Asks
Victor Oguejiofor Okafor, Ph.D.
Professor of African American Studies
Eastern Michigan University
Ypsilanti, Michigan 48197
Email: victor.okafor@emich.edu
On the surface, Nigeria's recent agreement with the Paris Club over the much-talked about debt relief program for the West African country may seem like a cause for celebration. But a close look at this dubious gift gives one a real cause for concern and skepticism. A critical analysis of the "debt relief" shows that, on balance, Nigeria comes out as the big looser of a lop-sided game in which the odds were against Nigeria from the onset. The deal confirms what the literature of the international economic order has long argued: colonialism grafted Africa into an inclement international financial system, which is designed to benefit the haves of the wealthy Northern hemisphere at the expense of the Southern hemisphere. It vindicates dependency theorists' contention that this inclement international economic order inevitably produces dependent development and creates structures of poverty in the post-colonial societies.
In sum, the Nigeria-Paris Club agreement provides that the club will "write off" 60% of the debt that Nigeria owes members of the club. Nigeria, on its part, will pay back the remaining 40% in two phases. As a news report puts it, "in real terms, the Paris Club will cancel $18 billion of Nigeria's debt, or about 60% per cent of the about $30 billion owed to the Club. But the Club will be paid `an amount of $12.4 billion.'"
It's also reported that the Paris Club members "endorsed Nigeria's economic reform programme," which, sometimes, is characterized as Nigeria's poverty-reduction program-- a euphemism for IMF's structural adjustment program that historically leaves a "reformed" country worse off economically than it was at the onset. It should be of interest to Nigerians, at home and abroad, that under this so-called poverty-reduction program, hundreds of employees of various federal parastals have been or are being relieved of their jobs by the federal government. What a way to reduce poverty!!! Indeed, it would appear that the parties responsible for the execution of this "poverty-reduction" program possess a diabolical sense of humor.
Let's recall, at this juncture, that a few weeks ago, the New York Times called for the outright cancellation of the international debt owed by poor African countries. In making the call, the Times observes that "Right now, African countries spend four times as much on paying back their debts than they do on health care. They are trapped into making ever-escalating interest payments that never touch the principal." Citing Nigeria as a typical example, the New York Times recalls that "NigeriaŠborrowed $5 billion, has paid $16 billion and still owes $32 billion." It then concludes that "canceling these debts should wait no longer." The New York Times could not be more correct. Its advocacy of debt cancellation, rather than debt relief, falls in line with similar calls by international NGOs. It also rhymes with the voices of debt cancellation that have emanated from various Nigerian media.
It's also of significance to state, at this point, that the facts of the debt situation as stated in the foregoing by the New York Times, a well-respected newspaper of record, approximate a history of Nigeria's troubling experience with the Paris Club, which Lanre Banjo reproduced with clarity in his July 2005 critic of Nigeria's debt relief arrangement. In it, he recounts that Nigeria's problematic international debt arose from credits that she borrowed from a group of 15 countries during the 1980s-countries that later established a cartel of creditors that called itself the Paris Club. The countries include the United Kingdom, France, Japan, Germany and others. Citing an economist of the Brookings institution in Washington, D.C., Banjo claims, in that article, that Nigeria's high indebtedness was due more to "a flaw" in the Paris Club's "debt restructuring process" than to "Nigeria's inability or unwillingness to pay." As he explains it, "what we have here is a case of non-performing creditors, and where the creditors refused to perform because of the military rulers the loans were given to." "A prudent borrower ought to hold their feet to fire," he adds.
Banjo continues with the following details of how an original Paris club loan to Nigeria of only $8 billion (the New York Times reported a lower original loan of $6 billion) later ballooned to $31 billion even though the additional $23 billion was not real money that ever touched the hands or shores of Nigeria or ever entered Nigeria's treasury. "In 1985, Nigeria's external debt was $19 billion, of which $8 billion was owed to the Paris Club creditors, $2 billion to other creditor countries e.g., Bulgaria, $8 billion to commercial creditors, and $1 billion to multilateral agencies (mostly the World Bank and the African Development Bank). At the end of 2004, the Nigeria's external debt was $36 billion. Of this amount, $31 billion was owed to Paris Club creditors, almost nothing to other bilateral official creditors, $3 billion to multilateral agencies, and $2 billion to commercial creditors."
