Debts: Road to second slavery

Posted by News Express | 8 September 2018 | 2,171 times

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Obi Nwanodozie, a little less than four years, is born into a farming family with tremendous landed assets in a rural community known as Ntigha, Isiala Ngwa North Local government Area, near the commercial heart land of Abia State.

Obi’s father, Mr Eze, is a big-time farmer. But because he had the limitations of not being blessed with enough cash to back up his dream line of business, he made up his mind to go into the business of importation from one of the West European nations.

The quick-thinking rural farmer, who planned to diversify his trade, then approached a big-man in a nearby community. The man whom Mr Eze approached to raise the working capital (a loan), has the challenge of not having enough land in his family due to the extended size of that family, which meant that land he inherited was so small. He, therefore, demanded that Mr Eze should tender his huge landed assets as collateral for the loan, which he must pay back with less than 5 per cent interest after seven years. The deal was sealed but not without reaching a legal agreement that - should there be a default in payment - the ownership of the massive family land will change hands to the lender in place of his N100 million loan he gave to Mr Eze.

Walking away resplendently, Eze then proceeded to embark on his new business trip and made success out of the first few trips. But the sixth trip became a huge problem. He fell into the wrong hands of professional dupes who took all his money and left him in penury. This tragedy happened in the sixth year of his loan agreement. He made frantic efforts to reschedule the repayment without success, because the big-man was actually eyeing the land.

The bigger tragedy happened when the time for repayment was due, but Mr Eze had no money to repay. As a result, he was compelled to surrender the ownership of his vast landed property. This was exactly when his son was almost getting ready to enroll into college. Mr Eze became so poor that he could not meet basic financial obligations to his family.

Ironically, the man who was rich in landed assets now became homeless and impoverished because of wrong investment choice, and his encounter with the wrong business partners who were dubious.

The above analogy is the likeliest situation that Nigeria could face in the near future; if the nation, due to current high level of corruption, cannot repay the massive loans Muhammadu Buhari’s All Progressives Congress (APC) administration has continued to generate in the guise of “building strategic infrastructures”, but ended up being stolen by his thieving officials.

Recall that few years back, the United Nations Office on Drugs And Crime (UNODC) estimated that Nigeria has lost to government thieves over $400 billion revenue generated from exports of crude oil in the last four decades.

The signal Nigerians are now getting even from official quarters is scary, and shows a nation whose leaders have gone a borrowing: with little or no plan on how to repay these loans.

Ironically, just before 2015 when Buhari came on board, the nation had exited the bad club of heavily indebted poor countries by virtue of the fact that the Finance Minister during the Chief Olusegun Obasanjo’s administration, Prof (Mrs) Ngozi Okonjo-Iweala successfully negotiated with Nigeria’s multi-lateral creditors for soft landing.

A development policy review edited by Geske Dijkstra of the Erasmus University Rotterderm and published on September 5, 2013, had celebrated the so-called exiting from this inglorious club of debtors by Nigeria. The researcher had asked: What did $18 billion achieve? That is the 2005 debt relief to Nigeria?

 The researcher said the aim of the paper is to assess the contribution of the 2005 debt relief agreement to Nigeria, to this higher growth. This agreement eliminated Nigeria’s US$30 billion debt to Paris Club creditors. The creditors cancelled an unprecedented US$18 billion, while Nigeria paid US$12 billion. 

The agreement, he argued, was concluded in the midst of intensive international campaigns for more aid and more debt relief. He recalled that the G8 Summit had just decided to eliminate all multi-lateral debts for countries that had fully complied with conditions for the Heavily Indebted Poor Countries (HIPC) Initiative. He recalled too that together with the HIPC initiative itself, this new Multilateral Debt Relief Initiative (MDRI) hugely reduced the external debts for the involved low-income countries. 

But there was a big snag. Nigeria's case was different. It was not a HIPC country, mainly because of its huge oil income, and most of its debt was with bilateral creditors. Debt cancellation for Nigeria was heavily disputed at the time, the researcher noted. He told us vividly that an important argument against it was precisely that Nigeria was oil-rich and that the country could easily pay its debts. 

Another objection, he said was Nigeria’s bad reputation in terms of policies and governance, which made it highly unlikely that the country would use the debt relief savings well. 

On the other hand, he noted, it was argued that Nigeria was a low-income country (in 2003, GDI per capita was US$320), with 54 per cent of her about 150 million people living in poverty, and that the debt cancellation was necessary in order to help the country achieve the Millennium Development Goals (Moss et al., 2004; Okonjo-Iweala, 2008; World Bank, 2005). 

That is not all. The financial historian recalled that some analysts also claimed that the creditors should have cancelled the debt a long time ago, since most debt was arrears (Rieffel, 2005). He said given the conflicting views on debt cancellation to Nigeria, it is more relevant and interesting to assess what it has meant for economic growth and poverty reduction in the country. 

“This paper traces the three possible impact-channels of debt relief, namely, the flow channel (reduced debt service), the stock channel (removal of debt overhang) and the conditionality channel (Dijkstra, 2008).” 

The researcher reminded us that by carefully establishing the most likely counterfactual scenario for each of these channels, the paper concludes that the debt relief agreement played a key role in the country’s improved economic performance. 

“The conditionality channel was, in fact, most influential. It was the anticipation of possible debt cancellation the broke the political deadlock that had prevented policy reforms for a long time.” 

Mrs Okonjo-Iweala got lots of plaudits from this brilliant move that saved Nigeria the much-sought-after $18 billion debt relief. 

