reactions to debt relief essay
December 28, 2006 | posted by Nigerian Muse (Archives)
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ANONYMOUS REACTION VIA NIGERIAN VILLAGE SQUARE
BLOG
August 30, 2005
I enjoyed reading the rejoinders, and would like to add my opinions...in no
way expert opinions.
I think we shoudl probably not be focusing on the opportunity cost of the 0.30
cents on the dollar or $12 Billion to be paid over a spread to Paris Club.
I want to call out some issues, that the rejoinder and related articles fail to
highlight. One is that the $6 Billion to be paid to Paris de Club (Paris
Club)could be deemed our excess revenue from the sky rocketting crude oil sales.
If this excess isnt applied to our yearly accumulation of bilateral debts now,
we all know:
a) What would we do with the money now, that we couldnt have done during the
Gulf war windfall...and would be more efficient and constitute non-inflationary
use of the oil windfall.
b) What happens to this excess, come 2007 and beyond ?
Why cant we take advantage of our World Bank IDA-only status,and borrow at
IDA-only 0.75% for 40 years for capital and infrastuctural projects ? I get the
sense that the general feeling, is that the excess oil money would have turned
Nigeria into a gulf country overnite ??
What I would have preferred to see in the rejoinders , are a few points.
i. That the terms of this deal offer was probably not drafted overnite
haphazardly...to our detriment.
ii. That we certainly got a better deal offer than Iraq got at the Paris Club
for 0.20 cents on the dollar, or Argentina $25 cents.
This deal looks like a really great opportunity to put this debt thing all
behind us. To look at this another way,the first $6 Billion covers our entire
Paris Club debt to the U.K,France, Germany, Japan and Italy. Our $5-6 Billion
debt-buy back covers the less countries...which we owe some as little as $300
Million. Unfortunatley, we just cant slice it that way at the Paris Club :-(
I think we should all put sentiments aside, and focus on the real issues:
1. The Nigerian debt would never , ever have gone away by debt servicing, and
hoping one day we can pull the repudiation threat, or successfully invoke the
odious debt doctrine...
2. We would continue to dish out a highly discounted debt service of $1 billion
every year , that could have gone to infrastructure spending and other needs in
the country, WHILE,still incurring heavily interests payments of equal or more
portions.
3. Why are we expecting the creditors to cut us some slack with our debts ? we
didnt even over-borrow, we just simply didnt pay. In the true manner of a debtor
who neglects to pay his credit card bill. We need to pay these monies back.
We're certainly not like other sub-saharan coutries or HIPCs (Highly Poor and
Indebted Countries), and we cannot even imagine that we would have gotten a
total debt write off with no buy back option.
4. The creditor simply has to benefit from the deal too...yes, it is our relief,
but whats in it for the creditor too ?
My 0.02 cents.
Signed...
A loyal reader of Professor Aluko
--
Posted by Anonymous to Mobolaji E. Aluko at 8/30/2005 12:07:18 AM
REACTION VIA
USA-AFRICA DIALOGUE
August 28, 2005
A. B. Assensoh, Indiana University
In Praise of "Alukoism"
Although Nigeria and Ghana now seems to be at each other's brotherly throats
economically, several Ghanaians feel that the issues at stake are mere
misunderstandings of regional cousins that will soon evaborate in the context of
regional cooperation and unity; to many Nigerians and Ghanaians, it is like the
loud and "bitter" noises that often followed soccer matches between Nigeria's
Green Eagles and Ghana's Black Stars of old, the time when soccer was real
football. A.B. Assensoh, a former Journalist in Nigeria, very much thinks
remembers the old times with a lot of admiration and euphoria. Here, he writes
to praise Professor Aluko (in USA/Africa Dialogue No. 1043) and, in a nutshell,
also to pose a few questions that disturb him about Nigeria's $30 billion Paris
Club debt.
When growing up, I and my many brothers and sisters (as my Dad, indeed, had 22
sons and 26 daughters from his six wives) used to attend large traditional and
political rallies, at which notable citizens were as well as royal personages
were carried in gold-plated royal stools and palanquines as signs of respect and
opulence. That practice is not common these days but -- after perusing Professor
Aluko's excellent "debt relief" declaration (similar but superior to to the "Ahiala
Declaration" of the erstwhile "Biafra"; the "Aburi Declaration" of the
Gowon-Ojukwu meeting in Ghana; and other Third World declarations), I feel that
Nigerian leaders should bring a gold-plated stool (or a royal palanquine) to
carry Brother 'Bolaji (Aluko) "shoulder high" to Abuja to help President
Obasanjo's government and its economic experts. Indeed, many of us have
unlimited praise for "Alukoism", as his brand of economic theorizing also
includes answers to queries, problems and meaningful suggestions but not just
criticisms of African leaders and nations. Therefore, long live "Alukoism."
