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Nigeria: Debt, Loot and the Economy
Nigeria: Debt, Loot and the Economy
Date distributed (ymd): 000610
Document reposted by APIC
+++++++++++++++++++++Document Profile+++++++++++++++++++++
Region: West Africa
Issue Areas: +economy/development+ +US policy focus+
Summary Contents:
This posting contains two documents on the Nigerian economy. The
first is testimony by Dr. Mobolaji Aluko at a congressional hearing
on May 25 (slightly condensed). The second is excerpts from an
article in the Nigerian magazine Tell, previously posted on the
shell-nigeria-action listserv.
+++++++++++++++++end profile++++++++++++++++++++++++++++++
"Debt Relief, Loot Recovery and Constitutional Reform in Nigeria"
Testimony by Mobolaji E. Aluko, PhD, President, Nigerian Democratic
Movement (NDM) [Professor & Chair of Chemical Engineering, Howard
University] Before the US Congressional Subcommittee on Domestic
and International Monetary Policy, Committee on Banking and
Financial Services
May 25, 2000
Introduction
Mr. Chairman, Honorable Members of Congress on the Subcommittee on
Domestic and International Monetary Policy of the Committee on
Banking and Financial Services, ladies and gentlemen:
It gives me great pleasure and it is a privilege to testify before
you today on ways in which the United States and its other partners
in the international community might be able to assist Nigeria in
creating sustainable economic growth after so many wasted years
under tyrannical and unprogressive military rule. Due to the short
time that I have, I will be direct and state that those ways
include as foremost (i) debt relief, including outright
cancellation; (ii) loot recovery from Western banks and (iii)
constitutional reform.
Debt Relief
During the period 1986 to this year 2000, the exchange rate between
the US dollar and the Nigerian Naira changed from US$ 1 equals
about 2 Naira to $1 = 100 N. Furthermore, its internal debt
increased from N36.5 billion in 1986 ($0.36 billion in today's
dollars) to about N400 billion ($4 billion) today.
During this same period, Nigeria's external debt increased from
$11.5 billion in 1986 to $33.2 billion in 1990, $33.4 billion in
1991 and then fell to $29.5 billion in 1994. It rose to $32.6
billion in 1995. Currently, it is placed at about $30 billion
dollars, or about 70% of its 1999 estimated Gross Domestic Product,
and of which about $14 billion is payment on arrears. During this
period it has, at an official level, tried everything to manage the
debt: debt rescheduling, debt conversion, debt-buy back and
curtailed new borrowing, yet it has seen little or no relief. The
strategy is just not working and cannot work.
For the US, the dollar figures quoted above are not large, but for
Nigeria, they are insurmountable, but go to accentuate the fact
that Nigeria with its monoculture of oil and its 120 million
population, is a poor country, even though it is oil-rich. In fact,
the current 2000 National budget of Nigeria which the Executive and
the legislature are still haggling over is roughly N600 billion (
roughly $6 billion), which is what the District of Columbia is
budgeting to spend on its schools in the coming year. But this Year
2000 budget means that 120 million Nigerians will have to starve
for about 5 years if it is to use up all of its money to pay off
its external debt if all interest payments were to be frozen today.
What all of this means is that if Nigeria is to EVER hope to reap
any "economic dividend" which President Obasanjo so much harps upon
and improve the lives of its citizens, it is imperative that
Nigeria be granted a mixture of :
(i) IMMEDIATE stoppage on interest payments; (ii) OUTRIGHT
cancellation of a substantial portion of its debt; and (iii) An
institutional RE-DIRECTION of some portion of the debt under
international supervision to definite projects such as health (AIDS
and malaria), water provision and education within the country.
In general, these tally with the Jubilee 2000 recommendations for
the cancellation of debts of developing countries which are
commended to this sub-committee, with some modifications depending
on each country.
