AFRIPOL.ORGIDEAS
HAVE CONSEQUENCES
AFRIPOL.ORGIDEAS
HAVE CONSEQUENCES
Nigeria payment of foreign debt: The largest transfer of wealth in modern time By Emeka Chiakwelu 15th September, 2008
Nigerian government in the year 2006 paid almost $20 billion to two giant international syndicates: Paris Club and London Club of Creditors to settle her foreign debts. This transfer of wealth by a relatively poor nation contradicts the entire prudent financial judgment and rudimentary economic disposition preached to Nigeria by the rich donor nations that babbles about the ills of capital flight in developing nations.
The government of
President Obasanjo, the Nigerian ex-Head of state made the arrangement and
secured the purported $18billion debt relief for Nigeria from the Paris Club of
Creditors, which became the inducement for the country to pay off her $36
billion foreign debt. Nigeria's total foreign debt stood at $35.916billion as of
June 2005. The largest chunk of the debt $31billion was owed to 15 of the 19
creditor-countries of the Paris Club.
On Friday, April 21, 2006 Nigeria paid the final installment of $4.518billion to
exit the Paris Club. Earlier, Nigeria paid off $12.4 billion in arrears and
debts as was stipulated to fulfill arrangement and concord reached with the
Paris club in June 2006.
In addition, the federal government of Nigeria finally paid off the last batch of outstanding debts owed to the London Club amounting to $2.15 billion. For the settlement of both Paris Club and London Club of Creditors, Nigeria paid off almost $20 billion. This is one of the largest transfers of wealth by a third world nation to the first world nations.
On the global financial scale and rating, there is no doubt that Nigerian payment of her debts makes her a credit worthy nation with - BB- rating from Standard & Poor's. But for a country with enormous internal economic problems; with 70% of the population mired in penury poverty with increasingly educational and health challenges to repatriate such a wealth to the west is not a prudent decision. Without doubt, Nigeria was compelled to do so by those nations that supposedly are the partners in fighting poverty in Africa.
In 1985, Nigeria
owned $8 billion to Paris club creditors, out of $19 billion of its foreign
debt.
By the end of 2004, Nigeria owned Paris club $31 billion out of $36 billion of
its foreign debt. Since 1992, Nigeria has not received any loan from Paris club.
So, where is the justification for the increase of the debt? Blame it on the
malleable interest rate, interest arrears and interest charged on the arrears.
Maybe the political and monetary instability did contribute to the debt
increase, but it is beyond the control of poor Nigerians who bear the brunt of
poverty. The Paris Club would have cancelled the total debt, rather than
requiring for the debt buy back of the 40% of the remaining debt. Nigeria has a
good record of servicing and meeting its debt obligations, and has paid its
principal and reasonable interest on the debt, that can justify 100%
cancellation.
Britain the former Nigerian colonial ruler was the largest creditor of the
debt; she received $3 billion from Paris Club. United Kingdom declined the
request of Archbishop Desmond Tutu and development charities including The
Jubilee Debt Campaign to return the share of her debt payment to Nigeria.
Britain was criticized for accepting the payment from developing country
Nigeria. (To finalize the debt payment deal, Nigeria made the total payment of
$12.4 Billion to Paris Club and Britain the largest creditor received
$3Billion).
“The British government has drawn sharp criticism from development charities for
taking a debt repayment from Nigeria which dwarfs the UK's entire annual aid
budget for the African continent. Charity Jubilee Debt Campaign says the
payments mean the G7 will receive more in six months from Nigeria than the 2005
Gleneagles G8 deal will provide to poor countries in a decade. The G8 is the G7
plus Russia. Trisha Rogers, Jubilee's director, said: "It is obscene for G7
countries to take billions of dollars from one of the poorest countries on
earth. In particular this means the UK will take from Nigeria almost exactly
twice as much as it is giving in aid to the whole of Africa in 2005." In his
letter dated 27 January 2007, Tutu said: "While it is to be welcomed that much
of the debt has been wiped off the books, it is unacceptable that 40 per cent
($12.4 billion) must be paid in a one-off payment.”
"For rich creditors to be claiming such a vast amount of Nigeria's savings at
this time smacks of a meanness of spirit which stands in stark contrast with so
many of the sentiments expressed in 2005.” (In 2005 G8 leaders gathered at
Glenglades in Scotland and pledged to effectuate debt remission for Africa).
