria’s problems squarely. It is not just in what he and his team say the begging bowl strategy has achieved but what it has destroyed and continues to threaten. The truth is that Nigeria has been presented to the rest of the world as a very unserious country, one that will carry an elephant on her head and still go scratching for rodents. To escape this image and to wipe it out from the memory of international players, will take [some] doing. But not even the so-called friends of Nigeria are willing to tell this to President Obasanjo. Because Nigeria, under Obasanjo, has preferred the will-o’-the-wisp of debt forgiveness, the smart alecs of the international marketplace (amongst whom many Nigerians are to be counted) have been lining up to collect their fees [sic] for one jousting for scheduling, rescheduling, defaults, and buy backs and what have you. Whatever Mrs Ngozi Okonjo-Iweala may be saying about this, she cannot annul the reality that fees are paid and added to the account for every deal that Nigeria makes or only half makes on the trail of debt forgiveness and debt management. Thanks to Okonjo-Iweala’s and Mansur Muhtar’s proficiency in institution-building, Nigeria may now be able to keep a proper account, and our negotiators may be more transparent in their pursuits. But this merely spells a greater proficiency in knowing how bad or well things are without offering an exit from the mayhem.

What is beguiling about the debt forgiveness binge is that in order to have it, Nigeria’s debt managers had to unnecessarily put the noose of IMF conditionalities as holy writs and albatrosses around their own necks. There was an exit from the debt trap which did not require that route. It called for a format of economic management that is more proactive towards production rather than waiting for the Godot of a trickle-down from a liberalization that abhors genuine planning. Under the banner of privatization, which assumes that a government that has no business in business can be relied upon to know how to privatize, they have pursued a loss-making anti-productivity charade which uses the incongruous case of the privatization of the communication sector as a ground for the privatization of all other enterprises. Let’s even forget that Nigeria has lost about 200 billion naira in pursuit of privatization. Because the liberalizers turn out to be more interested in privatization than in supporting the private enterprise (which are not the same thing) they have been unable to press policies that can make Nigerians who have money, to keep it on-shore. They have been unable to design policies that can credibly woo Nigerians with money abroad to bring the money back home.

It makes it laughter-inducing to hear a lot of talk about attracting foreign investors to an economy which Nigerians with money will not bring their money into unless it is for the takeover of monopolies and monopsonies. Or to talk about attracting foreign investments to an economy which Nigerians are avoiding in order to establish factories abroad for the purpose of producing for the Nigerian market. Truth to tell, you wouldn’t need to attract foreign investment if Nigerians feel that their money was safe within the country. There would be enough indigenous money to power investments if only Nigerians would feel that the managers of the economy know what they are doing.

In order to make it seem as if there is something different from Ibrahim Babangida’s fiasco of structural adjustment programmes, the economic team with which the Finance Minister must help President Obasanjo, has crafted a homegrown but servile programme of mendicancy which an otherwise erudite Charles Soludo on his way to the Central Bank has marketed as National Economic Empowment and Development Strategy (NEEDS). After what I have read of Soludo’s writings I would have said he was now in a position to see how, without offending the Bretton Woods institutions, he could out-bid the inequality in the international system to which he adverted so much attention in The Debt Trap In Nigeria. But the game is not really in his hands. All the fine phrasing in the policy documents adds up to a few ball points: devaluation of the Naira, liberalization, privatization and [an] inordinate search for debt forgiveness. Or, to put it differently, because of the misbegotten search for debt forgiveness and the need to humour creditors rather than embark on genuine developmental strategy, they opted for policies that will make sure the Naira will never become respectable.

So that the creditors will be happy that Nigeria is where they want her to be: incapable of ever standing up to their wiles. And, in order to make sure that there are no serious organized groups to counter the drift, the whole programme is cushioned by a full-steam constitutional effort to decapitate the labour movement, (after smashing the liver of the political party system) and reducing the universities, in the name of reforms, to mere handmaidens of a poorly-funded parastatal. (And, creating a situation that authorizes even people still in government to promote their own private universities as rafts for the normalization of private as public purpose).

