Democratic Socialist Movement (DSM)

For struggle, Solidarity and Socialism in Nigeria

Committee for a Workers' International logo

Committee for a Workers' International

 

Home
Join DSM
Contact DSM
About us
Our Manifesto
Statements

Socialist Democracy

Newspaper of the DSM


Campaigns
NCP
Trade Unions
DSM News
Students
Women
International

Downloads

email

July 25, 2005

REJECT THE DEADLY DEAL, INSIST ON DEBT CANCELLATION

An Open Memorandum To The National Assembly Concerning The June 30, 2005 Paris Club Deal

 

INTRODUCTION:

President Olusegun Obasanjo is billed to address the joint session of the National Assembly on Tuesday the 26th of July 2005 to brief it on the June 30, 2005 alleged debt relief deal with the Paris Club of creditor nations and seek its approval to implement the terms of the deal. We the undersigned political parties, trade union centres, pro-democracy coalitions and civil society organisations urge you not to approve the package, as it will lead to a further impoverishment of the country and the people rather than enable relief. The grounds of our position are stated in the sections that follow. (See note one)

 

THE TERMS OF THE DEAL:

The terms of the deal, as reported by the international and local media, citing the official statement of the Paris Club on the matter, reveal the following:

The Paris Club has agreed in principle to enter into negotiations with Nigeria that will lead to the write-off of a yet-to-be-specified amount out of about $31billion owed it by Nigeria. Some analysts, including Nigeria’s Minister of Finance, Ngozi Okonjo-Iweala, have projected that the process could result in the write-off of about $18billion. This amount is thus still a speculation or, at best, a promise, as there is no document so far confirming an agreement to write off any specified sum. The National Assembly should do well to ask to see a copy of the Paris Club’s June 30, 2005 communiqué on the matter to better inform itself before taking a decision.

 

Before the commencement of the negotiations Nigeria must pay (between now and September 2005) the sum of $6billion. And before the deal is concluded (within months thereafter) Nigeria must "buy back" another $8.25 billion, which is projected to amount to at least another $6billion at a discounted market rate.

 

Before the deal is finalised Nigeria must secure approval from the IMF’s Board for its economic reforms and submit itself to continuing monitoring.

 

THE IMPLICATIONS OF THE DEAL

1.Unprecented Massive Outflow of Foreign Earning

The Nigerian economy risks a collapse if the massive and unprecedented outflow of $12billion (about N1.68trillion) cash, equivalent to our total annual budget for 2005, within a space of months is allowed. That would lead inevitably to the abandonment of infrastructure and social services and ultimately the deepening of poverty, underdevelopment and social instability. It is indeed an irony that the government is portraying such a potentially fatal bleeding of the country as debt relief. If over the years Nigeria has been groaning for spending $1billion per annum on servicing debts owed the Paris Club, how could the sudden outflow of an unprecedented $12billion within one year bring relief?

 

2. Emptying the Foreign Reserve

The government has argued that it intends to draw from the foreign reserve to meet the terms of the deadly deal. The foreign reserve currently stands at $23billion, thanks to the recent increases in the international price of crude oil. This trend, going by previous experience, may not, however, last for long. If we empty the existing reserve at once to service the terms of a dubious deal, what shall we fall back on when the price of crude oil crashes again?

 

3. Millennium Development Goals Threatened

Even at the current figure of $23billion, the reserves are indeed meagre compared to Nigeria’s population of over 120million, which translates to about $200 per person, worth less than one week’s upkeep for the average person. Thus, even with the reserves, the United Nations estimates that Nigeria will need a further between $2 billion and $3billion in grants per annum to be able to attain the Millennium Development Goals. (See note two)

 

4. IMF Stranglehold Will Tighten

The requirement that Nigeria should secure approval from the IMF’s Board for its economic reform programme portends an escalation of poverty-inducing measures. Ordinarily, reforms should translate into better conditions for the people. Unfortunately, however, the experiences of African countries over the last 20 years show that in reality IMF-dictated "reforms" (or Structural Adjustment Programmes) are indeed counter-reforms, which have led to the destruction of the economies that tried them and circumscribed the sovereignty of the victim nations. In the last six years, the Obasanjo government has embarked upon such reforms with disastrous consequences for domestic industrial development and the welfare of the people.

