Nigeria’s External Debt: Which Is More Unsustainable – The Debt Or The Repudiation?

By

Attorney Aloy Ejimakor

Washington, DC United States

alloylaw@yahoo.com

 

 

This commentary follows on the heels of the resolution recently passed by Nigeria’s House of Representatives calling on the President to unilaterally “stop” or “halt” further payments or servicing of Nigeria’s external debt. Parliamentary words of art like “stop” and “halt” may have been used as euphemism in the news reporting of what our legislators truly intended. However, a plain reading of the entire legislative history, particularly the remarks made by several lawmakers before and after the resolution passed indicate that the true sense of the House is one of a popular desire for repudiation or willful default of the country’s foreign debts or at least, an indefinite suspension of all further payments and servicing. “Repudiation” itself is a word of art used to describe any of the situations where a sovereign unilaterally takes matters in hand and intentionally stops or stalls further servicing or repayments of its debts. The House drew parallels with Brazil and, to a greater extent, Argentina which either had defaulted in the past or came damn near close to it. Well, the House was just about right because, at some point in its own unique burden, Argentina failed to meet deadlines set for servicing and repayments. But Argentina’s default was not intentional or dressed in the garb of a willful state action, and thus can hardly represent the clear repudiation contemplated by Nigeria’s federal legislators. And the case of Brazil is also different because, in August 2002 when it nearly came to pass, the IMF, backed by the unalloyed support of the Bush Administration and the goodwill of many nations, announced a hastily arranged loan of 30 billion dollars to shore up Brazil and brace against the imminent default. That says a lot about how jittery the epicenters of international financial system and order can become at the scary specter of even something as watered down as an unintentional default, occurring in the ordinary course of a sovereign’s good faith struggles with its external debt burden. So, much of what was not addressed by the resolution, aside from the summary call for repudiation, is the extent to which Nigeria’s present travails can be said to have risen to a level that should warrant solutions more drastic than the policy the nation is presently pursuing in its attempts to deal with her external debt burden. That policy, consisting primarily of rescheduling and cancellations talks, is already hurting Nigeria’s credit reputation and her standing as a ranking emerging market worthy of the requisite confidence critical to attracting foreign investments and capitals of note.

 

Most observers will agree that in calling for repudiation as a “final” solution, the House was no doubt primarily motivated by patriotic fervor fed by the increasingly great burden Nigeria’s external debt has continued to impose on her citizens. This surely comports with the popular feelings of vast majority of Nigerians. And the other, and perhaps more appealing reason why such drastic measure would receive public support, is the well- founded suspicion that a significant portion of the debts at issue, especially the ones owed to the combine of private lenders called London and Paris Clubs, are questionable to varying degrees. Yet another reason is the public’s lack of appreciation of the long term consequences of repudiation or default, willful or otherwise; and the extent those consequences might pale in comparism to the usual hardships occasioned by the nation’s present levels of commitment to repayment and servicing. This throws up the obvious question: Judging by the current effects of the debt burden on Nigeria’s economy or its drag on the GDP, is there more to lose or gain if the nation buckles under to seek the final solution represented by repudiation?

 

First of all, it is probably not fiscally possible or sensible for Nigeria to repudiate her debts to the World Bank and the International Monetary Fund, or even the African Development Bank because Nigeria is either a member nation in good standing or has substantial foreign exchange deposits, reserves, or special drawing rights in all or some of these international financial institutions. Nigeria’s repudiation of these debts will almost be like repudiating her domestic debts to the Central Bank of Nigeria. It does not make any sense at all and will amount to yet an unheard of act of state irresponsibility and irrationality to repudiate debts to Banks that a nation co-owns, or in which it has substantial deposits or reserves of foreign currency. Any nation that treads this path can expect the repudiation to be largely futile because her currency reserves and other negotiable instruments held at such institutions will immediately become subject to seizure and the proceeds will be applied to repaying the debts the country is repudiating anyway. This is besides the retaliatory actions that will surely come from the nations that got burned. It is therefore a double whammy of sorts when your ineffectual repudiation still begot you international isolation to boot. An illustration, though a little off the mark, is to imagine Nigeria repudiating her debts to her central bank, where it is the sole shareholder or even any of the domestic commercial banks where it maintains substantial cash deposits and other instruments. How does that sound? Well, very weird and highly unlikely. Though the House resolution did not clearly create an exception, we can assume that what it delineated for repudiation is the “other debt” – that popular “whipping boy” of the compassionate minority which had held steadfast to the mantra of sovereign repudiation since the world began to see how prostrate foreign debts have rendered developing nations. That other debt is comprised mostly of the ones owed to the so-called London and Paris Clubs of private lenders.