Thank God that Nigeria's debt is not yet in trillions: or candidly, which will
be bigger, millions or trillions? It is early in the morning, but I guess that
trillion is larger than million! On the other hand, I want to confess that I
sometimes find it difficult to remember how many zeroes that make a billion or a
trillion. Therefore, I seriously wish to know (1) about the Paris Club
accountant or financial expert that kept the annual debt figures, since
Nigeria's independence in 1960, to arrive at the $30 billion Nigerian debt that
is in negotiation now?; (2) that, apart from Nigeria suffering economic
alienation and a measure of strangulation from the Paris Club, what will happen
if Nigeria boldly decides to halt all negotiations in order to probe this huge
debt to find out which specific aspects are tainted with corruption, malfeasance
and possible financial exaggeration?; (3) is it because Nigeria reportedly earns
so many millions of dollars per day from oil and gas revenues that is why the
Paris Club did not cancel the country's external debts outright?; and (4) where
does Nigeria stand now in her quest for a Security Council seat at the UN in
view of what the country reportedly owes the very Club, whose members may have a
lot to say (including using Veto Powers) when it comes to which African
countries are deemed viable and bona fide enough to sit down to drink coffee as
well as chit-chat with them? Like Brother 'Bolaji (Aluko), who rested his case
in economic theorizing, I too rest my histo-political case for now, but I need
some answers to share with my graduate students as they debate the "Bolaji
Declaration" and other discussions!
P.S.: As I await answers to my feeble queries above, I also want to draw
Dialogue readers' attention to a newly-published excellent book that has been
edited by Professor Obioma ("Obi") Nnaemeka of the Indianapolis campus of
Indiana University (IUPUI). This very useful and fascinating book is titled,
"Female Circumcision and the Politics of Knowledge: African Women in Imperialist
Discourse" (Praeger, 2005). The 288-page book has a powerful introduction (pages
3-18), in which Dr. Nnaemeka quoted an intelectual sister as underscoring the
following: "Sister Obi, now that they have placed our toto on the curriculum, we
have to defend it." (page 3). Please, find the time to read the Praeger book
that is being reviewed soon in "African and Asian Studies Journal" of Leiden,
The Netherlands.
REACTION VIA
USA-AFRICA DIALOGUE
August 27, 2005
Chikwendu Christian Ukaegbu (University of
Wyoming)
A good, no doubt patriotic, argument on the debt
relief by Bolaji Aluko. With his plan of small installments spread over
three decades, however, those of us who want to live to see Nigeria on the
path to development may not see our dreams fulfilled, and will leave the
earh wondering whether it will ever happen. According to President Clinton,
in his numerous statements on the American economy during his regime,
managing the national economy is no different from managing one's personal
or family finances. The only difference is in the size of the national
economy vis a vis its household counterpart. Imagine those times when
there are huge debts on your credit card and suddenly a windfall emerges
from nowhere or even from somewhere. You quickly write a big and final check
on that debt, heave a sigh of relief, and almost immediately begin to think
of and plan for a new project which had been dear to your heart but had been
stalled because of your prior state of indebtedness.
I assume that all the things we have read about
the debt relief is true. That is, Nigeria's debt to the Paris Club has been
forgiven to the tune of $18 billion. Nigeria, in my opinion, will be best
served to dip its hands into its foreign reserve and pay the remaining $12
billion dollars. A shock therapy approach, some may say. Since the end of
the civil war, every Nigerian administration has blamed its developmental
failures on the debt burden. It was President Obasanjo who rightly elevated
to the arena of public discourse the idea of corruption as another major
constraint to development. If Nigeria pays off the outstanding $12 billion
debt, debt servicing to the Paris Club will end, and the debt burden will no
longer be an excuse for developmental bottlenecks.