 

5. Shrinking Local Industrial Base

Data from the Manufacturer’s Association of Nigeria (MAN) show that the government’s faulty energy policies under IMF-style reforms – the incessant increases in the price of fuel in the absence of steady electricity - have led to a 33% increase in the cost of production, damaging the competitiveness of local industries in the globalised market. In the same vein the continuing devaluation of the naira in the guise of the Autonomous Foreign Exchange Market (AFEM) has meant the continuous escalation of the cost of imported industrial spare parts and raw materials, further upping production costs. The net result has been the massive closing down of local industries, while the few that have survived now operate at less than 40% of installed capacity. A gradual process of de-industrialisation has thus been taking root and unemployment, especially youth unemployment, has, logically, been on the rise.

6. Privatisation and declining Public Spending on Social Services

The shrinking of the domestic private sector of the economy has ironically gone on side by side with the programme of privatisation, which has seen to the giving away of plum public enterprises to foreign capital and their local fronts in the corridors of power. Privatisation has also produced massive retrenchment of erstwhile public sector employees. Simultaneously, public spending on education, health, potable water, public transportation and other social services has been drastically cut, resulting in a regime of commercialisation that has priced the essentials of human developed beyond the reach of the poor majority and widened the gap between the rich and the poor.

 

7. Sovereignty Surrendered

The required IMF endorsement will not only ensure the deepening of anti-poor policies under a vigorous regime of monitoring by the IMF, it will also take away Nigeria’s sovereignty in a process already described in the July 14, 2005 Guardian editorial as re-colonisation. It is quite instructive that the IMF is not one of the groups currently owed by Nigeria. What then, other than the motive of perpetual subjugation, would explain the role of IMF in the whole deal?

 

8. The deal does not capture the total picture.

The harsh terms of the Paris Club deal, even if met by Nigeria, will not secure its exit from foreign indebtedness. Currently Nigeria is said to owe other groups of creditors – London Club and World Bank/ADB – an estimated $5billion dollars. Such creditors will come forward with their own terms and bloated claims, once we start implementing the Paris Club deal, translating into more payments – in excess of the $12billion to be paid under the Paris arrangement.

 

PLEASE REJECT THE DEAL

We therefore urge the National Assembly to reject the deal of death and instead insist on outright debt cancellation, a demand logically premised on the following:

 

We Have Overpaid What was Borrowed: Data from the government’s Debt Management Office (DMO) put the total amount Nigeria borrowed from the Paris Club at between $13.5 billion and $16billion , while over the years we have paid altogether about $42 billion as interest and penalties on the loan. (See note three.) It is indeed amazing that after having repaid over three times what was borrowed, our government could still not argue for total cancellation.

 

Who took the loans?

The loans were contracted largely by unelected and unaccountable governments to shore up their dictatorships rather than improve the lives of the people. Data from the Debt Management Office (see note four),  and other sources indicate that the debts were incurred in the period between the military governments of Generals Olusegun Obasanjo and Ibrahim Babangida (between 1976 and 1991), a 15-year period dominated by military dictatorship (for 11of the 15 years.)

 

What were the loans used for?

A 1996 assessment by the Ministry of Finance (see note five) of projects executed with the loans could only establish $2.6 billion of investments, representing less than 20% of the total borrowings. And out of the verified projects 60% were described as failed or unsuccessful, 15% as only bit functional, while 10% of the funds never got to the project sites at all. Only 2% of the projects were assessed as successful. In essence over 80% of the loans were squandered by the corrupt elite in and outside government, while the bulk of the remainder were sunk into failed projects. Where then is the moral justification in making the already impoverished masses pay for the profligacy of the corrupt and dictatorial elite of the time.

