PEOPLE AND POLITICS BY MOHAMMED HARUNA Paris Club Debt: What Price, Exit?
But for the double tragedy that struck Nigeria two weekends ago, chances are that Nigerians would have since been drowned by a cacophony of official celebration of at least three government “successes”. An indication to this effect was President Obasanjo’s national broadcast, October 25, on the death of the First Lady, Stella, and the crash of a Bellview aircraft which claimed the lives of all 117 passengers and crew on board. “The successes gained in the first six days of last week that included the IMF acceptance of our Policy Support Instrument (PSI), indication of noticeable improvement in Transparency International’s rating of Nigeria among other nations, and the signing of the debt relief agreement with the Paris Club”, the president said in the very first paragraph of his speech, “has been overshadowed by the tragic incident of the Bellview aircraft crash at Lisa in Ogun State and the sudden death of my dear wife, Stella, while on holiday and without noticeable illness.”
Now that we have put the period of mourning behind us at the urging of the president himself – “After the period of mourning”, he said in his speech, “let us move on” – it should not surprise anyone if very soon the president’s men, in their overzealous pursuit of his apparent third term, some would say, lifetime, presidency agenda, roll out the drums to still celebrate those self-proclaimed successes.
Of the three “successes” the president listed in his national broadcast, easily the most important was the debt relief agreement the minister of finance, Dr. Ngozi Okonjo-Iweala, signed with the Paris Club on October 26. As Dr. Mansur Muhtar, the Director-General of the Debt Management Office, said in an article in July which was a well-measured critique of those, including this reporter, who believed the president had grossly exaggerated the significance of the decision of the Paris Club to negotiate a debt exit strategy with Nigeria, the Paris Club deal represented, albeit arguably, “a once-in-a-life-time opportunity to rid ourselves of the shackles of our accumulated debt.” The more zealous of the president’s men even claimed the deal ushered in “a new independence” for Nigeria, never mind the fact that at the time negotiations had not even begun.
The argument then was that the Paris Club does not engage in idle talk, that its mere willingness to talk about a deal is as good as striking the deal itself, to rephrase the words of the Central Bank Governor, Professor Charles Soludo, a key member of the president’s economic team. Apparently furious at the widespread skepticism about the veracity of the debt relief, the minister of finance, Dr. Okonjo-Iweala, was even more definitive than Soludo in her denunciation of the skeptics. “Let me note at this point,” she said in a widely publicized opinion piece in July, “that no amount of opinion pieces will change the facts. That fact is that we have got a debt relief to the tune of about $18 billion. In addition, Nigeria has been given an unprecedented opportunity to rid itself of the remainder of its Paris Club debt. Whether this tiny minority likes it or not, Nigeria will make us of this change.”
The president himself had been no less vehement than his minister in his defense of the so-called debt relief. “I can only say”, he said in his rather celebratory national broadcast on May 31, “for those who doubted that we would ever get debt relief or those that felt we were merely junketing around the world doing nothing, history and events have vindicated us.”
But have they? In the first place, the president himself was as great a skeptic of any possible dividends of his “junketing” as any one. “In three years,” he once said in obvious exasperation, “I went round the world and I didn’t get anything. From April 1999 I went round the countries of Europe twice-over. I went to Japan, to America, to Canada and got good words, but no action.”
Now that our finance minister has signed the deal are celebrations in order? Some of us believed and said such celebrations were premature at a time we only had an agreement in principle. They remain premature even today.
Before we examine why, let us look at the other two items on the president’s list of recent government “successes”. First, is the related issue of IMF’s acceptance of Nigeria’s Policy Support Instrument PSD, mid October. Why the president thinks this is a cause for celebration truly beggars relief. This is simply because from the little of it that is known, it is different from the IMF’s deservedly castigated Structural Adjustment Programme only in name. Both the IMF and the Nigerian authorities may deny it, but The Economist of October 22 gave the game away. “Normally” said the magazine in a boxed article titled Africa’s biggest debtor reaches agreement with its rich-country creditors, “any country that pleads forgiveness before the Paris Club must first accept the charity and chastity of a full IMF programme. But the Fund has an unfortunate reputation in Nigeria. IMF will monitor the country’s progress at one remove, using a new ‘instrument’ it has invented for the purpose and without offering any money.” In other words, Nigeria’s PSI is IMF’s SAP by another name.