Prime Minister Tony Blair replied that Britain will keep the debt payment and
will not refund any money to Nigeria.
It's perplexing to comprehend why Britain’s former Prime Minister Tony Blair
refused to adhere to the appeal from eminent personalities of Desmond Tutu and
Trisha Rogers caliber. The then Prime Minister Tony Blair had good credentials
on Africa. He highlighted Africa in his leadership of G8 in 2005 and said that
Africa's plight was "a scar on the conscience of the world." He also championed
the cause of Africa with the formation of the Commission for Africa. During his
leadership of G8 he recommended massive aid and debt remission for Africa, which
has not been fully implemented due to the reluctance of some of G8 nations to
oblige to their pledges. Africa is a continent beset with dire problems -
Diseases, wars and instability are ravaging the continent. The least thing
Africa needed is enormous capital flight. Every penny is needed to curb the
problems and alleviate quality of life in the most populous nation in Africa.
Britain and Blair understood Africa's political landscape and indeed Nigeria;
particularly its sociological-economic needs more than the rest of the G8 and
Paris Club members because of her colonial rule in Nigeria. Yet they
participated in sharing the wealth from poor Nigeria.
The billions of dollars that Nigeria paid was larger than the donations the rich
nations will be providing to poor countries in a period of ten years. The money
paid to the rich nations of Paris Club and London Club of Creditors would have
found its best use in Africa, if not in Nigeria.
Mr.Emeka
Chiakwelu is the Founding director/Principal policy strategist, Afripol Organization.
© 2008 AFRIPOL.org
AFRICA AND FOREIGN DEBT By Stevie C.Chiakwelu
The progress of the enormous debts which at present oppress, and will in the long-run probably ruin all the great nations ... -Adam Smith -
A linguistics sociologist once defined a disaster as something one can smell, touch and feel. African foreign debt is an enormous disaster; its ugly consequences litter everywhere even along the roadsides. Yes, a great disaster indeed! You can smell it, touch it and feel it in Africa’s heartland.
Africa received $540 billion loans between 1970-2002, she paid back $550 billion (i.e. principal with interest inclusive) and she still owned $295 billion as at the end of 2002.
Africa from what we can deduce, has overtly tied herself to the apron string of foreign debt payments. Unfortunately these payments are endless. The borrowed principal has already been paid, yet the interest continues to accrue at a whopping rate. With such a trend, it is erroneous to believe that the continuous rescheduling of the debt payment by Paris club or any other allied group could proffer lasting solution but fire brigade approach. This will only succeed in delaying the great disaster that is lurking behind.
Already the disaster has arrived! The effects of the disaster have commenced amplifying and will continue to permeate to all facets of life in Africa. Without mincing words, the people that are hardly hit by the brunt of the debt services are the poor and the children. Majorities of Africans fall into these categories. It is pathetic to note that qualitative education, good health care, affordable shelter, clean and drinkable water supply, sewage system and reliable power supply have all eluded these poor people. Their government in question has failed in providing basic amenities that will affect them positively, all in the name of servicing foreign financial obligations.
Enough is enough. This abuse and torture meted out on Africa as a result of these foreign debts have diminishing impact on the well being of the continent. Without deferment or holding back, somehow, something must be done to bring this apparent disaster to an end. A sensible and constructive compromise must be reached with the western creditors and international bankers.
It is truism to acknowledge that self inflicted torture rooted in ignorance, naivety and lack of intellectual insight on the part of the greedy and corrupt African leaders, who took out the loans in the first place, created such an agonizing situation.
The western bankers and financial institutions did not twist round African leaders with their little fingers in order to compel them to borrow to their demise. It was their choice to borrow, most times, they were propelled by avaricious inclination and in the process they stole from their constituencies without minding the ensuing retardation it will have on the economy in particular and populace in general. Corruption is and has been the bane of development in Africa.
Most of these debts were accumulated during the cold war. During the era of bipolar world, African leaders were granted loans at the height of cold war for political reasons and these had nothing to do with sound financial decisions. The funds were wasted on some white elephant projects or rather siphoned to some secret bank accounts that were beyond spying eyes of an average African. Most of these loans were acquired without the consent of the citizenry, ironically now; they are the ones absorbing the greatest burden of the loan services.