Aluko's plan of very gradual repayment will
put Nigeria in more and more debt in the long term. Recall that the
vocabulary or concept of multiplier effect has never existed nor does it
presently exist in the consciousness of Nigerian politicians. A typical
Nigerian politician-president, governor, minister, senator, assembly
member, commissioner, councillor, senior bureaucrat and technocrat, sees
government money as something to be distributed rather than be multiplied.
That is why they are incapable of linking the shortcomings of the Nigerian
socioeconomic environment to the multiplication of the country's economic
resources. In a society where the consciousness of political leaders espouse
distribution rather than multiplication, gradual repayment of the debt will
increase the temptation for more borrowing in the future. Hence the country
goes 'back to square one', as Nigerians always say. Aluko's plan asuumes an
ideal world, that all the conditions he stipulated would be respected by the
govering apparatus called the Nigerian state.
The speedy increase in Nigeria's foreign
reserve to $24 billion dollars was facilitated by the continuing rise in oil
prices. The government always proudly, with excitement, announces the
increase in the foreign reserve. But hardly, to my recollection, has it
announced that the cost of a bag of gari, rice, beans or millet, has
decreased by a given unit of the naira. Or that the production of beef and
fish has increased to help the teeming population of havenots to have
something near to an adequate amount of protein in their diet. Or still that
at least 60% of National Youth Service Corps (NYSC) graduates will step into
employment the day after passing out. Afterall, there were times when
Nigeria's foreign reserve was $7 billion and $12 billion. The human
condition in Nigeria has not changed qualitatively for the better just
because the foreign reserve is now $24 billion.
The increase in the oil prices will not last an
eternity. Be assured that people in advanced countries who are hurt by the
rising cost of fuel will not fold their arms and watch the increase till
eternity. Certainly, they possess the technological capability to turn
around the cost of oil. Do not be surprised, watching the evening news
someday, to hear that some synthetic material, or something, has been
perfected as a substitute for oil. Historians of technology have attested
that this happened in the case of rubber during WWII. Rubber latex was
in such short supply that it was about to hurt American effectiveness in the
war, especially after the Japanese occupied Singapore and other parts
of Asia housing nearly 80% of the world's rubber trees. President Truman
issued what amounted to a decree challenging American scientists, engineers
and corporations to come up with an alternative to latex. Corporations,
scientists and engineers rose to the challenge. And synthetic rubber became
an effective alternative to latex. Aluko himself is a notable scientist and
engineer. He is aware, more than I am, that science and engineering feats
will never cease to occur especially in the technologically advanced
countries.
What is important in the current discourse on
the debt relief is not how much Nigeria can save by gradual and extended
instalmental repayments, but what it can do with debt servicing out of its
way forever. Mine is a commonsense position. Economists may prospose some
econometric equations and argue to the contrary. But I strongly believe in
Clinton's idea, managing the national economy is not different from
managing personal or household economic endeavors. Both demand creativity,
commitment, dedication,determination, effort, and the same expectation of
economic robustness. So pay off the remaining debt now, eliminate the
debt-burden excuse, re-establish national political, economic and
psychological freedom, and tackle the developmental endeavor with renewed
energy.
May I also rest my case here, as Aluko earlier
did.
C
REACTION VIA
USA-AFRICA DIALOGUE
August 27, 2005
Kasim Lekan Alli
Atlanta, GA
2005.
I agree that we probably can (and should) negotiate better terms for this
"debt relief" assuming the terms as presently presented to the public will
actually materialize. However once the country accepts these are legitimate
debts, the question then becomes how do you payoff/refinance/reschedule the
balance. There are two possible alternatives here:
1. Make a lump sum payment (as the
government as agreed (proposed?) to do in this case. This assumes the
debtor has the cash (or can get the cash) available to make the lump sum
payment as it appears to be the case for Nigeria.
2. Reschedule the payment over a
period of time at agreed upon interest rates, that could range from 0%
(interest free) to a market rate. Of course, the closer the interest rate
is to 0%, the better for the debtor. This is the option you are
suggesting. I agree that this is probably the best option as long as the
country can get an interest rate closer to zero (making it interest free).
This will be the optimal solution (assuming we cannot get 100% relief) and in
light of the country's developmental needs, amount of debt repayment that
has occurred overtime and the questionable legitimacy of the value of the
debt outstanding to start with.
