Compassionate debt relief or Paris Club 419?

In spite of the effusive enthusiasm of this Administration, some Nigerians refuse to celebrate the recent debt relief conditions granted by our major creditors of the Paris Club: “Under the terms of the Paris Club deal, Nigeria will see $18 billion of its total debt of $30 billion cancelled on condition that it pays the remaining $12.4 billion between now and March 2006.”

Ordinarily, the prospect of a much lighter debt burden that would allow almost $2 billion [of] annual debt financing to be channeled into the improvement of decrepit infrastructure and [the] alleviation of acute poverty [would] be universally welcome. However, popular opinion on the streets is that the common man will not benefit from this ‘compassionate gesture’ of our creditors; after all, there is little to show for the trillions of dollars and other revenue available to government at all levels in the last two decades!

Apart from the helpless resignation of the masses, some eminent Nigerians have cautioned against accepting the conditions attached to the Paris Club ‘gift horse’. They see the deal as a clever way to separate a fool from his money and question the morality in a transaction in which a ‘poor beggar neighbour’ borrows less than $10 billion and yet still owes his affluent master over $30 billion after payments of over $17 billion! Indeed they claim that in spite of their pariah status, our military dictators were seduced by these same international creditors with the notion that Nigeria was ‘grossly underborrowed’ in order to offload their idle reserves with rates and conditions that were inapplicable in Europe in those times.

Meanwhile, the Paris Club is yet to attempt a justification of a demand for an upfront and immediate payment of $12.4 billion from a debtor who already finds the annual repayment of about $2 billion an uphill task, especially when that debtor is also formally recognised as the sixth poorest nation in the world with a rapidly growing population approaching 150 million!

The government [for their part] appears fired by a zeal to return Nigeria to ‘international financial credibility’ and [have seized] the opportunity offered by the Paris Club to save $18 billion and make Nigeria debt-free so that foreign investors [will] quickly beat a path to our doorstep. There are Nigerians who consider the government’s mindframe in this matter to be rather simplistic. In this regard, they claim that it is not good business to be debt free! And point to the [United States’] debt profile of over $8 trillion . . . There is no hope that the US will ever be able to redeem itself from debt, but this has not stopped investment flow into America from all parts of the globe!

Besides, a debt-free Nigeria with subsisting and unrelenting inflation and interest rates above 20% and an exchange rate that is resistant to increasing export revenues and huge foreign reserves amid political and social insecurity, will only attract foreign commercial adventurers!

Indeed, less charitable observers hold that the Paris Club succeeded in this scam because the Nigerian negotiators consisted of commercial greenhorns who have never previously managed a microfinance or even a small scale industry successfully. Our Negotiators would be unlikely to so glibly give their own personal hard earned money away if they found themselves confronted by shylock creditors to whom they have already paid much more than they borrowed!

So, Government critics maintain that we should have demanded outright cancellation of all the $30 billion debt, moreso, when we can show that we have paid much more than the capital sum. Obviously, this [is a] harder line but [is] certainly [a] more equitable perspective [and] not as untenable as some people would make us believe. Indeed, the Guardian – UK carried a story by one Ashley Seager on Monday 5th of December on the position of a movement called the Jubilee Debt Campaign (JDC) on the issue of debt cancellation and poverty eradication in poor countries. The mission statement of the JDC is, “an end to all unpayable poor country debts by fair and transparent means.” The JDC is the noncharitable campaign arm of the Jubilee Debt Coalition which initiated and co-ordinated the global Jubilee 2000 petition which became the largest petition ever with 24 million signatories!

JDC is demanding an end to the scandal of poor countries paying money to the rich world and calls for 100% cancellation of unpayable and unfair poor country debts.

The JDC maintains that the world’s most impoverished countries are forced to pay over $100 million EVERY DAY to the rich world in debt repayments, while poverty kills millions of their people. Meanwhile, creditors use their power over indebted countries to force them to privatise their services, open up their markets or cut essential social spending.

The JDC observes that the payment of $12.4 billion will mean that “the G7 (Group of Seven leading Industrialised nations) will receive more in six months from Nigeria than the 2005 Gleneagles’ deal will provide to poor countries in a decade. JDC’s Director Trisha Rogers is quoted as follows: “It is obscene for G7 countries to take billions of dollars from one of the poorest countries on Earth. In particular this means that the UK will take from Nigeria almost exactly twice as much as it is giving in aid to the whole Africa in 2005!” she urged Britain, which chairs the G7, to take the lead in refusing to accept the payments.

It is not difficult to recognise the similarity between the position of JDC and other pioneer activists like William Wilberforce and Granville Sharp in their struggle for the abolition of slavery in the early 19th century in England. These social activists represent a benign façade of the brotherhood of man and portray a progressive evolution in the conscience of the human race! Slavery was abolished against all the odds, and so we should not undermine the efforts of [the] JDC, especially in a world which has been reduced to a global village by giant strides in information dissemination.

Thus, the merit of our acceptance of the conditions of the Paris Club is still debatable! Indeed, in view of our internationally acclaimed state of poverty, and our urgent need to transform the lives of our people with our current [oil revenue] windfall, a preferred option in the absence of total debt cancellation may have been a strong demand for the cancellation of all further interests and penalties on our outstanding debts while the balance sum is repaid at the rate of $1 billion annually rather than the immediate payment of $12.4 billion within six months; after all, we have already paid more than we borrowed. In any event we can learn from successful countries such as the US who continue to maintain a solid and ‘no shaking’ posture in spite of [an] $8 trillion debt profile.

However, even if, the government has made up its mind to pay, it may be prudent to consider other ways of paying the $12.4 billion without dipping into our own pockets. There is no reason why we cannot source for the funds in the international capital markets with benign condition and interest rates of about 2.0%. The Chinese, for example, are currently engaged in expanding their sources for oil and maybe encouraged to enter into a more favourable loan arrangement for the $12.4 billion demanded by the Paris Club, even if this entails a repayment of not more than $1 billion annually for 12 years with sensible interest rates or, in the alternative, an oil deal spread over 10 years with China! This would serve us better than giving away $12.4 billion in six months! In the words of Rev. David Ugolor of Jubilee Nigeria “this money ($12.4 billion) should be helping 80 million Nigerians who live in extreme poverty, not subsidising rich countries like the UK. If they take this money, they will be denying our people access to water, education and healthcare!”

Lles Leba, Vanguard (Lagos), December 12, 2005

Categories: Africa, Nigeria, Odious Debts

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