Cash-strapped Nigeria prioritises disputed Paris Club payment

The Nigerian government, which is facing a revenue crunch, has drawn fire for prioritising the payment of the controversial $418m Paris Club refund to some consultants over capital infrastructure.

The move by Nigeria’s attorney-general, Abubakar Malami, and his finance counterpart, to pay a $418 million to persons claiming to have provided “consultancy” services to the states with respect to Nigeria’s debt cancellation by the Paris and London Clubs in 2005 has generated outrage.

Keen to hurriedly pay off the “consultants”, despite President Muhammadu Buhari’s August 3, 2022 directive to the finance minister to suspend plans to begin the deduction of the $418 million Paris Club refund allegedly owed the consultants from the federation account, Malami has drawn criticism from governors.

SaharaReporters reported last week that Malami ordered the release of millions of dollars from the federation account on June 28, 2022 and July 7, 2022 to some of the consultants.

“Minister of Finance, Zainab Ahmed and the AGF (Attorney General of the Federation) Malami and others actually began paying these men since last year using heavily discounted promissory notes,” SaharaReporters quoted a source as saying.

Malami, a leading member of President Muhammadu Buhari’s cabinet, said there was no justification for the state governors to challenge the $418 million deductions from the Paris Club refund paid to consultants. “A clear case of absence of defence,” he said at a recent press conference put together by the communications team of Buhari, who had himself publicly directed a halt to the payment of the consultants.

“All the noise making that is now being generated by the Governors Forum is not only unjustified, but indeed a clear case of absence of defence.

So, it was the Governors Forum in the first place that engaged the consultant when eventually successes were recorded, the governors collectively and individually, presented a request to the federal government for the fund,” he said.

While Malami said the consultants were hired by the governors and that they had taken steps to pay before backtracking and taking the matter to court, Nigeria’s 36 governors rejected that claim.

“There is no component that compels the governors’ forum to pay consultants anything, and there is no agreement between the consultants collectively and governors collectively,” Abdulrazaque Bello-Barkindo, the spokesman for the Nigeria Governors’ Forum (NGF), said.

In 2021, the governors had obtained an order from a federal high court in Abuja restraining the federal government from deducting the money from states’ accounts for the purpose of paying the disputed debt.

“What the attorney general is claiming that there is a consent judgement is what the NGF is saying does not exist,” Bello-Barkindo said. “What the NGF is asking for is evidence of work done.”

He added: “This matter is in court. The court is the only authority that can determine clearly whether there is a reason for payment or not; why are highly placed lawyers afraid of their own platform? What the NGF is saying is that there is no money to be paid and the monies that have been paid are gross errors.

“Where they are asking the money to be gotten from is the biggest sacrilege. This money belongs to the states, the masses of this country and because you’re powerful, you want money to be taken and given to you. That’s why they are using the attorney general of the federation to get the money at the source because the state does not have any reason to pay.”

The role of the attorney-general in this affair rankles Eze Onyekpere, a lawyer and executive director of the Centre for Social Justice in Abuja. “Whose interest is the honourable Attorney General serving: the public interest or the interest of a few consultants?” he asked.

He said: “We are discussing $418 million which is N173 billion at the current central bank rate, and N275 billion at the prevalent market rate. This is so much naira against the background that most states are owing salaries, owing pensions, have very poor educational and health infrastructure; and if this money is available to the states, it can be used for value for money issues.

“The legitimate question that everyone of us should be asking the federal government is: what exactly did the consultants do? What special competencies or service do they bring to the table that entitles them to this kind of humongous amount of money?

Did they go to court, or calculate the figures? If it is legal services, states have attorneys-general and Ministries of Justice that could do the job these consultants claim they did.

If they claim they calculated the amount of debt owed by the states and local governments, states have Ministries of Finance and Accountants-General, and the truth is that I can do all my calculations by myself on an excel sheet.”

According to Onyekpere, there is no clear definition of services rendered by these consultants.

He added: “The obvious truth is that these contracts were not entered bona fide. If they claim they did accounting work as well as legal work, I wonder where the big accounting firms in the country, Deloitte, KPMG and others, were when these persons who call themselves consultants were procured to audit states and local government debts.

“It is insensitive and wicked to take a humongous amount of money and pay a group of people who did no discernible work. The AG is supposed to be the defender to the poor, the citizenry; why is the AG defending those who are intent on stealing the monies that could be used to help the poor? What is so special? What is their interest? They must be told that they must be stopped. This is just spurious and it is all meant to divert public money.”