As you correctly stated, this option will only be an economically viable
option if the government can get a higher return on investing the cash
available than the implied interest rate on the rescheduled loan. In your
example, you used an implied interest rate of 8% on the loan and a return
of investment of 20-25% (based on suggestions from some investment
advisers). The problem with this example lies with the assumption on the
minimum rate of return that the country can get by investing the $12 billion
as opposed to "emitting" the funds to the creditors as the government
plans to do. An assumption of a minimum 20-25% is grossly unrealistic for
a number of reasons. Using the US and other developed countries as an
example, the real rate of return on the stock market has averaged about
6.5% over the last 200 years. Even the most risky investment instruments
available (e.g. hedge funds) cannot guarantee this kind of return. Since there
seems to be a consensus that rather than "emit" the funds, the funds
should be used to fund infrastructure development in Nigeria, a more
realistic return on investment will be the growth rate in GDP for the country
that will result from these investments. Unless the work ethic and
productivity levels in the country changes exponentially, a GDP growth in
Nigeria
greater than 8% will be a
welcome miracle.
On a lighter note, I think
these investment advisers suggesting a minimum 20-25% return must be
smoking something (or drinking some strong #1's), if not, we all need to
give them our life savings if they can guarantee us a 20% annual return
over 25 years. Please note that at 20% rate of return, a lump sum investment
of $100,000 will be worth $47 million plus change in 25 years. Better yet,
a $10,000 (about the cost of a good "Sowambe" naming ceremony) investment
today (at 20% rate of return) will be worth $1.28 million in 18 years (more
than enough to pay for an ivy league education for 4 years for a new born
child).
REACTION VIA NIGERIA2DAY
August 26, 2005
Debt Relief and Nigeria -
To Emit or not to Emit $12 billion
By Gbola Oba (London)
gbolaoba@hotmail.com
Those of us who are avid readers of this daily news-bulletin have a plethora of
reasons that make us sometimes read some editions as though our lives depend on
them. For this romantic lover of good prose, logical intellectual presentation,
erudition and prosaic prolificacy (fertility), this byline ‘By Mobolaji E.
Aluko, PhD,Burtonsville, MD, 20866, USA alukome@comcast.net’ gives me the fix
that an addict gets at the sight of crack-cocaine: I simply cannot walk away
from any sentence, not to talk of a word, or indeed a dot, authored by the
intellectually glorious mind caged in the body that bears that name.
I love him! Sorry, not to be mistaken as a gay man, after all Omogbolahan Adisa,
the very begotten of ‘Ya-Eleja’, is a man in all respects. And to let the
fortunate woman (I am presuming that the plural form is somewhat superfluous in
his case) for whom God has allocated him for keeps not to have a cardiovascular
‘you know what?’ I should say: I love his style of writing, his methodical
presentation of points, his stylistic paragraphing, his
brilliance-in-thought-and-in-text and the fecundity of his literary mind. I
need say, though, that I know many Pot-hole-Diggers (sorry, I wanted to write
PhD holders) whose only claim to having gone to school is in the certificate
they carry. Therefore, I am neither doting on him because of his well-deserved
title, nor, more so, as this humble writer also reside in the Diaspora- London,
UK, to be specific, because he lives in ‘Burtonsville, MD, 20866, USA’.
However, in consonance with my tradition of Berean-believer-type (ie,
cross-referencing the postulates of respected authors, authorities, etc, with
known canons of a subject) adoration of those I formally or informally chose as
mentors; like the good Doc herein referred to, yours truly seem to find Dr.
Aluko’s metaphor-rich and figures-suffused piece with the above title
somewhat ACADEMIC. Why? Insomuch as it is healthy in a democracy to trade ideas
on any issue or topic of concern to the polity (in this case, the so-called ‘theft-cancellation’
or ‘debt-cancellation’ or ‘debt-relief’ or ‘debt-buy-back’;
depending on the mouth-cum-politics of who is referring o the issue), one thing
that is factually sacrosanct to me could be best expressed in the following
nostalgic analogy:
As a young boy growing up in extenuating material circumstances with my beloved
single-parent-mum, ‘Ya-Eleja’ of blessed memory, in Mushin, I used to help
her hawk fresh fish- ie., ‘Eja Olokun Busoke’. And occasionally, due to the
volatility of the market-place or some other factors, her profit-projection for
a particular consignment that she procured from Chief Bode Akindele’s then
famous ‘Obelawo’ fishery pool in Apapa would go haywire. At times like that,
and in order to redeem her cost, or minimise her losses, Ya-Eleja would call me
in a soul-edifying romantic manner- ‘Omogbolahan Adisa, omo alanu ti ki nje ko
ju ti eni ti e’ (meaning, Gbolahan Adisa- the latter being the Yoruba
honorific with which she used to excite gallantry in me- a kind child that would
not let his own person be put to shame) -to give my utmost best to marketing my
ware on that particular redemptive hawk-about.