 

The G8 Initiative

Currently, European governments under the aegis of the Group of 8 industrialised nations (G8) have been mouthing a commitment to "Make Poverty History". The initiative has as its professed strategy not only the cancellation of the debts of poor countries but also the massive infusion of aid to such countries in the coming years. The initiative is partly in acknowledgement of Europe’s historical role in the impoverishment of the poor countries of Africa, Asia and Latin America. Unfortunately, while the Nigerian government has been trying to portray the Paris Club deal in such positive light, the terms of the deal appear rather targeted at further impoverishing Nigeria than helping it overcome poverty. If the Paris Club deal with Nigeria is to be seen as an example of the G8 initiative, then "making poverty permanent", rather than "making poverty history", would be a more fitting and honest slogan for it! The National Assembly should hold the G8 to the terms of its professed strategies for making poverty history by boldly demanding not only the outright cancellation of Nigeria’s debt but also more aid and favourable terms of trade.

 

THE WAY FORWARD: TOWARDS A DEBT-FREE NIGERIA

The goal of a debt-free Nigeria is one we all yearn for. Unfortunately the current Paris Club package cannot take us there. Rather it will lead to further outflow of scarce foreign earnings and a surrendering of our national sovereignty. To be debt-free we should demand debt cancellation on the grounds already stated in this document. Furthermore we need to ask ourselves how we got into the current debt trap. Since the discovery of oil in commercial quantities in Nigeria, the nation is estimated to have earned over $430billion from that source alone. Yet we have nothing to show for it. The bulk of those earnings have been lost to corruption in the corridors of power. According to the United Nations Development Organisation (UNIDO) there is over $105billion dollars held illegally in foreign bank accounts by corrupt Nigerians in and out of government. This is close to one-quarter of our total oil earnings and about three times our total foreign debt. By the time we add the cost of ostentatious lifestyles and corruptly acquired property within, we could safely conclude that close to half of all our oil earnings have gone into the pockets of Nigeria’s ruling class. If such monies had been judiciously used we would not have needed to borrow in the first place. The way forward is thus to fight corruption and ensure that the resources of the country are utilised to provide education, medical care, housing, roads, power supply, potable water and other social necessities for the people. Unfortunately, the Obasanjo government has only been paying lip service to the fight against corruption, while the wealth of the nation continues to disappear into private pockets and the living conditions of the people continue to decline. This state of affairs cannot endure for much longer.

 

The National Assembly must act now to save the nation.

 

Dr. Osagie Obayuwana

National Conscience Party (NCP)

Kehinde Edremoda

Democratic Alternative (DA)

Abiodun Aremu

United Action for Democracy (UAD)

Didi Adodo

Congress of Free Trade Unions (CFTU)

Dayo Olaide

Global Call for Action Against Poverty (GCAP – South West Zone)

Segun Sango

Democratic Socialist Movement (DSM)

Biola Akiode-Afolabi

Women Advocates Research and Documentation Centre (WARDC)

Rufus Olusesan

Campaign for Democratic and Workers’ Rights (CDWR)

Wale Eleto

Education Rights Campaign (ERC)

Chima Ubani

Civil Liberties Organisation (CLO)


Notes

[1] See Guardian (of London) July 1, 2005; Reuters News Agency July 1, 2005; The Guardian (of Nigeria) Editorial, July 14, 2005; Financial Times (London) July 1, 2005. (back)

[2]Professor Jeffrey Sachs, Special Adviser to the UN Secretary-General on the Millennium Development Goals, in The Guardian, July 14, 2005, page 1. (back)

[3] Dr. Mansur Muhtar, Debt Management Office, in This Day March 13, 2005. See also The Guardian editorial, July 14, 2005.   (back)

[4] Dr. Mansur Muhtar, ibid  (back)

[5] Dr. Mansur Muhtar, ibid  (back)