Like other Nigerian observers, Banjo wonders why Nigeria's Paris Club debt increased by $23 billion over a period of 20 years. He offers an eye-opening answer. "In brief, the Paris Club creditors stopped advancing new loans to Nigeria because they disliked the country's military dictatorship some of whom signed for the loans. The bulk of the $23 billion increase represents interest arrears, interest charged on these arrears, and penalties that accumulated after 1992 when the Paris Club creditors refused to negotiate a debt workout for political reasons, compounded by adverse exchange rate changes. It is instructive to mention that less than $400 million of the debt represents post-1985 borrowing."
Banjo also explains that "Š Nigeria has received virtually no new loans from the Paris Club creditors after 1992. On the other hand, she has paid almost $8 billion to these creditors since then. Yet, she still owes them $14 billion more than she did in 1992. Moreover, instead of applying Nigeria's payments to post-1985 loans to make these performing loans, the creditors have applied the payments against arrears and penalties. Thus, the post-1985 loans continue to accrue their own interest and penalties without challenge from all the Ministers of Finance since 1985, including the World Bank agent, Okonjo-Iweala."
It would appear that what Nigeria and other indebted poor countries of Africa deserve and should insist upon is an unconditional debt cancellation. While one salutes President Olusegun Obasanjo for all his dogged efforts to get Nigeria out of this morass of a debilitating foreign debt, the fact is that the debt relief program to which his administration has committed Nigeria drastically falls short of the debt cancellation that well-meaning citizens and institutions of the world, including the Times, have advocated. The so-called debt relief that the Paris Club has extended to poor Nigeria "writes off" a phantom sum of $18 billion that never came out of the pockets of the Paris Club members, a paperwork sum that accrued from interests, arrears and charges. Not a dollar of this "relief" represents real money. But alas, the unsuspecting tax-paying citizens of the member countries of the Paris Club might be misled into thinking or believing that their tax dollars have been used to relieve Nigeria of her international debt. On the other hand, Nigeria, with a huge population of over 136 million million (the bulk of whom are said by the United Nations to be living below the world poverty line despite Nigeria oil wealth), will have to dole out a hefty sum of $12 billion in real currency to a group of relatively wealthy banks and governments, which had already extracted a profit of $11 billion on an original loan of $5 billion that Nigeria received from them, going by the New York Times report that "NigeriaŠborrowed $5 billion, [and] has paid $16 billion."
This whole exploitative debt relief deal typifies the octopus-like nature of international capitalism, which apparently cares only about itself. International capitalism is a blood-sucking octopus that neither cares about the human beings located within the metropole nor about workers located in "external markets," such as Nigeria. To international capital, Nigeria is simply another external market. Within the affluent countries themselves, the big exploitative multi-national corporations and banks are becoming even more exploitative as they extol the virtues of corporate globalization, which enables them, among other things, to make more profit by outsourcing jobs to places around the world where they can pay "employees" peanuts without health care, pension or gratuity benefits. These blood-sucking multinational corporations are cutting back on the wages of workers within the metropole; in addition, they are immiserating millions of their own citizens by laying off thousands of workers. A recent and prime example involves the largest automobile parts manufacturer in the United States, Delphi corporation. This corporation has announced plans to lay off more than five thousand of its eight thousand employees in order to remain competitive. It also wants to reduce the hourly wage of remaining workers from $26 an hour to $10. But, that's not all. The company also plans to drop its employees' dental and vision care plans.
What Nigerians need to understand is that this deal (or "exceptional treatment" as the Paris club self-servingly and deceptively calls it) that the compradors of Nigeria's financial establishment have worked out with their international counterparts means a net transfer of wealth from Nigeria to the latter. Not a cent of the $12 billion dollars that Nigeria will be giving away ("giving back" is not an applicable term, for Nigeria never collected such money from the club) was spent on any aspect of Nigeria's social development. This is a classic case where international capital created money for itself through sheer manipulative financial book-keeping.