 

Generally speaking, a sovereign, just like any private citizen in financial distress is not prevented by any “criminal” statute to take the self-help option by repudiating all her debts. But does it really help to repudiate? Yes, it does help plenty in the short run because you can enjoy the brief palliative and ultimate high of your new found power to say no to your creditors (read: tormentors), and literally tell them to “go to blazes”. It is more like finally getting the hefty monkey of your back but only for a little while before it jumps back up. A sovereign can expect its economy to immediately become awash with new monies freed from its future commitments to debt repayment and servicing. In the case of Nigeria, the national budget will see an unusual “surplus” of roughly 20%, poignantly reminiscent of the oil boom era of the early 1970s when the nation felt so heady under Gowon that it undertook the payment of salaries of civil servants in some Caribbean nations. Today, what Nigeria will do with this surplus can range from financing ambitious infrastructural projects and social services to another Udoji Award. Properly spent or not, the temporary reprieve brought by the repudiation quickly begins to wane as those whose debts you repudiated scramble to squeeze you with myriad legal, diplomatic, trade, and even political pressures to backpedal or lose your sanity. Consider a private citizen who can still afford to, but suddenly ceases any further repayments of his debts. The extra cash he gains can be deployed to either buffering his health insurance or buying his mistress a new car. You can never be too sure that those charged with managing Nigeria’s own surplus will not use it to buy their mistresses new cars. Nonetheless, the drag that comes with sovereign repudiation is more like the enormous psychological pressure a debtor domiciled and obligated in America unwittingly brings upon himself when he repudiates his credit card debts, car notes, or mortgage without legal cause. Well, barring the protections offered by the United States under her federal laws, your creditors are likely to unleash and inundate you with telephonic and postal harassment, a sort of “low tension” equivalence of the “baseball bat” debt collection tactics known to be favored by the Mafiosi in Chicago and New York of the post-Depression era. If it is your car note you repudiated, then kiss the car goodbye because you will be trailed to your job or the grocery lot until they find the car and repossess it. If it is your mortgage, you might as well begin the arduous process of applying for consideration for public housing under America’s infamous “Section 8” scheme. In the interim, you may find yourself and your chattels on the hostile sidewalk, and save what American jurisprudence calls “equity of redemption”, your house is a goner forever, and you might still owe plenty after the foreclosure and sale. And in addition to all these troubles, you will not sleep well, enjoy a moment’s peace, and every telephone call or mail to your home or any other contact number or forwarding address known to your “tormentors”, otherwise known in common parlance as “collectors”, will give you a start and a mild blood pressure. And above all these, you will be deemed a very bad credit risk, and your credit reputation will be ruined for a whole seven years. Anywhere you go to apply for even the most infinitesimal amount of credit, your bad reputation already preceded you and your Social Security Number becomes the beacon that warns an entire nation that you must not be trusted to honor your obligations. Conversely, if you live in Nigeria, and you dare repudiate, your creditors will find a way of criminalizing the act and getting the police to take you into custody on account of it. More terrible repercussions might be brought to bear and some, if not most will be extrajudicial. However, in both societies, legal protections are in place to shield any debtor who suddenly falls on hard times and becomes unable to pay up. The difference lies in reach and practice. In the United States, much of these protections are industry-managed, but the “mother” of all debtor-shield is the one offered under the bankruptcy statute. Generally, a private citizen can wipe out his entire debt, except for child support arrears, in a bankruptcy proceeding brought before a federal court. There may be other nuances here and there, but in the main, you can expect to walk away on a clean slate and begin afresh after scaling through the lengthy and inquisitive forms required, and surviving the harrowing experience of having to sit through the proceedings and admit on the record that you have failed to live up to your word. The Nigerian bankruptcy regime is less clear but one is wont to assume that it likely has some of the fine points of British common law from which both American and Nigerian legal systems derived. So, on the whole, the human society everywhere is smart and compassionate enough to offer succor to its members who for any reason, suddenly become unable to repay their debt. It is an across the board pious obligation that has origins in the Judeo-Christian, and even Islamic traditions which teaches us to show forgiveness and compassion to those who become truly destitute out of no fault their own. But there is a quid pro quo, a price to pay for being let off. In the United States, your insolvency becomes public record and the entire nation is put on notice for ten years that you have been excused and set free from all your debts at public mercy. But what does that get you? Well, once the gavel falls, you get to feel this peculiar euphoria of being “free at last”. But surely some hard times lie ahead when every potential new creditor runs for cover each time you apply for credit and their computer terminals lit up with shouting imagery of your severely damaged credit record. Such is your lot for many years to come.