As a keeper of my African brothers and sisters, I should not, must
not talk just about Nigeria alone without talking more generally
about Africa's debt burden as a whole owed by its governments to
multilateral, bilateral and commercial donors, which currently
stands at about $350 billion. Of the 41 nations identified by the
World Bank as Heavily Indebted Poor Countries (HIPC), 33 are in
Africa. The Cologne meeting of the G-7 promised relief, and in 1999
the U.S. is to be commended for taking the first steps to meet its
obligations. However, the United States must exercise greater
political will and a serious commitment to find the funds to make
deep debt relief a reality, and must appropriate, not just
authorize, to raise the current level of funding in the foreign
operations bill from a paltry $75 million to the needed $435
million for this year. The fact of the matter is that if the United
States government contributes its fair share to the international
debt plan, and you and your colleagues approve $810 million over
the next 3 years, this will encourage all creditors to do their
part, and $90 billion in debt can be written off for 33 of the
world's poorest countries. This is because due to US's leadership,
every dollar that you contribute to the HIPC trust fund will
leverage more than $20 dollars from other international creditors
and regional development banks. More than 17 countries have already
made a contribution and several others have made pledges to the
trust fund contingent on the U.S. contribution. They are waiting
for your action!
Loot Recovery
I am sure that at the back of the mind of everybody listening are
the questions: how did Nigeria incur these debts in the first
instance, and what has the country got in return? How can we ensure
that debt relief will not result into more bad behavior, if that
was what cause all the debt in the first instance?
Despite all of the debt, Nigeria remains an under-developed country
with very weak physical infrastructure and an outrageously low
human development index. Although a lot of money was spent on
education, particularly in mid-70s to early 80s, much of the money
owed was spent on conspicuous consumption and unproductive salary
increases in the public sector. However, more outrageously, for the
overwhelming portion of the debt, it is estimated that over the
years US $98.8 billion is stashed away by Nigerians in foreign
banks, illegally acquired money by its leaders, family members and
cronies. During the Gulf Crisis of the early 90s, about $12 billion
of Nigeria's oil windfall went missing. In five years alone
(1993-1998) General Abacha and some members of his family are now
confirmed to have salted away as much as $5 billion in Swiss,
German, UK and American banks, among several other countries.
Abacha's son, currently on trial in Nigeria for other suspected
crimes, recently confessed to moving $700 million in cash from his
home in Abuja through several such banks, all on behalf of his
father, no questions asked.
It is mind-boggling. One wonders how these large sums of monies
from developing countries are moved between banks in Western
countries without eyebrows being raised, when within the US, for
example, a bank has to report to the US Reserve Bank if more than
$9,999 is transferred from a single account!
However, not all the loot was acquired by Nigerians alone. Some of
the schemes ostensibly used to reduce the debt, particularly the
debt-buy-back schemes, were in fact avenues for loot acquisition
both by Western individuals and banks in the West. In this respect,
my organization the NDM has recently passed onto the US State
Department and the Internal Revenue Service a thick document of
dubious-looking schemes from 1988 to 1993, involving US individuals
and some otherwise reputable banks involving as much as $6 billion
dollars of Nigerian bought-back debt - in promissory notes,
government debts and multilateral debts. This is detailed in the
so-called "Fashanu Report" after a UK-based Nigerian ex-soccer star
named John Fashanu who has taken it upon himself to expose some of
the suspected funny financial criminality and international sharp
practices, and who has also been in touch with British and Swiss
government officials with the same document. One does not know
exactly how much of these monies in the Fashanu Report were looted
or laundered, but a close investigation of the deal files might
reveal the extent.
The Obasanjo civilian regime has made an anti-corruption crusade
one of its watchwords, and it must be encouraged by the United
States in that direction. It has, (together with the Abubakar
military regime before him) already reported recovery or freezing
of some of the loot (as much as $2 billion total so far),
especially from and in Swiss banks, some directly from the Nigerian
crooks and their partners, but there is greater need of
multilateral cooperation with Nigeria and relaxation of secrecy
laws to speed these recoveries. None has been reported from the US
so far, but there must be some bodies buried here as noted above.
