Debt Relief For Nigeria

Debt Relief For Nigeria, A Bogey?

Baba Kabiru Isa

So much have been written and said about Nigeria’s debt. They were either in the terms of debt servicing, rescheduling, outright cancellation, repudiation or forgiveness. Even the excruciating burden of the debt was never left out of the discourse.

The discourse is becoming more intense by the day with the recent debt relief granted the country by the Paris club of creditor nations.

While many have criticized the entire deal upon which the relief was premised as pyrrhic and callous, others viewed the recent euphoria with which many Nigerians, especially the president and his aides relished the debt relief as a big hoax.

Prominent among these dissenting voices are Professor Jeffrey Sachs, a Development Economics Expert who is currently an Adviser to the Secretary General of the United Nations on Millennium Development Goals (MDGs) and our own Dr. Chu S.P. Okongwu, a former Finance Minister.

No doubt, these two people have intimidating credentials that qualify them to shape public opinion on economic matters any day.

And they have variously knocked at the claims by the Nigerian leaders of successfully securing debt relief for the country.

Professor Sachs in particular took a swipe at the creditors as being nasty and stingy in terms of the framework of the relief deals. A renowned poverty eradication campaigner who sees debt forgiveness to Highly Indebted Poor Countries (HIPCs) as a veritable panacea, Sachs viewed the demand by Paris club for immediate settlement of the US $6 billion arrears and the buy back arrangement for the balance of US $6 billion as obnoxious.

His concern was, how can a nation whose annual budget hovers between US $3 and 4 billion cough out US $12 billion within this short period without causing serious set back to the fragile structure of the Nigerian economy. He fervently believes that Nigeria can bargain for some thing better and more worth while.

Other skeptics who are still finding it difficult to buy into the debt relief claim are using the minutes of the Paris club meeting of June 29, 2005 posted on their website to debunk whatever President Olusegun Obasanjo and his economic team’s taken as gift to the nation. Dr. Chu S.P. Okongwu subscribed to this particular disposition. To him, there is virtually nothing to celebrate for now. This is because his understanding of the position of the Paris club is that they are ready “to enter into negotiation with the Nigerian authorities in the months to come on a comprehensive debt treatment. Other components of minutes of the Paris club, June 29, meeting include the willingness of the Nigerian Authorities to take advantage of oil revenue windfall, conclusion of Policy Support Initiative (PSI) to be vetted by IMF, immediate payment of all arrears and a buy back at a market related discount on the balance of the debt stock. He therefore submitted that nothing has been concluded in debt relief for Nigeria.

Be as it may, Dr. Okongwu must have been driven by patriotic zeal of protecting Nigeria from falling into the abyss of “debt peonage” cum poverty. More so that the oil windfall is what both parties are targeting to seal the deal. He is further bemused, if, the Paris club members are not already “taking Nigerians for fools, who, do not know how to use revenues productively and certainly have no use for exceptional or windfall revenues”.

On the side of Mr. President and his anointed economic team, nothing other than patriotism and a call to national service was the driving force that saw them through the tortuous journey to secure the relief package.

According to President Obasanjo, debt relief for Nigeria is real and that the terms are unambiguous.

The relief is an out come of negotiations that took several months to conclude and at times at odd periods of the day and night.

Indeed Nigeria managed to get the relief even though it is not categorized among the Highly Indebted Poor Countries (HIPC) or included under the International Monetary Fund’s Monitoring – two of the pre-conditions to get such debt cut. What Nigeria did was to propose to the Paris Club a home grown programme, christened, National Economic Empowerment and Development Strategy (NEEDS), to reform and reposition the country on the path toward sustainable growth and development.

While explaining the pitiable situation to which the debt over hang has reduced Nigeria and Nigerians sometime ago, the Finance Minister, Dr. Ngozi Okonjo – Iweala painted a gloomy picture of resource depletion in the name of debt servicing. According to her, about twice the budget for health and 123% of the budget for education is being expended on debt servicing.

Nigeria being the most heavily indebted country in Africa to tune of US $35 billion and ranked as the seventh largest crude oil exporter in the world was never categorized among the HIPC. The country definitely needs to be freed from the shackles of debt. And the campaign was taken outside the shores of this country by members of the National Assembly.

The Finance Minister never failed to explain to Nigerians what the negotiation team went through to bring the Paris club of creditors to terms with the arguments marshaled out for debt relief.

According to Dr. Mansur Muktar, of the Debt Management Office (DMO) the relief did not come before now due to loquacious behaviour of our past leaders who were saddled with the responsibility of negotiating the relief on behalf of the country in the past. He further chided them for the nonchalant and self serving attitude towards this all important problem of debt overhang. There was virtually nothing to show for any form of commitment to really free the country from the debt quagmire .Of course this unserious- ness led us to where we find our selves today.

In designing a programme for economic reforms with which Nigeria confronts the creditors, a home grown option known as NEEDS, was conceived and packaged under the leadership of Professor Charles Soludo, the current Governor of the Central Bank of Nigeria. The Apostle of NEEDS, Professor Soludo, said they took cognizance of the hardship encountered by the citizens of this nation with the adoption and implementation of various economic reform programmes of IMF in recent past. Hence the patriotic desire to have a home grown reform programme package which IMF has since endorsed, as the best that can happen to Nigeria at this moment. The initial resentment of the programme by IMF not withstanding, the level of positive developments on the account of faithful implementation of the NEEDS initiatives has now won the debt relief.

Thus far, we have every reason to be convinced that debt cancellation or relief is real and well deserved. We must commend the spirit of patriotism which the economic team has displayed. It is their doggedness and unfettered determination to make their mark on the annals of history that really kept them going despite various frustrations encountered in wooing the creditors to the negotiation table.

President Obasanjo couldn’t have led a pack of Ngozi Okonjo-Iweala, Charles Soludo and Mansur Muktar to torment over 130 million Nigeria with debt relief. Yes, the relief cannot be a deceit. It should be noted that it took a political will on the part of Mr. President to provide the necessary support to the economic team and negotiators to attain this feet.

Soludo and Muktar have at different fora made it abundantly clear that there are no new conditionalities imposed on Nigeria as the much talked about Policies Support Initiatives (PSI) is not different from what is obtained in the NEEDS documents being implemented since 2003. It only needs to be formalized with the IMF so as to reassure the creditors.

And of course the oil windfall revenue is what is being targeted, but suffices to say that similar windfall which was enough to drastically reduce the debt over hang earned in the past was frittered away. So, what is really wrong if the current windfall is being committed to freeing Nigeria from being referred to as Highly Indebted Country (HIC)?

After all, there are no indications that oil price will fall bellow US $ 50 per barrel in the next couple of months .So we still have the opportunity of building the external reserve to a comfortable level even after off setting our debt with US $12.

Probably what is baffling the doubting Thomases is that for the first time, Paris club is agreeing to a deal without a formal IMF backed programme, which according to Muktar is unprecedented.

All that is now required of Nigeria is to rally round the government to ensure that the gains of the relief impacts on every Nigerian out there. At this point in time sentiments should be jettisoned in all ramifications. And relevant organs of the government should assist the negotiation team in explaining to the public what the relief entails.

As we look forward to September 2005 when proper implementation of the relief package is scheduled to commence, the debt relief is not a boogey after all.