In Congo, the maximum President, late Mobutu, took out so many loans that were indirectly deposited into his France bank accounts.
Nigeria was granted loans particularly because of her oil wealth, unfortunately some of those loans were more or less not put to good use that would alleviate the sufferings of her people by creating employment opportunities and enabling environment for a sustainable industrial growth. The vast majority of Africans were aware of their leaders’ misadventures but were helpless and as well powerless to compel them otherwise. Even Apartheid South Africa borrowed money without the consent of the black majority. Today who is paying the price? There is this clarion call to African citizens to pay back the loans with the shocking interest rate that was acquired without their blessing. Though this may be inimical to their psyche, the Black South Africans have to pay back the loans of apartheid era. The Congolese have to pay back loans made out to their dictator.
African governments at the expense of their peoples’ livelihood carry out debt payments and in some countries, a great chunk of their GDP is devoted to these loans services. Those funds would have been ordinarily invested in healthcare and education, the two core areas that needed immediate attention in Africa. The money owned to the industrialized nations have so much quadrupled, due to the malleable interest rate. It is beyond anybody’s wildest imagination on how these debts will ultimately be repaid in this lifetime. It will also be inconceivable and fallacy to believe that they can be repaid in this our generation or the one to come, if nothing is urgently done.
DEBT CANCELLATION AND AFRICA
2006
The triumph of Dialogue and Leadership have been registered with the 100% debt
cancellation for 18 Heavily Indebted Poor Countries by G8 nations. Most of these
countries are in Africa.
The debt cancelled was $16.7 billion owed by 18 countries - Benin, Bolivia,
Burkina Faso, Ethiopia, Ghana, Guyana, Honduras, Madagascar, Mali, Mauritania,
Mozambique, Nicaragua, Niger, Rwanda, Senegal, Tanzania, Uganda and Zambia.
In another development, Nigeria was also granted a $18.309 billion debt relief
by Paris Club of Creditors. This debt arrangement translate to 60% of the total
$30.515 billion owned to it by Nigeria. The conditional stipulation is for
Nigeria to pay $12.4 billion from its debt arrears, this is not debt
cancellation akin to the 18 HIPC by G8. This deal must be fully examined,
analyzed and absolutely comprehended before its acceptance and implementation.
A communiqué issued by the Paris Club titled “Paris Club Creditors Agree in
Principle on a Comprehensive Debt Treatment for Nigeria," read thus: “The
representative of the Paris Club creditor countries met in Paris on 29 June 2005
and expressed their readiness, consistent with their national laws and
regulations, to enter into negotiations with Nigerian authorities in the months
to come on a comprehensive debt treatment."
APRIPOL is canvassing and looking forward to
the total and unconditional write-off of the entire Africa‘s foreign debt in
order to achieve the UN Millennium Development Goal of halving global poverty by
2015. Developmental aid should also be given to those nations that have
democratic systems with checks and balances. And to those countries that respect
human rights and are willing to fight corruption.
From L- R President Clinton, Gates, Mbeki, Blair, Bono & President
Obasanjo
AFRIPOL extol this affirmation and congratulate G8 nations, Paris Club of
Creditors, The Commission for Africa, The Jubilee Debt Campaign, DATA, World
Economic Forum & others. In addition, men and women of goodwill who initiated
and championed the struggle for debt cancellation, poverty alleviation and
diseases eradication. These people are:
Music superstar Bono of U2, the founder of DATA
President George Bush USA, The leader of the Free World
Tony Blair, the Prime Minister of Great Britain
Gordon Brown, Chancellor of the Exchequer of Great Britain
Thabo Mbeki, the President of South Africa
Olusegun Obasanjo, the President of Nigeria
Dr. Ngozi Okonjo-Iweala, the Minister of Finance Nigeria
Dr. Noreena Hertz, the Author of The Debt Threat
Dr. Jeffrey Sachs,
founder of Earth Institute & Author of the The End of poverty
Kofi Annan, the Secretary General of UN
Microsoft founder Bill Gates and Gates Foundation.