If we can recover a substantial part of this loot, it can be used
to pay back some of our excruciating external debt. A multilateral
approach is clearly needed, because in this digital age, money is
readily transferred across capitals with the click of a mouse. If
we can plug the complicity of Western individuals and banks in the
raping of developing countries such as Nigeria, maybe the continent
of Africa will not be described as "hopeless" according to the
recent alarmist characterization by The Economist magazine.
Constitutional Reform
Nothing in the economic realm happens properly outside the law, and
the source, the well-spring of that law is the constitution of the
country.
During the years of military rule in Nigeria, government was run by
decree, by fiat. The various military governments suspended various
portions of the most recent constitution, and even those
unsuspended portions were followed only capriciously and in the
breech. For years, we had the oxymoron: "Federal Military
Government of Nigeria." Each time the military transited out of
governance, we were left with a new Constitution with a heavy
stamp: "Made in the Barracks" without citizens' ownership as can be
obtained for example from a referendum.
Since May 29, 1999, Nigeria now once again runs a Civilian Federal
System of governance with separation of powers between the
Executive, the Legislature and the Judiciary similar to that of the
United States. However that is where the similarity ends. Whereas
in the United States, the original states sat together to form a
union, and more states were later formed as part of the union as
additional territory was acquired and populations grew, Nigeria's
colonial legacy coupled with decades of military rule has provided
the country with an inverted false Federalism which is difficult to
manage, and which has become ossified in the most recent 1999
Constitution. Parties are sanctioned by the state, not through free
association. Without ideological differences between the parties,
the electorate is left to choose, if at all, between personalities,
who then go on to cut private deals in parliament. The quickest
form of punishment in parliament for any infraction now seems to be
impeachment or threat of such, and there is a fundamental confusion
in the minds of legislature as to their role in law-making and
executive functions. Consultation by the Executive of the
legislature for advice-and-consent is perceived to be a necessary
nuisance. The Federal might is suffocative of state rights, which
in turn are suffocative of local government rights. There is too
much power and too much money in the center to the detriment of the
states where the money is derived. The weak physical and financial
infrastructure makes it virtually impossible to run such a
relatively big country from some central command, a familiar
structure inherited from years of military rule.
The constitutional requirement that will enable changes to occur is
onerous: 2/3 of the National Assembly and 2/3 of the State
Assemblies. In a country still riven with ethnic, religious and
socio-economic divisions, it is most unlikely changes that are
necessary NOW will come any time soon. Both the Executive and the
Legislature recognize the need for constitutional reform - each has
been a victim in one way or the other of the present 1999
Constitution, and are "learning" it as they go along - but are
pursuing parallel paths in engaging the nation in this important
task.
Demands for a national conference of nationalities and civil
society of some sort for settling of the National question as well
as a comprehensive root-and-branches reform of the Constitution are
loud, but are rather hastily and haughtily dismissed by the
Executive and legislative leadership - who feel threatened by such
a device - as recipes for disintegration of the country. One fears
that by the time it is recognized that a sovereign national
conference - my preferred option and recommendation to this body
for consideration - is absolutely necessary, that time might be too
late.
The US and the international community has the obligation to nudge
all parties to a dialogue, so that UN hard-hats do not find their
way to Nigeria some day. As Nigeria goes, so goes West Africa.
...
Posted on shell-nigeria-action, 6 Jun 2000
[for list archives see
http://www.essential.org/listproc/shell-nigeria-action]
TELL No.24 June 12, 2000.
Ken Saro-wiwa Not Alive to Witness the Fruits of His Labour.
By Sanya Ademiluyi
In Achebe-speak, proverbs are the oil with which words are eaten.
But in the Niger Delta, oil is, indeed, the driving force that is
expected to oil the economy of the state and, perhaps, transform
the people from poverty to a sustainable average life of comfort.
The crux of it is the 13 per cent derivation revenue allocation
from crude oil or petroleum which the 1999 constitution of Nigeria
granted oil-producing states of the Niger - Delta Basin.