Nigeria is cash-strapped

Ahmed, finance minister, has said several times that country was battling with revenue problems, which have compelled the government to keep borrowing.

The country’s debt stock had risen to N41.6 trillion ($100.07 billion) in the first quarter of 2022, with projections that it could peak at N45 trillion by the end of the year. Nigeria’s external debt stock as at March 31, 2022 stood at $39.97 billion.

The country is currently faced with unprecedented dwindling revenue occasioned by petrol subsidy burden, low oil production and poor investor confidence in the economy, among others. The federal government earmarked about N4 trillion for subsidy payment in 2022.

Ahmed recently said that the government might spend a N6.72 trillion as fuel subsidy in 2023 or pay N3.36 trillion up to mid-2023 if the subsidy regime is to end in May 2023.

“That there are little revenues coming in and huge costs to execute is an indication of poor macroeconomic planning,” Rajneesh Narula, professor of International Business Regulation and director of the John H. Dunning Centre for International Business at Henley Business School, University of Reading, said. “The endemic nature and level of corruption is also largely responsible for the situation Nigeria has found itself where it has to borrow to finance its debts.

He said: “Nobody is making it easy for anyone to do business in Nigeria and if people and firms aren’t encouraged through incentives and policies to invest in the country, I wonder where and how the government expects to get money from.

“What happened with other economies, especially in Asia, is that they make it easy for the common man to join the supply chains. There must be good macroeconomic policies that allow people to start businesses and make a profit without being extorted endlessly.”

The World Bank also recently warned that if the country failed to optimise its tax system and focus on other areas to boost its revenue, the already low revenue would continue to drop, causing the country to face an existential crisis.

Nigeria has failed over the years to invest in its critical infrastructures while the few available ones are in a deplorable state as a result of the poor maintenance culture and the age-long corruption in the country.

It is estimated, according to Andersen Global, that the country will require between $100 to $150 billion per annum for at least the next ten years to close the gap.

The gap includes lack of good roads and a railway network that can drive economic activities, poor and in some instances non-existent power generation, transmission and distribution systems, decaying public educational facilities, dilapidated government-owned hospitals (including tertiary healthcare facilities) and even airports.

President Buhari agreed in November 2021 at the Glasgow COP 26 high-level side event on improving global infrastructure that Nigeria requires the sum of $1.5 trillion in ten years to close its infrastructure gap.

The country scores very low in the global human development index, which is the index used by the United Nations to measure the progress of a country. Nigeria scored 0.539 points in 2019, leaving it in 161th place in the table of 189 countries published.

The country owes foreign airlines $450 million in earned revenues which they have been unable to repatriate as a result of the restrictions on repatriation of profits by the Central Bank of Nigeria.

Nigeria’s public universities are currently shut because the Buhari administration says it cannot meet the demands of the Academic Staff Union of Nigeria to spend billions of naira to upgrade the facilities in the universities and pay university teachers.

Terrorists are wreaking havoc in the capital city and other parts of the country as soldiers in the field demand for good equipment to win the war.

Read also: $418m Paris Club refund: Governors’ objections baseless – Malami

The balance in the country’s Excess Crude Account (ECA) slumped to $376,655.09 as at July 25, 2022. The account balance in May 2015, when Buhari took office, was $2.1 billion. The ECA was created in 2004 by former President Olusegun Obasanjo to track the country’s excess revenue from crude oil.

“How can any reasonable and morally sound public officer support the payment of $418 million Paris Club refund commission to some individuals, in a country that has its public universities closed for five months on a matter relating to funding?” Shehu Sani, a politician and activist, wondered.

“The Paris Club refund is most awkward. It is sad enough to read about it,” Kayode Garrick said. A retired diplomat who headed economic and commercial affairs at the Nigerian embassy in Washington and later served as the country’s ambassador to Brazil believes that the Paris Club refund scandal mirrors the realities of the poor socio-economic governance of the country.

“If we spend a few minutes thinking about it,” he said, “we will realise that this is just a small example of the nonsense that goes on in this country. And so, when we take it all in, we understand why it is tragic because of the results we see.

So, this is what it seems governance is all about: just ripping the country. For the actors in governance, this is what it is all about and so, it helps us to understand where we are as a country and why we aren’t making any discernible progress.”