Nelson Mandela, former President of South Africa
Former Presidents Bill Clinton and Jimmy Carter of United States
LEADERS OF GREAT 8 AND RICHEST NATIONS
AFRICA’S DEBT REMISSION: UNDERSTANDING G8
AND PARIS CLUB PROPOSALS.
A critical analysis must be delved in order to fully understand the just
concluded debt relief of the 18 Heavily Indebted Poor Countries by G8. The
initiative for HIPC debt cancellation for debts owned to World Bank, IMF and
African Development Bank were extended to them because those nations have
reached the “completion points” as were proposed by their creditors and
G8.Initially 22 and 24 countries were proposed by Canada and Britain's
respectively for 100% debt cancellations. But only 18 countries were able to
meet the stringent requirements for the debt cancellation. Fourteen of these
countries are in Africa.
There are salient points that must be highlighted in this historic milestone :
1. Sixty two countries were recommended for debt cancellation by civil groups
because of their dire poverty, diseases and starvation. But only 18 countries
were approved for debt cancellation.
2. The nominally debt owned by these 18 nations is about $40 billion. But the
actual cost to the creditors is between $(15-18) Billion and that is the amount
needed to payoff the debts.
3. The modalities for the payment of the debts by G8 to the multilateral
financial institutions namely The World Bank, African Development Bank (ADB) and
IMF have been planned and mapped out. These are the institutions that are the
creditors of the 18 nations. The World Bank and ADB will have G8 countries pay
according to percentage of their relative shares in the institutions. And the
IMF, its resources worth about $4 billions in gold will be utilize for the
reimbursement to the institution. This implies that every member nations of IMF
is paying for the debt write off by the G8. After all the IMF resources are the
collective ownership of its financial members.
NIGERIA AND PARIS CLUB OF CREDITORS:
The cancellation of Nigeria’s 60% of the $31 billion debt owned to Paris club
creditors was a historic milestone.
A great deal of credit must be accorded to the democratic administration of
President Obasanjo, for its implementation of the stringent economic reforms led
by the Finance Minister Dr. Ngozi Okonjo-Iweala, which culminated to the debt
relief. Let’s reflect on Nigeria external debt.
In 1985, Nigeria owned $8 billion to Paris club creditors, out of $19 billion of
its foreign debt.
By the elapse of 2004, Nigeria was owning Paris club $31 billion out of $36
billion of its foreign debt. Since 1992, Nigeria have not receive any loan from
Paris club. So, where is the justification for the increase of the debt? Blame
it on the malleable interest rate, interest arrears and interest charged on the
arrears. And the political and monetary instability that did contribute to the
debt increased.
The political situation prior to return to democracy, was tantamount to adding
insult to injury. Making it nearly impossible for Paris Club to negotiate with
Nigerian leadership. The exchange rate then was not realistic nor was Naira
subject to market forces, another obstacle for any viable negotiation. Now the
condition for this debt cancellation is that “Nigeria will pay off $6 bn owned
in arrears to creditors. It will then receive 67% debt relief worth $16.7 bn, on
its remaining debt, and finally buy the remaining $8.2b it owes at discounted
market rate.” Nigeria have repaid $42b over past 38years. The Paris Club would
have cancelled the total debt, rather than requiring for the debt buy back of
the 40% of the remaining debt. Nigeria has a good record of servicing and
meeting its debt obligations, and have paid its principal and reasonable
interest on the debt, that can justify 100% cancellation. IN TOTALITY, NIGERIA
WILL PAY BETWEEN $(12-12.5) BILLION IN RETURN OF $18 BILLION IN DEBT RELIEF.
The billions of dollars that Nigeria will be paying is larger than the amount
rich nations will be providing to poor countries in a period of ten years.
©
2006 AFRIPOL.org
WHY DEBT CANCELLATION FOR AFRICA?
In this continent, the four horsemen of the apocalypse - conquest,
conflict, famine and death are no mere visitors. They have taken up residence.
-Martin Wolf (Financial Times)
In view of mismanagement of Africa’s resources and funds; even the looting of
her treasury by some of her leaders, it can be said thereof, that corruption has
attained an alarming proportion in the continent. In fact, it has eroded the
system. It may therefore, sound incredible and laughable when one suggests that
time has come for a cancellation or rather a major debt relief to Africa’s
enormous foreign debt.
