Nigeria: beyond debt

Lisa Peryman

June 4, 2006
The rush to pay off foreign loans has derailed Nigeria’s chance to challenge its odious debts, claims Lagos-based lawyer and commentator Remi Ogunmefun in “Nigeria after debt relief“.

Specifically, Nigeria became the first African nation to pay off its
debt to the Paris Club cartel of western creditor nations in April when
it made a final payment of $4.5 billion of the $30 billion it owed. In
reward for fast repayment and for carrying out certain economic
reforms, the Paris Club had earlier agreed to drop $18 billion of the
total debt, leaving an outstanding amount of $12 billion to be paid,
which Nigeria has now cleared.

Although, Mr Ogunmefun concedes that the resolution of Nigeria’s
foreign debt issue has been “one of the landmark achievements” of the
country’s government and “probably saved millions of lives that could
further have been driven into poverty,” the battle has also “been lost
in some regard because we could not get total cancellation of the
debt.” In June 2005, Mr Ogunmefun had called
for the repudiation of Nigeria’s foreign debt on the grounds that the
debts were odious and had largely been incurred by a series of military
regimes which had used borrowed public funds for their own gain.

On the other hand, it could also be argued that the Paris Club was
eager to help Nigeria precisely because it had lobbied for debt relief
on the basis of an odious debts challenge. The country in its efforts
to obtain relief had argued that most of the money it had received had
been loaned to corrupt military dictators, a fact Nigeria alleged was
widely known by foreign banks and governments.

“Presumably, these arguments were not considered,” said Mr Ogunmefun.
“Apparently those in government considered it better to resolve the
debt issue on moral and business grounds, but at what cost?”

Although, an odious debts argument might not have been acknowledged
publicly, it is likely that the underlying threat of such a challenge
by Nigeria was taken into very serious consideration by the country’s
creditors. Rather than face opening the can of worms that would spill
forth from such a challenge, negotiating write-offs is a far more
preferable option that also allows creditors to appear magnaminous when
the truth is they have much to hide and much to gain from quelling
allegations of odious debts with the promise of debt relief.

Mr Ogunmefun is right to be concerned that when odious debts go
unchallenged legally, respect for people’s rights, the rule of law and
due diligence are set aside as well.

To avoid a repeat of the uncontrolled and unaccountable borrowing and
lending that resulted in Nigeria’s massive debt, Mr Ogunmefun is
calling for the establishment of oversight bodies and the strengthening
of laws to help protect Nigerian citizens from being looted by their
leaders in future.

Although debt is not necessarily the problem. Mr Ogunmefun points out
that “virtually all western countries” have considerable foreign debt
loads, in particular the United States, which ranks as the most
indebted country in the world.

“Yet no person in that country complains,” writes Mr Ogunmefun because
“in the United States and most western countries, foreign debts are
incurred with everyone’s knowledge,” supported by “structures and
legislations regulating this process.”

In the Third World, he says, there “is a complete departure from the
western standards” where “foreign debts are incurred without the clear
mandate of the people and nobody knows about them.”

To promote transparency and put an end to public theft and dubious loans, Mr Ogunmefun recommends the following for Nigeria:

• Legislation that specifically regulates international borrowing by
the government. Officials who are found to be in breach of the law
should face harsh penalties such as impeachment.

• The passage of a civil rights law that encourages citizens to
challenge government decisions which appear to jeopardize the well
being of the nation. (In response to westerners who ask “why in Africa
we allow our leaders to behave the way they do, dragging the progress
of our country down for their personal gain,” Mr Ogunmefun points out
that what westerners may not understand is the difficulties that
African citizens face. When there are no civil rights laws in place to
support citizens “who genuinely see things going wrong and wish to do
something . . . best practices cannot hold in an atmosphere when civil
liberties are not guaranteed,” he says.)

• The appointment of oversight committees by the National Assembly of
the Federal Republic of Nigeria to periodically review and assess
Nigeria’s foreign debt status.

• The promotion of foreign investment in Nigeria with a view to lessening the country’s dependence on foreign loans and aid.

Mr Ogunmefun also calls for the creation of a new international
financial institution mandated with the power to review and approve
loan applications from Third World countries, and charged with the
responsibility of determining loans that might prove ‘odious’ to the
borrower nation.

But, points out Probe International’s Patricia Adams, author of Odious
Debts: Loose Lending, Corruption and the Third World’s Environmental
Legacy, there is no institution better able to evaluate whether a loan
is odious in its origin or not, and to ensure that it isn’t odiously
used during its dispersal, than the lending institution that stands to
lose its claim to repayment if the money is not used in the interest of
the people.

The best way to keep lenders on their due diligence toes, is to ensure
that the threat of non-repayment keeps them vigilant. Furthermore, she
adds, the danger in appointing a third party institution to screen for
odious loans is that it would rob citizens of a borrowing nation of the
future right to challenge a loan that looked legitimate in the
beginning, but was used in odious ways.

Categories: Africa, Nigeria, Odious Debts

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