 

But what about a sovereign? What becomes of this vast mass of legal fiction, an incorporeal political entity that has no blood and veins but with plenty of perpetual succession, and constituted of humans with blood and veins? Strictly speaking, under the rules of private international law, and the settled commercial customs and conventions of civilized nations, a sovereign has no clear legal right to willfully repudiate her foreign debts. Certain arcane rules of public international law, influenced largely by diplomatic expediencies than jurisprudence, may be more flexible. Repudiation of debt per se is unlike garden variety expropriation of foreign property which has clearer rules of engagement where a sovereign can, for limited reasons, such as brought by revolution, war or diplomatic retaliation, nationalize, expropriate, or forcibly take over foreign property. You can call it an act of eminent domain with extraterritorial impact. Even then, and despite the payment of adequate compensation, expropriation is generally and universally disfavored, and it often provokes some very unpleasant consequences such as economic sanctions, diplomatic isolation, seizure, and extraterritorial litigations. Even the highly tenable defenses of force major or fundamental change of circumstances is not complete to prevailing against the avalanche of world wide condemnation that follows expropriation of foreign holdings. This illustration is germane because expropriation compares well with repudiation in the sense that both actions constitute a unilateral sovereign action to suddenly disregard settled rules of law to breach vested contractual and legal obligations. However, much to the chagrin of lenders, some respected commentators have argued a fortiori for some form of recognition of complete or even limited defenses to sovereign breach of foreign debt. Force major or Act of God, and its close second, fundamental change in circumstances have been widely bandied as possible defenses. If such defenses should become acceptable, it means that a sovereign can only repudiate by asserting one or all of these defenses, at least colorably before the repudiation can receive any consideration of sympathy and grudging support. The rationale for these constraints is simple. And that is: a foreign debt is but a basic contract that carries the usual obligation for specific performance, requiring the sovereign borrower to repay what it owes. This rationale continues to stand because any opposite rule will surely be disruptive of commercial intercourse between nations, and may even impact negatively on world peace and tranquility. But we must be careful to distinguish “nonconsensual” repudiation from “repudiation by consent”, if you will. The later arises when borrowers are freed from their obligations by the volitional act of their lender, often at the prompting of their home governments. It usually follows the trail of a major upheaval of the sort that naturally galvanizes the entire world community to band together in a common effort to jettison vested contractual obligations to play “Mr. Nice Guy” for a change. You can call it debt cancellation without the protracted wheeling and dealing.