The late Sani Abacha junta first announced this offer, following
widespread unrest and agitations by the Niger Delta people,
especially after the Ogoni leader, Ken Saro-Wiwa, and eight other
compatriots of his were hanged in 1995. It took more than three
years for the fruits of the 13 per cent derivation revenue to get
into the hands of the governors of the oil-producing states.
Undoubtedly, the anticipation has been and expectations sky-high.
Yet, for many of the oil-producing states, the funds release has
been an anti-climax of sorts because, in many cases, they claim the
funds got fell far below expectations while the most vocal among
them considers the revenue "meagre".
The Delta State finance commissioner, David Eduibe, who spoke with
the magazine argues, that the state accounts for 30 per cent or N30
billion out of the total revenue of N100 billion. But out of the
N30 billion it produces, it gets only N2 billion. Complains Eduibe:
"Because out of N30 billion, you gave me N2 billion and you expect
me to be excited about it. I cannot be excited".
Bayelsa State governor Diepreye Alamieyeseigha, whose state has
been a hotbed of youth protests, however, strikes a different tune.
Alamieyeseigha says he feels "happy because this is something we
have been expecting ever since this administration came into
being." ...
Two important issues arise from this revenue windfall. First is the
serious contention by almost all the state governments that the
money they received was not 13 per cent of all the revenue
derivable from crude oil export sales accruing to the federation
account. But by their computation, what they got amounted to just
7.5 per cent. ...
The Obasanjo administration's position is that the oil-producing
states are only entitled to the oil wells on their land, that is
"on-shore," and not oil wells in the coastal waters of the
country's continental shelf which it considers to be "federal
property." It is on the basis of this onshore, offshore dichotomy
that the oil-producing states believe that what they have received
falls short of what is due to them. ...
The second important issue is what the states- or their governorswould
do with the oil money now in their kitty. ... Although
poverty levels vary across the Niger Delta, these are usually like
the difference between mangoes and oranges. The statistics are
appalling. In Bayelsa State, for example, the infant mortality rate
is 127 per 1,000, compared to the national average 90 per 1,000,
according to the state's health ministry. Health centres across the
difficult terrain - part swamp, marsh, or water - are few and
between. And worse still, they are mostly bereft of medical
equipment and drugs, making them of the poorest standards,
nationwide.
Statistics and other facts about transportation are even less
cheering. Again the terrain - one of the largest surviving mangrove
forests in the world, it costs at least five times more to build a
single kilometre of road in the Niger Delta than the national
average. Education, which could help improve the lot of the youths
of the states, is equally in bad shape, again worse than the
national average. Because the level of educational infrastructure
is so low, it worsens the social problems of the oil-producing
states. Without sound education, and a resultant absence of a large
professional class, the indigenes of oil producing states are mere
bystanders in the biggest industry in their domain - the oil
industry. This undoubtedly, creates another political backlash as
the jobless, and mostly 'unemployable' youths vent their anger on
the oil companies and their workers.
Will 13 per cent derivation revenue from oil create something close
to an Eldorado in the oil-producing states? The answer seems a
resounding no. While many powerful interest groups in these states
may be jostling to get a share of the derivation pie, the problem
of development are so dire and gargantuan that the derivation
windfall is so minuscule in comparison. ...
The implication of this that the citizens of the states,
particularly the unemployed youths, will continue to agitate for
better and higher standards of living. Their harassed state
governments would, in turn continue to seek ways of getting a
bigger share of the national oil wealth ...
Already, the state governments seem to be looking beyond the
current 13 per cent allocation. To back up this position, many
governors want a reversion to the 1950s when the regions got 50 per
cent of the revenue generated in their areas. That might be a long
shot. But it is a battle which the governors, backed by their poor
and disgruntled people, are determined to fight. The 13 per cent
derivation victory has ironically given more impetus to this
struggle.
This material is being reposted for wider distribution by the
Africa Policy Information Center (APIC). APIC provides
accessible information and analysis in order to promote U.S.
and international policies toward Africa that advance economic,
political and social justice and human and cultural rights.
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