On the surface, apostles of NEEDS market it as a strategy that does not believe in borrowing more money. But what does that mean in a country where the death of the national currency has already spelt out the death of industries, educational institutions, transportation, health facilities. When champions of debt forgiveness talk about passing a law to forbid unconscionable borrowing in future and at the same time talk about not completely ruling out borrowing, it is partly because they know that the way the NEEDS works, unless the upturn in oil revenue remains on the side of excess, will send us back to the creditors in no time. What does it mean, in any case, to say that you won’t borrow more money in an economy where the lynching of the national currency has ensured that what Nigerians used to earn in a week is now earned in six weeks. It means that we all work six times more to earn a day’s wage in relation to externalities. Since there are only twenty four hours in a day and no new inventions, apart from cassava, has been found by the presidency for raising productivity, we all know that the struggle for oil money is the beginning of survival.

This is why all the talk about non-oil exports is actually a way of reminding us that those who killed the marketing boards are about to lure Nigerians into false confidence about a future of prosperity based on agricultural produce. They are lying to themselves and to us. If the lying works, it would mean that few Nigerians would be able to afford Nigerian-produced foods. It will worsen the current situation in which the sweat that could have bought a brand new car in the past now buys a miserable tokunbo and money for medical equipment that could have gone round five hospitals can only now produce inadequately for one hospital. The situation, in relation to the knowledge industry, is such that no serious professors abroad want to teach in Nigeria and Nigerian professors look over-privileged when they are allowed nondescript placements abroad. Even in the supposedly non-militarized Fourth Republic, as Professor Niyi Osundare told us recently in his valedictory, the universe in the Nigerian University has been under erasure. It all boils down to what has happened to the Naira: which is why Paul Collier would expect to earn so much more money than a Nigerian professor who has higher credentials than he has and must acquire so much of his professional [sic] ware from the same international market.

For that matter, one paradox, unnoticed by the [sic] festivating crowds around NEEDS is that the only reason the strategy appears to look good these days is that there is a forced recapitalization of the banks, and recently there has been a state-pampered attempt to establish a mega-company that is supposed to stand up to the multinationals around us. Bright ideas in wrong times.

The good reasoning, even if not the open intention, is that with the Naira permanently in trouble, if you do not recapitalize you would soon be in more trouble than the market can take. By the same token, while the Naira remains the beleaguered currency that it has been since Obasanjo discovered the need for jumbo loans, the brouhaha about establishing a mega-company merely spells mega troubles. With the Naira in trouble, recapitalization is really like running hard in order to stand still. To expect a mega-company without monopoly status in its chosen trenches to compete with companies operating from hard currency bases, will turn out to be more a matter of prestige [and] regime-maintenance strategies and, therefore, politics rather than a matter of economics and productivity. For this reason, from the standpoint of the freedom that Nigeria expects to be able to exercise as a result of being freed from [debt] servicing after debt forgiveness, it is important to stress it, and do so clearly, that no strategy that fails to take the value of the Naira into consideration will pass muster as an exit from Paris Club debts.

Actually, this is the point to turn to the particular mode of debt forgiveness that President Olusegun Obasanjo has pursued and netted as he has told the National Assembly. In the president’s words, “. . . what we have now been given assurance to expect by the Paris club is that Nigeria will clear its arrears of $6 billion of the $30 billion owed The package in final terms that we are to expect would yield debt relief of about 60 percent on our current Paris Club debt. We shall pay off the 40 percent balance through a buy back operation. The total write off is about $18 billion which compares very favourably with the recent $40 billion write-off of debts for the 18 highly indebted and poor countries of the world by the developed nations”. Interestingly, although the president says that the debt forgiveness is real, he has not said that it is in the bag. He uses terms like “what we have now been given assurance to expect” and the “final terms that we are to expect.” These are not about the [waht is] real but [about] expectations. So, no quibbling about it: the president has spoken in the very language in which the NEEDS document promises prosperity and poverty alleviation. The expectations can be proved to be quite wishful. It is real only if the Policy Support Instrument (PSI) is actually accepted.