 

In the case of Nigeria, the national legislators who passed the resolution calling for repudiation sought to offer some legal justifications for doing so. One is that servicing and repayment of Nigeria’s external debts require up to 20% set aside annually from the federal budget with the result that expenditure for capital projects suffer. Another is the notion that some of the debts, mostly the private ones are either bogus or incurred under circumstances that raise some doubts about their validity. Yet another is the great burden that has become the lot of Nigerians because of the escalating costs of debt servicing and repayment without any appreciable reduction of the high balances. In other words, infrastructure and social services like education and health have suffered largely on account of the constant burden brought by these debts. And the catch all - that the debts have become unsustainable, partly evidenced by numbers indicating that the debts are either escalating or have remained constant despite the annual repayments and servicing. The proponents have even resorted to “legal precedents” by citing some countries which have “repudiated” their debt in the past. But what remains unsaid, or at least said sotto voce is the murmurings that a significant portion of these debts were as a result of over-borrowing by some of the military (read: illegal) regimes Nigerians initially embraced and then abhorred with hindsight. So, the real question is whether any of the grounds adduced by the legislators meets the definition of force major or changed circumstances or even some inherent illegality that can sustain a unilateral declaration by a democratically elected government of Nigeria to dare international community and repudiate Nigeria’s foreign debts. Although these defenses have not yet attained clear-cut universal recognition as grounds that can justify sovereign repudiation, they continue to possess strong universal appeal largely because they were propagated by jurists of world renown and thus have gained status as legal treatise. This supposes, therefore, that defenses like these are indeed theoretically assertable either in an international or municipal judicial proceeding or as diplomatic planks to support a political act of repudiation by the state. But before you even begin to advance these defenses, you need to work out the numbers to establish a fiscal climate that can best make the case. The numbers are in Nigeria’s debt to GDP ratio.

 

Both in the United States and Nigeria, a private citizen who is spending 20% of his income on “debt servicing and repayments” can hardly be deemed to be undergoing a fundamental change in circumstances that can adequately justify repudiation of his debt. If he as much contemplates repudiation merely because 20% of his income is going to his debts, he will be dismissed as either unserious or unreasonable, and treated with levity. And no bankruptcy court can let you off on a case that comes with such income to debt scenario. After all, a lot of people can carry or sustain a 50% debt to income ratio and still live well and not raise a whimper. That said, but is there any special characteristic a sovereign possesses that distinguishes it from an individual in similar fiscal circumstance and makes it harder for the sovereign to make do on 80% of her “income” or unsustainable to spend 20% on debt servicing and repayments? There is hardly any, especially since the sovereign, in territorial terms, is an aggregation of the individual human units living within its geographical boundaries. In strict economic logic, the sovereign’s 20% burden is an “aggregate” version of the individual’s 20% “per capita” burden. In other words, if Nigeria were to divide every kobo in the federation account amongst her citizens, everyone will have to turn around to fork over 20% of that to the country’s external lenders. Therefore, it is highly unlikely that current numbers can reasonably make the best case for changed circumstances. With this in view, whither the force major? Well, it goes without saying that the gross effects of 20% debt burden on the national “cake” is to force major what square pegs are to round holes. And that Nigerians are suffering is hardly on account of the 20% of their national budget that is set aside for foreign debt servicing and repayments. There is more diagnosis to it when that suffering is glanced off the 80% left over in the national purse. Again, most people, even the most committed supporters of total debt cancellation will not subscribe to the notion that a private citizen is “suffering” merely because he is spending 20% of his income on debt servicing and repayments. If he is still suffering atop the heap of the 80% left in his kitty, then his pockets must have developed some covert holes that he cannot as yet fathom. Anybody who cares to listen to his lamentations will tell him straight to his face to examine his pockets first, and look to himself, not his creditors as the architects of his suffering. And any suffering not brought by factors beyond our control will make a very hard sell. Without intending any insensitivity, it is not as if Nigeria suddenly got hit by the Tsunami or Hurricane Gilbert. The didactic lesson is this: that until Nigeria begins a bonafide effort to rid itself of certain fiscal wastes of its own making, the world may continue to be largely skeptical of the nation’s otherwise meritorious case for cancellation, not even repudiation. Think about trying to repudiate or cancel your note on a Beetle while still gallivanting around in your fully paid up Learjet, pretending that your lender is too naïve to notice.