Although yours truly then forcefully opposed the decision of Nigeria to pay off that huge chunk of foreign reserves to service the then $30 billion credits, which was reduced to just $12 Billion, the decision earned the government praises for, at least, saving the face of Nigeria and pulling us away from the enslavement of being a debtor-nation.

Few years down the line, the current government has literally gone back to accumulate heavy debts.

By its own confession, the government of Muhammadu Buhari told us that Nigeria’s external debt commitment rose by $11.77 billion in the last three years

According to debt statistics obtained by the media from the Debt Management Office (DMO), the country’s external debt rose from $10.32 billion on June 30, 2015, to $22.08 billion as of June 30, 2018. This means that the country’s external debt commitment has grown by 114.05 per centin the last three years.

Although multi-lateral debt made up $10.88 billion or 49.28 per cent of the country’s external debt profile, most of the increases in the last three years occurred in the area of commercial loans, according to a media report.

From the DMO’s records, commercial foreign loans, which stood at $1.5 billion as of June 30, 2015, had risen to $8.8 billion as of June 30, 2018.

This, according to the newspaper, means that in the last three years, the country’s exposure to commercial foreign loans has risen by $7.3 billion or 486.67 per cent.

With a commitment of $8.47 billion, the World Bank is responsible for 38.36 per cent of the country’s foreign portfolio, it asserted. 

The media uncovered that apart from the World Bank Group, Nigeria is also exposed to some other multi-lateral organisations, such as the African Development Bank with a portfolio of $1.32 billion and the African Development Fund with a portfolio of $843.47 million.

Others are the International Fund for Agricultural Development (IFAD) with a portfolio of $159.44 million; the Arab Bank for Economic Development with a portfolio of $5.88 million; the EDF Energy (France) with a portfolio of $64.96 million and the Islamic Development Bank with a portfolio of $16.92 million.

On the other hand, the newspaper affirmed, bilateral debts make up $2.39 billion or 10.87 per cent of the country’s external debt exposure.

The bilateral agencies to which the country is indebted are: Export-Import Bank of China, with a portfolio of $1.91billion; the Agence Francaise de Development, with a portfolio of $274.98 million; the Japan International Cooperation Agency, with a portfolio of $74.69 million; the EXIM Bank of India, with a portfolio of $4.76 million, and Germany (KFW) with a portfolio of $132.24 million.

However, the media stated that unlike the foreign debt, the domestic component of the country’s total public debt decreased marginally recently, as a result of moves to rebalance the local/foreign debt ratio.

According to the DMO, a major highlight in the latest public debt data was the decrease in the Federal Government’s domestic debt, which declined from N12.59 trillion in December 2017 to N12.58 trillion in March 2017, and N12.15 trillion in June 2018.

The DMO said the reduction in the FGN’s Domestic Debt Stock arose from the redemption of N198 billion Nigerian Treasury Bills in December 2017, and another N639 billion between January and June 2018.

A total of $3 billion was raised through Eurobonds to refinance maturing domestic debt as part of the implementation of the debt management strategy for the purpose of substituting high-cost domestic debt with lower-cost external debt to reduce debt service costs for the government, the DMO said. It also explained that the implementation of the Public Debt Management Strategy - which overall objective was to ensure that Nigeria’s debt is sustainable - was already yielding positive results.

The ill-advised decision of Buhari to lead Nigeria blindly into another debt-trap is dangerous: because, apart from massive corruption by the officials, the government has yet to plug the gaps in the crude oil sector, which makes it possible for multi-national companies to continue to milk Nigeria dry off the evenues from our crude oil resources and other sectors such as maritime, even as the current administration continues to pile up foreign debts that will inevitably return us to second slavery

Specifically, the Nigerian Maritime Administration and Safety Agency (NIMASA) had expressed worry over foreign dominance in the nation’s shipping subsector, saying that 95 per cent of income goes to foreigners.

The Director-General of the agency, Dr Dakuku Peterside, disclosed this at a one-day seminar, with the theme: Local Content Development in Shipping, Oil and Gas Logistics Operations in Nigeria, organised by Maritime Reporters Association of Nigeria (MARAN) in Lagos.

Dr Peterside who was represented at the event by Assistant Director, Shipping Development, Mrs Hannah Akpan, said 95 per cent of the income from the annual throughput of 150 million metric tons transactions, goes to foreigners.

 “Industry statistics show that the country generates an estimated annual cargo throughput of 150 million metric tons with freight earnings in excess of $50 billion in her international trade transactions. “Ninety-five per cent of this income is earned by foreigners, with the job deprivation to the country that goes with it.

“The same dominance by foreigners is also extended to the domestic shipping market where the estimated $3 billion annual marines related spending in the oil and gas production activities is virtually earned by foreigners.”

Let it be recorded that Human Rights Writers Association of Nigeria (HURIWA) has warned against this enslavement that President Buhari's administration is leading us into - especially the components of these loans from China - which will mortgage our crude oil resources and further impoverish the citizenry.

We must halt this maddening rush for foreign loans that end up being stolen by government officials in the current dispensation. 

•RIGHTSVIEW appears on Wednesdays and Saturdays, in addition to special appearances. The Columnist, a popular activist (www.huriwanigeria.com, www.emmanuelonwubiko.com), is a former Federal Commissioner of Nigeria’s National Human Rights Commission and presently National Coordinator of Human Rights Writers’ Association of Nigeria (HURIWA).


Source: News Express

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