Earlier on, we saw Lanri Banjo's description of Nigeria's Finance Minister, Okonjo Iweala as a World Bank's agent. Well, the mere fact that she held a top-ranking position in the World Bank does not, by itself, warrant the label put on her as an agent of the World Bank. What matters and what should determine whether she is operating as a Nigerian patriot or as an agent of the international financial system is the policy choices that she advocates and pursues in her capacity as Nigeria's minister of finance. It remains to be seen whether the debt relief that she has championed for Nigeria will benefit Nigeria as much as it would benefit international capital. It is also rather puzzling that President Olusegun Obasanjo and Minister Iweala considered a debt relief appropriate for Nigeria even when an influential and respected Western newspaper believes that the country's situation warrants outright debt cancellation.
How realistic is the expectation that debt relief will result in more resources going to health, education and other sectors of economy? Mark Curtis' (2005) criticism of the G8 Gleneagles debt relief plan is skeptical of its promise that "debt relief will free up resources for health and educationŠ" Explaining that in reality, the debt relief recipients will have to "Šsign up to World Bank/IMF economic policy conditions," Curtis writes: "Blair's assertion that aid will come with no conditions is contradicted by Hilary Benn, his development secretary, who told a parliamentary committee on July 19 [2005] that "around half" of World Bank aid programmes have privatisation conditions." Continuing, Curtis observes that "Recent research by the NGO network Eurodad shows that conditions attached to World Bank aid are rising. Benin, for example, now has to meet 130 conditions to qualify for aid, compared with 58 in the previous agreement. Eleven of 13 countries analysed have to promote privatisation to receive World Bank loans, the two exceptions having already undergone extensive privatisation programmes. Yet in the G8 press conference Blair refuted the suggestion that privatisation would be a condition for aid."
Curtis draws attention to the contradiction that lies in the fact that "the G8 communique stated that "developing countries ... need to decide, plan and sequence their economic policies to fit with their own development strategies," yet it also stated that "African countries need to build a much stronger investment climate" and increase "integration into the global economy."
In reality, Curtis laments, "poor countries are free to do what rich countries tell them." Such poor countries, of course, pay dearly for dancing to the tune of the wealthy nations. As he puts it, "the cost is huge. Christian Aid estimates that Africa has lost $272bn in the past 20 years from being forced to promote trade liberalisation as the price for receiving World Bank loans and debt relief." Of course, Africa's economic relationship with the West has historically worked to the net disadvantage of the former. During the 1970s and 1980s, against the backdrop of the activist age of the Non-Aligned Movement, there was a greater scholarly awareness and criticism of the inequities of the global economic system. There were the dreams of a new world economic order and a new world information. But in the wake of the collapse of the Eastern bloc and the attendant Western triumphalism, we have witnessed the ascendency of the gospel of private marketism. Globalization has meant greater wealth and greater power for the already mighty multi-national corporations, but, at the same time, it has meant diminishing wages and diminishing job security for workers and a weakening of state capacity within the sovereign nation states of the developing world.
Recently, Richard Drayton (2005) reminded us of a fact of history that Walter Rodney (1972) documented elaborately in his classic How Europe Underdeveloped Africa, a work in which Rodney demonstrates how the super-profits that slaving companies reaped from their trafficking in African captives (between the 15th and 19th centuries) helped to enrich Western Europe but simultaneously undermined African development. Drayton recalls it this way. "Africa not only underpinned Europe's earlier development. Its palm oil, petroleum, copper, chromium, platinum and in particular gold were and are crucial to the later world economy. Only South America, at the zenith of its silver mines, outranks Africa's contribution to the growth of the global bullion supply."
Continuing, Drayton recalls that "The guinea coin paid homage in its name to the west African origins of one flood of gold. By this standard, the British pound since 1880 should have been rechristened the rand, for Britain's prosperity and its currency stability depended on South Africa's mines. I would wager that a large share of that gold in the IMF's vaults which was supposed to pay for Africa's debt relief had originally been stolen from that continent." Such a rugged display of historical truth, as Drayton's, has hardly been brought to bear upon much of the debate on debt relief or debt cancellation for Africa. But he does not limit his analysis to a static analysis of the past, as if the past was an isolated and frozen rock of ice. His forward looking analysis allows him to recognize a chain of tragedies that intricately links Africa's past with its present. As he frames it, "there are many who like to blame Africa's weak governments and economies, famines and disease on its post-1960 leadership. But the fragility of contemporary Africa is a direct consequence of two centuries of slaving, followed by another of colonial despotism. Nor was `decolonisation' all it seemed: both Britain and France attempted to corrupt the whole project of political sovereignty."