 

This brings us to the point least made by the legislators as an additional basis for calling for repudiation, and that is the questionable legality of some of the debts based on the well-founded suspicion that the books were cooked to burden Nigeria with debts which were never disbursed to the country’s public coffers. An ancillary ground is the one that alleges that the debts were either contracted without proper legal documentation and paper trail required for bestowing validity or that the Nigerian head of the government of the day, for reasons of unjust enrichment of self, succumbed to usurious terms rammed down his throat by conniving lenders. These arguments gain further strength when the debts at issue were contracted by military regimes that Nigerians continue to see as legally incapable of binding them to any international agreements. So, while it is widely acknowledged that an “illegitimate” government cannot, in pure legal theory, bind a country it is ruling by force to international agreements, practical considerations and ordinary comity between nations dictate otherwise, especially in a situation where such illegitimate government has gained diplomatic footing and assumed the character of a de facto regime. This is why some of the arguments seeking to offer “regime illegality” as a complete defense to repudiation is at worst dismissed as simplistic and fringe, and at best, may be considered only as a mitigating or persuasive factor when time comes for renegotiation or rescheduling. But that the amount borrowed was immediately diverted to the secret private accounts of a dictator is even a better argument but still universally deemed an inadequate defense, except to the limited extent that the succeeding government can expect to get some temporary reprieve while it pursues and tries to recover the loot from foreign bank vaults. The Marcos and Abacha loot recovery cases come to mind.

 

Nonetheless, the point is often missed that since the beginning of modern transactional law, you can literally ignore a lender who lacks legally sufficient proof of the debt he claims. And this is true under the rules of private international law, and domestic rules of contract both for the personal debtor, a corporation, and even a sovereign. In the United States, if your creditor sues you to enforce the debt you owe him, he bears the burden of proof, and once he carries that burden, the only complete defenses you are permitted are either that you have paid, and you must prove it, or that the debt never existed at law, assuming you are in possession of evidentiary materials that can successfully rebut the creditor’s case-in-chief. In other words, and for purposes of this discourse, you are not obligated to repay any debt which remains unproven, and you might even get lucky and walk away with a collateral judgment for your costs of defending such a “frivolous” action. Alternatively, you can repudiate a legal debt by resorting to bankruptcy, but make sure that it is not a cheap ruse and can pass the muster of closer legal scrutiny. Nothing prevents a corporation from successfully asserting the same defenses. And even when the debtor is a sovereign, legions of legal treatise exist to support the proposition that a sovereign is not legally obligated to service or repay a debt that does not exist at law or one that has no legal proof of coming into being. It is that simple, and a truism. Just refuse to pay, and dare your creditor to commence collection, legal or other proceedings to compel payment. But sovereign bankruptcy? No way, because it is a legal concept that is not yet accorded universal recognition as a complete defense to sovereign debt, even when that sovereign is really broke for the entire world to see. Another way of looking at is to contemplate a judicial proceeding that lies before a Nigerian federal high court to enforce Nigeria’s domestic or even foreign debts and Nigerian government’s statement of defense includes an averment that the country is bankrupt. This is surely, an argument of first impression as well as one that could cause their Lordships to be deeply troubled and puzzled. So, if that argument cannot fly in your domestic courts, why should you expect foreign courts or some international court, like the one at The Hague to consider it? The closest the world has come to foisting a universal sovereign bankruptcy regime is the largely failed proposal by the IMF to design a comprehensive one that is comparable to common law corporate bankruptcy statute. And even if “passed” in its present state , the proposal is widely seen to be contain so many unsettled issues of law and diplomacy, such that will certainly create more teething problems for nations rushing to take advantage of it as a quick route out of a debt logjam. So, despite its far reaching clout and credibility with the traditional sources of international lending, IMF’s spirited effort to codify a universal system of sovereign bankruptcy merely remains a common roadmap that may be deployed as basic guidelines for lenders and borrowers mired in the unclear process of sovereign debt rescheduling. This is hardly comforting to proponents of outright repudiation. But there is hope. If the Nigeria can proffer any reasonable grounds capable of legally impeaching the veracity of any portion of the country’s external debts, then its options are clear and unassailable: Stonewall the “creditor” until it offers legally sufficient proof thereof. But is such proof more possible now than it was before? Hardly, because, I doubt that the federal government of Nigeria still harbors any misgivings after the tedious verification exercises that were carried out in the past. So, unless we have evidence that can impugn the results of the investigations that verified that Nigeria owes the odd 35 billion dollars to her external lenders, we must now assume that no part of the country’s current debt portfolio is sufficiently questionable to warrant a sustainable repudiation or default. That being so, what will really happen if Nigeria, a bonafide member of the community of civilized nations and a favored beneficiary of the international financial order suddenly acts out of character and repudiates the larger chunk of her external debts to private lenders? The reactions will be swift and predictable, and it can range from the initial disbelief and shock to one of a frenzied scramble by the nation’s obligees to thoroughly examine all their options in what is likely to become an epic collection action of global proportions. As in the case of the harried private citizen debtor, you can expect that the President of Nigeria has murdered his own sleep and that of his fellow country men women in one fell swoop. Aso Rock, the once comfortable and dizzying seat of Nigeria’s very powerful presidential government will be a beehive of activities, most of them unpleasant and disruptive. Aside from the customary and perfunctory “solidarity” visits by the traditional rulers and perhaps some of the legislators who had sponsored the resolution, Obasanjo can expect to be isolated by Nigeria’s intelligentsia, financial moguls, leaders of industry, informed governors, and indeed almost the entire international community. His own finance minister, a woman with a helluva of reputation around the world financial circles, might even resign in protest and embarrassment. In the disruptions that ensued, the attention of the President and the country will begin to be diverted from almost every other important business of government as the nation becomes consumed in managing a crisis in which it does not have the benefit of prior experience. You cannot invite Argentina or any other country with a “prior experience” to manage the escalating crisis for you because the lenders to whom these other nations are still beholden despite their so-called “repudiation” will see to it that none of them becomes handy to assist Nigeria in its hour of self-inflicted distress. That leaves the country at the mercy of fly-by-night “mercenary repudiation crisis managers”, who can be expected to be as shadowy and conniving as their military genre. These are the initial fallouts, and as the days become weeks, you begin to hear of aggressive lawsuits and tall claims in far-flung courts in America, Britain, France, and other countries.

