Debt Relief for Nigeria

Debt Relief for Nigeria- A Wake Up Call

John Iyobhebhe

The Paris Club of Creditors decided recently to grant us partial relief from our massive debt to its members. Effectively 60% of Nigeria’s external debt, totalling about US$20B, is to be written off. This represents slightly less than Nigeria’s annual income from oil sales. The mechanics and details of the relief will be worked out over the coming months between the Club and the Nigerian Government.

Are we happy with this? Well, we had few options. It is their money and legally we had an obligation to pay. Debt repudiation was no real option for a country that desperately needs foreign investment to move forward. We would have preferred a total write off for reasons we have all flogged to death, but nevertheless we appreciate the gesture from our creditors. Something is better than nothing, in my view. It is not the total success we wanted (100% relief), but it is not a failure either. They pretty much met Nigeria half way. It basically means less money going out to service our debt and more funds retained in the country to help our economic reform programmes and more money for HIV/Aids, Education, Healthcare, Roads, Electricity and basic development infrastructure.

If we are saving US$1B in repayments per year over the next few years it means, in real terms, less than US$15 per Nigerian per year. The total relief means less than US$300 per Nigerian-basically, a relief of about a year’s worth of GDP per capita for Nigeria. When viewed in this context it does not look as impressive as the absolute figures of US$1B per year and US$20B over the coming years. In real terms they have given the Nigerian government about US$300 to spend on each person in Nigeria- not a massive sum in real terms. We all know that if the Nigerian government decides to reinvest the savings in HIV/Aids Relief and care alone, the US$1B per year will not meet ¼ of the cost, if we really want to provide a half decent care regime in Nigeria. But, it is still better than nothing. In my view, a substantial proportion of the annual US$1B savings should go to HIV/Aids relief and healthcare. The Nigerian government is just not giving the HIV/Aids crisis the seriousness it deserves in terms of funding.

The question why they did not grant us total relief is still valid. They could have given 100% relief if they wanted; and it would not have brought down the Western banking system. That, we know for sure. I think if we are to be honest with ourselves, we never really expected the Paris Club, with a preponderance of private creditor institutions, to write off all our debts in an instant. These are commercial institutions, not the IMF, World Bank or the ADF. I think they did not give us total relief for a number of reasons. First, we are a major oil-exporting nation, earning billions of dollars per year on oil exports. So in relative terms we are considered to be slightly better off and less deserving of total relief than those nations with no real hard currency generators. Second, there is the perception, fuelled by Nigeria’s missing billions in Western banks that Nigeria is not as poor as claimed because Nigerian individuals have billions of dollars in bank accounts across the globe? Third, the view that they would be sending the wrong signal on fiscal discipline, corruption, lack of strategic planning, bad governance, inefficiency and waste to Nigeria’s rulers if they write off all the debt. Fourth, Nigeria has a healthy foreign currency reserve, unlike many African nations. Finally, I think they don’t want to give the impression or signal that all is well with the economic reforms in Nigeria. They believe we are on the right track but that we still have a long way to go; and to cancel all our debt may push us back into a false sense of security.

In political terms, the relief is a signal of encouragement to the Obasanjo government to continue its current economic, fiscal and political reform programmes that will hopeful help Nigeria fulfil her potential. So partial relief is, if you like, a form of saying: ‘well done, but you are still on probation’. That the Jury is still out on whether we can truly turn things round for the majority of our people. Nigeria cannot have a situation where more than 80% of her people live below the poverty line on a daily, yearly and lifetime basis. That is the challenge for the Obasanjo regime and future governments in Nigeria. It is a gigantic challenge. It is not to be underestimated.

I must say that I never thought for one moment that we were going to get nothing out of the talks with the Paris Club. We always knew we were going to get something. I was hoping for relief in the region of 70-75% now and the balance written off in the next few years if we can show that we can manage our resources better. However, if the net effect of the 60% relief is to make Nigerian leaders stop and really think about how things have gone so wrong in the past and force them to put mechanisms in place to prevent a repeat in the future then there could be merit in it. If we can meet the current reduced repayments, there is no reason why in 2-3 years time we cannot go back to the Paris Club and negotiate or beg for the balance to be written off. It is not impossible-provided we do not run up new debts and we can show that we are taking practical steps to improve the economy, transparency, good governance and making a real attempt to improve the lives of ordinary Nigerians. International sympathy is for total debt relief and a fresh start for Africa, including Nigeria. It may not be a bad idea if we can push on this point. We should pay the reduced amount but insist that if we meet certain preconditions in the next 2-5 years they would review the package with a possibility of total relief because we all know that 100% relief for Nigeria will not break the Paris Club. In fact, it is a drop in the ocean for them and they will not miss it. I think if we play our cards right in the next few years this is a real possibility.

Does partial debt relief call for celebration? I don’t think so. It calls for national self- reflection, new leadership psychology and a more effective economic development strategy for Nigeria, more like. Nigeria is still in crisis management, let there be no doubt about that. It is temporary relief from our national debt, but the main question of how to make Nigeria an economic success still remains. This is the job of Nigeria, Nigerians and their leaders- not of the G8, Bob Geldof, Blair, Paris Club, the World Bank or the IMF. The biggest job of all is still the responsibility of Nigerians. There is a responsibility to establish proper fiscal discipline; not to engage in reckless and irresponsible borrowing in the future; have responsible and patriotic leadership working for the best interest of Nigeria, instead of their private Swiss bank accounts; and to establish transparency and the rule of law. Whether the 60% relief will be felt immediately in terms of improvement in living standards for the average Nigerian is a different matter all together. We should wait and see.

Does it call for self-congratulation? Well, I don’t think so either. I think anyone who has been involved in government or leadership position in Nigeria in the last 40 years contributed, directly or indirectly, to the mess we are in today. And a lot of them are still around or hanging around the corridors of power in Nigeria today. So I don’t think they should be congratulating themselves for the partial relief we obtained from the mess they got us into in the first place. In the end, partial relief was obtained because of the international realisation of the crippling impact of debt on development and a determination by governments and anti-poverty groups around the world to give Africa’s most populous nation a fresh start out of poverty. Basically, common humanity has prevailed more than anything that we may have done ourselves, although President Obasanjo’s economic reform programmes and anti corruption campaign aided the case in a big way. And we must never forget our good friends at No.10 and 11 Downing Street, London SW1 for their efforts and concern. It is quite clear from the records that our British friends have been far more compassionate and caring about our plight than Uncle Sam.

It is time for Nigeria to stop, listen and think about where she is going as a nation. Without permanent democracy, the rule of law, patriotism, good and wise planning, hard work and good leadership there can be no progress. Nigeria cannot afford to be in the same position in 20 years time. Nigeria must quickly resolve her domestic political contradictions; establish democracy, transparency and the rule of law as a permanent way of life; get serious about making life sweet and happy for the majority of her people; fulfil her true potential and start playing her natural leadership role in Africa with confidence and pride. There can be no pride and confidence if in 20 years time we are still talking about debt relief, poverty and GDP of US$300 per capita in Nigeria. I, for one, would not like to be talking or writing about debt relief in 20 years time. I am sure that tireless and great campaigner, Sir Bob Geldolf, would be sick to his stomach if in 20 years time we are still talking about debt relief and poverty in Africa. It is a wake up call and a fresh start for Nigeria, not a case for national celebration or self-congratulation.

WAKE UP, NIGERIA. WAKE UP!

John Iyobhebhe Iyobhebhe@hotmail.com