Shedding further light on the shady ways and dirty tricks of neocolonialism, Drayton, once again, hits the nail in the head: "It is remarkable that none of those in Britain who talk about African dictatorship and kleptocracy seem aware that Idi Amin came to power in Uganda through British covert action, and that Nigeria's generals were supported and manipulated from 1960 onwards in support of Britain's oil interests. It is amusing, too, to find the Telegraph and the Daily Mail - which just a generation ago supported Ian Smith's Rhodesia and South African apartheid - now so concerned about human rights in Zimbabwe." Drayton's courageous and forthright analysis might prove a wake-up call for too many African experts of today who demonstrably suffer from an acute illness of historical amnesia.
Without making light of its history of neocolonial manipulation, it's no secret that some, if not most of Nigeria's past governments have been guilty of mismanagement of Nigeria's bountiful oil revenue. While one understands that in dealing with Nigeria's international debt, the hands of the current Nigerian government were relatively tied by the existing disadvantageous international financial system, one cannot help pointing out that Nigeria has not been advanced by this debt relief package. It's tempting to suggest that Nigeria could have tried to organize a debtors' cartel. However, given the many ways by which Nigeria and other developing countries have deepened their integration into the global economic system-a system that clearly works to their disadvantage-one concedes that such a step is easier to contemplate than to implement. But change is possible-at least in the long run. Increasing intra-African trade, increasing African economic integration, increasing the productive capacity of African economies, and conversely, decreasing dependence on foreign capital, foreign technology, and foreign food are means by which Africa can begin to dismantle the exploitative international financial tentacles around its neck. But all this will require a visionary and nationalistic political leadership that is not beholden to international capital and its neocolonial apron strings.
It's also no secret that bureaucratic corruption has been a bane of Nigeria's development. Although Olusegun Obasanjo's government appears determined to curb it, the administration doesn't have much to show for it in terms of results or convictions of allegedly corrupt officials. To date, despite all the braggadocio that we have seen from Nigeria's Economic and Financial Crimes Commission (EFCC), it has recorded only one conviction involving a 419 case. In the meantime, we have been reading of alleged "plea bargain" deals that may be in the works for an indicated ex-inspector general of police who is accused of stealing staggering amounts of public funds. While the West has loudly decried official corruption in Africa in general, it has also acted hypocritically (with the exception of France) by not endorsing the new United Nations convention against corruption-an instrument that could help stem the tide of corruption-induced transfer of wealth from the poverty-ridden Southern hemisphere to the relatively affluent northern hemisphere.
References
Curtis, Mark. (2005, August 23). How the G8 lied to the world on aid: the truth about Gleneagles puts a cloud over the New York summit. USA/Africa Dialogue, No. 1037. (http://www.utexas.edu/conferences/Africa).
Drayton, Richard. (2005, August 21). The wealth of the west was built on Africa's exploitation. USA/Africa Dialogue, No. 1027. (http://www.utexas.edu/conferences/Africa)
Drop the debt. (2005, September 24). Editorial, New York Times.
Rodney, Walter. (1972). How Europe Underdeveloped Africa. Washington, D.C.: Howard University Press.
Ige, Ise-Oluwa. (2005, October 17). Tafa Balogun opts for deal with EFCC to trade off assets for freedom. Vanguard online (http://www.vanguardngr.com).
Jimoh, Azimazi Momoh. (2005, October 19). Uproar in Senate over govt's plan to sack 30, 000 workers. Guardian online (http://www.guardianngr.com).
Ubani, Ezinche. (2005, October 21). Nigeria, Paris club sign debt deal. This Day. (http//www.allAfrica.com).
Walsh, T., & Roberson, J. (2005, October 22). Unions Irate over Delphi's new offer: electrical workers say they stand to lose 5,500 jobs. Detroit Free Press. (http://www.freep.com).