• Monday, July 15, 2024
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BusinessDay

Nigeria’s proposed recourse to the debt market

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In a season of minimal cheer that has essentially been spawned by declining oil prices and the devaluation of the naira, Ngozi Okonjo-Iweala, minister of finance, offered a ray of hope when she initially contended that despite the economic downturn, the country would not borrow from its traditional creditors in the international system.

That pronouncement must have been sweet music to the ears of all those who wish the country well, essentially because our recent experiences with our former creditors had been far from pleasant. In this instance, records reveal that fraudulent financial management afflicted Nigeria’s use of both foreign loans and oil revenues. The country reportedly owed $34 billion, much of which was in the form of penalties and compound interests imposed on debts that were not paid by the military dictatorships of earlier eras. As if to further underscore the seriousness and tragedy of our debt burden, it was further revealed that annual debt repayments were being made to the tune of $1.7 billion – a figure that represented thrice our education budget and nine times our health budget.

The immediate foregoing must have impelled the House of Representatives to direct, courtesy of a resolution, that there should be a halt to external debt service payments. A follow-up to this move was that the Paris Club of creditor countries agreed to write off $18 billion of the $30 billion debts owed by Nigeria to the governments of Britain, France, Germany and Japan. Ultimately, the country paid the final instalment of the $12 billion loan in April 2006, a move that has been described as the largest transfer of wealth to foreign creditors in Africa’s history.

As dire as the entire scenario was, the situation was even worsened by the fact that the procured loans were not used for any productive purpose. Rather, they were mindlessly wasted and looted by successive regimes.

Steve Berkman, in his famous book The World Bank and the Gods of Lending, gives a numbing insight into how loans contracted by Nigeria were subjected to various shades of kleptocratic practices. According to him, the decade from 1984 to 1994 saw the most rampant corruption and government dysfunction in Nigerian history.

Berkman further reveals a number of unwholesome practices which characterized the (mis)management of loan in Nigeria to include: the procurement of unnecessary goods and services for the sole purpose of bid-rigging and kick-backs; the packing of funds in accounts from which interest earnings were then siphoned; and the creation of phony documents to cover up diversion of funds from government accounts to private accounts. And in what can easily be described as the icing on the perverse cake, procedural safeguards were routinely breached through the submission of fraudulent documents to support the drawing down of loans.

In the case of structural adjustment loans, since these were not tied to specific projects but rather served as carrots for implementation of economic reforms prescribed by the World Bank, there were even fewer controls on where the money went.  It was also observed, and accurately too, that such loans constituted an excellent device whereby a lot of money was moved without any accountability.

Little wonder, therefore, that after the spate of borrowings dating back to 1978, the various indices of misery continue to dog Nigeria and Nigerians. Rather than come into the Nigeria of our dream courtesy of these loans, the dish of nightmare was what the various governments served to the Nigerian people.

It is against this background that we view with alarm the retraction by Okonjo-Iweala. Contrary to her earlier assertion that Nigeria would not borrow from external creditors, she has since recanted by contending that the Federal Government would shortly recourse to the World Bank and other international financial institutions for loans.

But if our recent and negative experiences are anything to go by, it is obvious that, once again, Nigerians may be in for another round of economic serfdom. This is in view of the fact that the free-loading and thieving tactics of the previous eras have continued to hallmark public service in contemporary Nigeria.

On this note, we wish to impress it upon the Federal Government that in principle, we are not opposed to the procurement of loans as is being contemplated. However, such loans must be judiciously and prudently used for earmarked projects and must not be looted and plundered, as happened in previous eras.

Our observations here are certainly not misplaced since corruption continues to be an integral part of our public life. Therefore, and if we may reiterate, the proposed loans must not be plundered as was done in earlier times. And in this respect, we wish to point out that, more often than not, when history repeats itself, such a recurrence usually comes with a steeper price.