In a rather uncharitable article in August, Sanusi Lamido Sanusi, formerly of the UBA, but lately an executive director of the First Bank, dismissed critics of the debt relief as “Babangida supporters” who are unhappy that Obasanjo has been cleaning up after the military president. In that article, the banker blamed virtually each and every one of the country’s economic woes on Babangida’s SAP between 1987 and 1993. These, said Sanusi, included the devaluation of the Naira, the collapse of governmental due process and credibility, the creation of a huge gap between the rich and the poor, the sale of national assets to “a vulgar emergent class empowered through what Karl Marx called ‘primitive accumulation’,” the destruction of the country’s manufacturing bases and the decimation of the middle class.
Anyone living in Nigeria since Obasanjo came to power in May 1999, can testify to the fact that nothing he has done shows any intent or will to reverse Babangida’s economic policies. On the contrary everything he has done has only deepened and worsened each and every one of woes in Sanusi’s long list. And whether you call the policies or programmes that caused them SAP or PSI, they are roses planted and watered by the IMF.
What is worse is that in what is supposed to be a democracy, no one, not even the federal legislators who, by law, have the exclusive power to appropriate money for any programme, seem to know the content of this PSI.
Clearly our all-knowing president does not think it is necessary to let anyone - except perhaps those within the charmed exclusive circle of his economic team, - into the details of the deal he has negotiated on our behalf, presumably because he believes he knows what is good for us, and in any case, we need to be saved from ourselves.
If there is really nothing to celebrate about IMF’s endorsement of our PSI, the same can also be said of our new rating in the Transparency International’s corruption index. Last time we ranked 144th out of 145 countries surveyed. Our score then was 1.6 points out of 10. This time we scored 1.9 points, coming 152nd and out of 158 countries surveyed. The score shows only a very negligible improvement, while our 152nd position, which we shared with Cote d’Ivoire and Equatorial Guinea, was a barely perceptible rise to third from bottom since the 155th position was shared by three other countries – Haiti, Myanmar and Turkmenistan – while the bottom 158 was shared by another two – Bangladesh and Chad. Needless to say all seven are not exactly the kind of company one should keep.
In any case, it seems the government itself is of two minds about the TI assessment. Before the president said our negligible improvement was a cause for celebration, his voluble spokesman, Femi Fani-Kayode, had said the government had never accepted the organisation’s assessment. Of course, a president’s word will always override those of his appointees’ but it speaks volumes of the confusion in a government if the boss and his lieutenants would speak at cross-purposes.
Finally to return to the Paris Club debt relief. No one doubts that an exit from any debt is a good thing. In our own case, however, we seem so desperate for the exit we are apparently prepared to pay any price. First, good as debt relief is, $12.4 billion dollars payment of arrears within six month is a very stiff price to pay. It all seems as if our creditors see our oil windfall more of an opportunity to cash in on our good fortune while it lasts than a chance for them to let us off their debt hook. At least this is the considered view of Professor Jeffrey Sachs, the principal author of United Nation’s Millennium Development Goal.
Second and even more importantly, there is no firm commitment of an exit date despite the impression to that effect our officials have tried to create. According to a statement on the Paris Club website, the deal signed by our minister of finance is to be implemented in two phases. In the first phase which would have been over by now, Nigeria is to pay arrears due “on all categories of debts”, amounting to $6 billion plus, in return for 33% cancellation of “eligible debts.” We are not told what the eligible debts are.
Phase Two, which is planned for March next year will cost us another $6.1 billion after an approval of IMF’s first review of our PSI. In return we will get another 34% cancellation. Nigeria will thus pay a total of $12.4 billion “to complete the exist strategy”, according to the Paris Club.
“This exceptional treatment of Nigeria’s debt,” says the Club “offers a fair, sustainable and definitive solution to Nigeria and Paris Club creditors”. But does it?
An interview in Thisday of October 29 by the French ambassador to Nigeria, Mr. Yves Gaudeul suggests otherwise. The debt cancellation, the ambassador said, is a long process. It, he said, “has to be negotiated individually with the 19 member countries of the Paris Club and that will take some time. There are lots of technicalities to be solved. It will take a long time. I do not know exactly when that will be”.
Clearly it is grossly misleading for anyone to claim that come next March all of our Paris Club debts would have been wiped off our books. But even if that were to be the case, it is a cause for worry that Nigerians are being told next to nothing about a matter that concerns their well-being and that of generations to come. And until we are told what price we are paying for our exit from the Paris Club debts, one can be forgiven the conclusion that any celebrations of the debt relief remains as premature today as they were when Nigeria first struck an agreement in principle for the relief.
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