The cost of the foreign debt payments to the African citizens is not a child’s
play. The funds that would have been used to upgrade the health care system and
quality of education were diverted to debt servicing and payments. African
children are paying the price for debt servicing.
These debts are owed to industrialized nations. African governments have been
unable to meet up with their financial obligations and have resorted to
continuous rescheduling of the loan payments as regulated by International
Financial Institutions and their agents, such as IMF, London Club, Paris club,
World Bank and others.
As years progress, so also the burden of the debt widens. However, all the
stakeholders fully take cognizance of the fact that these loans seem impossible
to be liquidated with ease.
So many figures have been thrown around, but the most recent data stated that
Africa’s foreign debt currently stood at $350 billions. This is outrageous, a
gigantic yoke!
To buttress the level of poverty in Africa, out of the 41 nations identified as
Heavily Indebted Poor Countries (HIPC) according to World Bank, 33 of those
nations are from Africa. Africa has nothing to show for such an enormous debt
but weak and dilapidated infrastructures with a very devastating low human
development index.
Below are the intrinsic reasons why APRIPOL
subscribe to debt cancellation for Africa, which must go forward without much
ado or conundrum:
1. Mutual Benefit: Africa and the West can share an affirmative
interdependence based on mutual respect and benefit. This can only be possible
when the burden of debt is released from African’s shoulder. When Africa is
stable, this spells well for democracy and capitalism. This will in return
stimulate trade.
2. Global Stability: A healthy and wealthy Africa will contribute to the
world stability. Moreover, Africa will have the adequate resources to make
impact in resolving conflicts within her continent. This is good for Africa in
particular and the world in general.
3. Social Security and Freedom: Actually, the brunt of the debt payments
mostly rests on children and women and not on African leaders. Those who absorb
the agonizing pains are the poor masses. For them, there is no job; no food; no
shelter. The leaders hide under the guise of being incapacitated because of
foreign debt payment obligations, to shy away from their responsibilities and
they allow the masses to wallow in abject poverty while they themselves live
flamboyantly and affluently. Therefore the debt cancellation at least, if
judiciously managed will affect the poor positively, when such funds are
channeled to areas that will make life worth living.
4. Non Restrictions on Economic Policies: The truth is that as a result
of these foreign debts, the West directly or indirectly dictates Africa’s
economic policies. Africa’s economy is import driven. They rely heavily on
importation. It is not always economic policies that suit African that matter
but those that are favored by the foreign creditors. That is why their policies
are tailored to suit foreign debt demands. If debt relief is granted, Africa can
now employ policies that will be considered unique to her economic goals.
5. A Clean Slate /Economic Freedom: What Africa desperately needs now is
a fresh beginning. For the fact that the debts are cancelled, it will give
Africa hope and a sense of belonging. Africa will now put up confidence to
bargain for what is good for the continent in the comity of nations without ego
problem of being indebted.
6. Africa's History: Yes, it is important too. This is not just to be
visceral but to be realistic to Africa and again for the sake of history, Africa
has suffered untold hardship via slavery and colonialism. This time around,
reasonable people can conclude that Africa needs a push.
7. Principal Loan Accomplishment: The actual principal borrowed had been
paid. The problem now is the accumulated interest over the years and it is still
going up. It is point clear now that Africa has demonstrated concerted
commitment to her financial obligations.
8. State of Health Care in Africa: Against all odds, a case must be made
for a sound healthcare in Africa. There is no fund to implement Africa Union
agenda on health. The cost is beyond the resources and funds at hand. AIDS,
Malaria, Polio, Ebola are confronting Africa. This continent needs the funds to
aggressively fight back these killer diseases.
9. Promotion of Democracy: A political paradigm based on fairness and
equality with broad-based representatives known as Democracy cannot survive on
an empty stomach. Democratic system of government is quite expensive to operate.
For democracy to have a true light of the day in Africa, the needed resources
must be available.
10. Reinforcement of Economic Capitalism: For Adam Smith’s concept of
free enterprise to take hold in Africa, Africans must have good impression of
capitalism. These foreign loans servicing and payments do not augur well for
capitalism and laissez faire before the suffering masses of Africa. Africa’s
weak and dilapidated infrastructures must be developed to international
standard. This will enable industrialization and investments to be realized in
the continent.
©
2006 AFRIPOL.org