 

That Nigeria will be compelled to defend herself in potentially hostile foreign courts is not by accident, neither is it the result of “forum shopping” on the part of her obligees. It is so, because in the complicated business of international lending, every lender usually insists on, and obtains a contract of adhesion requiring all legal disputes concerning the debt to be subject to adjudication only before foreign courts of law applying laws other than that of the borrower. These clauses are called “choice of law” and “choice of forum”; and they are often nonnegotiable not only because they have come to represent somewhat of a standard contract but also for the reason that a nation in dire financial straits is in no position to call the shots when negotiating its way out of the mess with a tough and largely distrustful foreign lender. So what do you get? Avalanche of lawsuits filed against Nigeria in foreign courts that can easily assert either inherent or long arm jurisdiction to hear and determine the suits. Once such legal actions commence, Nigeria must defend against all of them or risk the entry of default judgments for her failure to appear or defend. Assuming that the country obeys the many summons and begins to defend against, say 20 billion dollars part of the debts she repudiated before American courts, you can expect that the legal fees will be enormous, perhaps running into hundreds of millions of dollars. And because of Nigeria’s now severely damaged credit reputation, none of her American lawyers on retainer can be expected to take the case on “contingency fee” arrangement. So, most, if not all the legal fees will have to be paid upfront or no dice. Before long, the scenario quickly assumes the character of defend and lose billions or do not defend and still lose billions more. Talk about the devil and deep blue sea. And arraying the best legal eagles in America to defend against the suit will unlikely guarantee a verdict or judgment in your favor if you cannot successfully assert one of the limited defenses enumerated in the foregoing paragraphs. And if any of the defenses are accepted at all with its inherent limited reach, perhaps as a matter or defense of first impression, the best you can ever hope to get is some kind of judicially imposed “debt rescheduling” which you already have anyway as a legal option before the repudiation. So, what is the final legal picture? Nigeria will still be stuck with the debt in addition to more hundreds, or even billions of hard currency in legal fees, debt acceleration costs, attorneys and other costs incurred by her lenders, court costs, and other expenses incidental to defending an international suit of attrition in a foreign land.