President Obasanjo has said that the PSI which he would present to the creditors is the very NEEDS document that is the basis of the current reforms already going on. This is saying that an agreement to put the Naira down for the [sic] hacking is part of the means by which Nigeria is seeking debt forgiveness.

It does not say so in so many words. But the recent announcement of a [sic] qqming increase in the price of fuel is enough as an eye opener. I do not hesitate to say, in this connection, that the NEEDS document looks a very good instrument for enthroning political impatience with critics and selling a new and testy political class schooled in the practice of describing the creation of poverty as reforms. But faced with impetuous price increases, such as we are told to expect, few Nigerians can remain absolute fools. It becomes obvious to all concerned that an underdeveloped economy based on NEEDS will always put the poor and the rich under undue pressure. If anything was needed to weaken a poor country and make her dependent on creditors, nothing could be better designed. While the president and his economic team are talking about the freedom they will now have to carry out programmes in accordance with Nigeria’s national aspirations, they forget to say how this will happen with devaluation of the Naira.

The fact that the President is talking about using a package that includes devaluation to convince the creditors about Nigeria’s deservingness of debt forgiveness ought immediately to put everybody’s back up. What is in the document for the creditors that can also be said to be for Nigerians? This is one question that must be answered in plain terms, with facts not sentiments, as the Minister of Finance, likes to put it. Truth is, [sic] what is for the creditors in the NEEDS document is against any productivity in Nigeria that can grant respite from external dicta. And that is the gospel truth. And that is what makes it so attractive as a bait for debt forgiveness. The creditors know this and that there is nothing in the document that can truly help Nigeria to pay what Nigeria owes. At any rate, they have decided to make assurance doubly sure by insisting that Nigeria must pay 12 billion dollars in two installments in order to qualify for debt forgiveness of 18 billion dollars. Even the least knowledgeable Nigerian can see that this is targeted at the oil windfall that has netted Nigeria about $24 billion in foreign reserves.

Suppose Nigeria did not have such an amount? And, by the way, many Nigerians should be wondering where Nigeria would be finding that kind of money if the rest of the world had listened to President Obasanjo’s consistent arguments against a rise in the price of oil at a time some OPEC countries were pushing for it. This is only part of the whimsicality that has governed Nigeria’s search for debt forgiveness. Besides, the fact that President Obasanjo has already agreed to paying so much money without seeking the say so of the National Assembly and the state governments, which own vast proportions of that money, is a telltale of how much incivility is being built into the process. Which country in the world but Nigeria has ever allowed herself and her money to be so parted? Which country with Nigeria’s potential would fail to find what to do with 12 billion dollars in order to be able to produce the means for liquidating the 30 billion dollars that is dragging Nigeria to her knees!

Of course, I concede that an economic establishment already too sold on the moribund theories of devaluation, liberalization and privatization as the way of saving a third world country, cannot be relied upon to know how to spend 12 billion in a way that brings prosperity. After all, Babangida got 12 billion and used it to worship at the shrine of frippery. Which is to say, that those who wish to advise Obasanjo to do the right thing must know that his team has been so trained to doing the wrong thing that if they try to do the right thing, they may botch it. The National Assembly should therefore be well advised to let the President know that the money he wishes to give away in his gamble – yes it is a gamble – does not belong to the federal government alone but to all the states and local governments as well. No Nigerian wants to spend that kind of money in pursuit of a lie.

It may be just as well to remind the president of his own appreciation of the fact that Nigeria is not in the same boat as those countries that got debt forgiveness without conditionalities. From postwar Germany, post-Hussein Iraq, Poland, Yugoslavia, Kyrgyzstan, Pakistan and Afghanistan to others in Eastern Europe – these were countries in a crisis of survival. Many Nigerians remember the comic relief of Obasanjo threatening, obviously in frustration, that he was prepared to resign if the fall of a president was all it required for a country to get debt-forgiveness. It was good to hear him admit before the National Assembly that those luckier countries that got debt forgiveness have more geo-cultural, political, economic, military, strategic significance for the creditor countries than Nigeria has. What he does not add is that the very reason that Nigeria is not of such strategic significance is the reason that we should not rely on the goodwill of the creditor nations. They have no reason to do Nigeria a favour. For them it is warfare-trade by other means.

This makes it rather embarrassing that the President of Nigeria should be expressing so much faith in either Tony Blair’s government or his commission. The hard fact is that Britain has her own problems and Tony Blair needs to serve Britain’s national interests. As Mark Curtis notes in his book Web of Deceit (Vintage 2003): “Two decades of Conservative rule left Britain with the worst poverty record in the developed world, according to the OECD. Poverty affected 20 percent of the population between 1991 and 1996. This was a worse record than even the US – where 14 percent were affected – and compares with 10 percent in Germany and 7 percent in Sweden. A UN report found that a fifth of adults in Britain were functionally illiterate and that 13.5 percent were permanently living in poverty, a worse record than all other developed countries, except the US and Ireland.” Speaking objectively, this is to say that Tony Blair has a patriotic duty to raise Britain out of the morass by helping countries like Nigeria to continue to buy from Britain. Obasanjo and his economic team ought therefore to know what to buy and what not to buy or take from Britain, in order for Nigeria’s national interests to be well served. Whereas Tony Blair must remember that his political party, the Labour Party was once blamed for taking Britain to the IMF like a poor Third World country, he would certainly not want to be blamed for not knowing how to use Third World countries, like Nigeria, to escape that fate during his tenure. Or after. Blair does not have to be as virulent as Margaret Thatcher, whose miserable monetarism set the stage for the impoverishment of Britain while savaging her Third World trading partners.

Obasanjo ought to know this, He ought also to know that, whether as a former military or civilian dictator, he will always be blamed for allowing so-called developed countries to use Nigeria to bail themselves out of bad patches rather than angle for terms of mutual prosperity. If truth be told, it makes sense for Britain to forgive countries like Burkina Faso, save them for another day, while ensuring that a country like Nigeria supplies what will be lost in the process. At any rate, why does Obasanjo expect British workers to subsidize the folly, if not profligacy, of his country without demanding a pound of flesh in return?

So to say, I think that Britain and the other creditor countries would be acting irrationally to give debt forgiveness to a profligate and cowardly elite like Nigeria’s, which would rather beg for crumbs [than build] the Naira into a hard currency and make a bold lurch for her hard-earned money stashed away in foreign vaults. In my view, the rest of us ought to find ways to make the Nigerian government turn a new leaf and face up to the reality that it is not in Nigeria’s interest to throw 12 billion dollars away in pursuit of a vacuous debt forgiveness which, no matter how it is looked at, promises tragedy. If we are so keen on meeting our international obligations, let’s meet [them] squarely. Demand the return of Nigeria’s looted funds, [sic] whose exit into offshore havens all the creditors have connived at. And insist on saving the Naira by putting it where our oil wealth, not non-oil expectations, have put us in world affairs. If our insistence on saving the Naira requires that we pay 20% of our national income for debt serving purposes, why not. Simply consider the saving graces of a proper management of the Naira which, in a shotgun manner, can relieve the country of more than 80% of liabilities arising from following the moribund undertaker economics imposed by the creditors.

Odia Ofeimun, Vanguard (Lagos), August 29, 2005

Categories: Africa, Nigeria, Odious Debts

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