 

And then, the sanctions, this time-tested non-judicial punitive measure that has brought great but recalcitrant nations to their knees. Nigeria will immediately become an international pariah as the door of every nation, including even the most sympathetic ones are shut on her face. The country’s assets in foreign and international financial institutions will be frozen and become subject to immediate seizure. The country might have to sell its oil for “cash” because foreign banks can no longer be trusted to remit any new monies deposited by Nigeria’s customers. Letters of Credit from Nigerian banks will become dud and as such, Nigeria’s importers may also have to resort to cumbersome “cash” payments for the nation’s imports, critical and mundane. And then the host governments of the lenders hurt and burnt by Nigeria’s action will wax patriotic and begin to tighten the noose of the sanctions as they deploy their enormous clout to levy a barrage of economic, diplomatic, and even cultural isolation of Nigeria. With these many darts being hurled at a lonely Nigeria from all directions, the country’s economy will begin to suffer, domestic financial market will virtually come to a halt, and the value of Naira will plummet dangerously since the foreign reserve that partly shores up its value has since been frozen. The “end game” is social and even political unrest as Nigerians from the grassroots levels to the ivory towers begin to feel the effects of the economic and financial crisis coursing through their helpless nation. Social critics, pundits, students, labor, and leaders of thought will, despite their patriotism, bare their fangs and self-righteously begin to blame the President for taking such a “dangerous” decision. Politicians, including even the ones who sponsored the resolution will abandon ship and begin damage control to save face with the electorate as they join in what may blossom quickly to a national call for the resignation or impeachment of the President. Many others may even postulate that the President was motivated by “hidden” agenda that includes using the repudiation to intentionally cause social unrest as a subterfuge to suspend or amend the constitution to serve a third term. As the nation boils and roils, security forces, represented by Nigeria’s highly politicized Army will become restive. Coup rumors, both “phantom” and real will become the order of the day as the nation braces itself for what may become the first coup that stands the chance of garnering the instant support and recognition of nations which have, as a matter of longstanding public policy, abhorred any forcible change in government. Just imagine if the world would have banded together to force Eyadema’s power-usurping son from power if the manner of his coming was an overthrow of a government that repudiated Togo’s external debts. America and other model democracies will likely abandon their steadfast aversion to military coups and begin to outdo each other as they offer diplomatic recognition to the “new government” on a platter. And, of course, the new government will immediately reverse the repudiation as its first order of business, if only to prove to the world that it is a “responsible” government.

 

Although, it is quite possible that all these may not come to pass in the proportions that have been hypothesized, but why should Nigeria willfully court such a risk when it is already on track with debt rescheduling and cancellation talks? The technical details of rescheduling, restructuring, renegotiation, and cancellation are beyond the scope of this discourse, but you do not have to be a rocket scientist to reckon that these other measures, standing as alternatives endorsed by lenders, carry almost no risk at all in comparism to the unilateralism inherent in repudiation. The process of rescheduling, cancellation and their like may be demanding, but without any universally promulgated bankruptcy defense to sovereign debt, these other third measures are the only options open to any responsible nation which seriously desires, and merits some debt relief. And as Nigerians ponder the nation’s debt dilemma, three very important questions need to be considered to boot. First, is: whether it is really true that the nation’s infrastructural decay is attributable to the 20% earmarked from Nigeria’s national budget for external debt servicing and repayments? Second, is: to what extent has Nigeria’s high debt profile discouraged further over-borrowing and foreign debt-based capital expenditure? And the third relates to the title and theme of this discourse, and that is: after reading this essay and perhaps many more like it, do you still subscribe to the notion that repudiation or willful default is more sustainable than the current level of debt servicing and repayment? And finally, as the world ponders Nigeria’s push for cancellation, it needs to look less to legalities and profit but more to pathos and the human elements marooned inside a country that is so monumentally burdened. If some novel “structural adjustment” is necessary to ensure that the new funds freed from debt cancellation must be channeled to specific infrastructures or economic programs to spur new growth, the world needs to say so with the confidence that Nigeria can be trusted to comply for the sake of her citizens.

 

Aloy Ejimakor

Washington, DC United States

alloylaw@yahoo.com