Boy, whenever I would come back from such a hawk-about, either my ware was
exhausted or not, that is, her cost covered or not covered on that round of
trading, as soon as she sees me from afar she would burst into a recitative
praise of my achievement in helping her minimize her losses. It is in this same
appreciatively practical way that I would like to praise the historic
accomplishment of Dr. Mrs. Okonjo-Iweala with all the members of the economic
dream-team (‘plus including Baba Yaabo’, as Chief Zebrudaya would say) in
helping Nigeria, firstly, to get a more realistic reclassification if her true
economic status using the GDP-divided-by-per-capita index (that they use to
adjudge the Ghanas and the Malawis of this world as Highly Indebted Poor
Countries- HIPC). And, secondly, in getting the $30-something billion prima
facie debt to an arrangement wherein it has been abridged to a bona fide
arrangement of being paid off with 40 percent of its literal value!
My dearly beloved Doc., any other rationalisation that does not countenance this
as a superlative economic achievement smacks (notwithstanding the plans B, C,
Ds, etc), to this lover of yours, of an ‘afi-enu-wa-moto-ki-njam-syndrome’
(meaning, he-who-drives-in-an-oral-F1-race-never-crashes-syndrome). Theory, sir,
is usually worlds away from real-politik. This takes me to this graphic
conclusion: I once had the journalistic good fortune of interviewing Dr. Mrs.
Okonjo-Iweala in London for one of my TV programmes on BEN TV, SKY CHANNEL 184
across Europe, prior to the debt-relief deal. Albeit I went to the interview
with a pedantic intellectual-persona, and after grilling her with my armoury of
questions, I walked away with the following opinion:
This lady loves Nigeria to bits; she is going beyond the-call-of-duty to get the
best for her fatherland in the face of a warped and frustrating global-finance-world’s
opinion of Nigeria; and, lastly, what-a-mind-that-anybody-in-Nigeria’s-Diaspora-ought-to-be-proud-of-as-an-ambassadress.
Sir, herein I rest my case. Thank you.
REACTION VIA NIGERIA2DAY
August 26, 2005
Should we Pay up or
Continue in Debt?
bcswog@yahoo.com
This guy is a Professor (Bolaji Aluko) but has written like a
non-entity. In practical terms if i owe someone $100k and am to pay $15K/month
for 1year making $180K. The guy comes out to me after he sees that i have some
money on me and says...ok mate! give me 40% of the $100k paid twice...$20K this
month and $20k next month........i beg wont i be craze not to take the
offer....knowing fully well that their is no guaranttee if i attempt to
re-invest my money or spend it that it would be done judicously, 2. knowing the
psycological release of being debt free..ofcos you will sleep better.
3. Knowing the credibility level that i will all of a suden have in the 'eyes'
of all my other friends and foes alike...since i borrowed and i paid even though
it has taken 25years This means people will start to guaranttee me again and my
children will breath. 4. knowing fully well that it is an option, i borrowed
money and the lender is under NO OBLIGATION whatsoever except
sentiments/compassion to negotiate with me...mind you most especially because i
dont look like i will die, i have a cash cow called Oil for another 60years. 5.
we are of the illusion that because we have paid over what was borrowed so
therefore the debt should be cancelled...ha ha ah enh yin yin yin, i cant help
but laugh...so if you have an arrangement signed to with a business colleague
with interest and he pays just about interest in a very unregular way..which
really put him into more problem..so you cancel? I begi i collect my money sanm
sanm( you know the guy is making money o!.
This guy has made some unrealistic permutations saying 'Paramount in a genuine
debt relief to us, therefore, is our own ability to pay at a rate COMFORTABLE to
us, not at the rate that the creditors want. Any other "debt relief" is a
mirage' Doesnt a Professor know that you can strain yourself to get out of Jail
free, if the bail is unconditional though expensive, but mind you , you got the
dough now. What makes him think Nigeria will make this kind of money continuosly
for another 5years?. This quote is just ridiculous A relief does not have to
meet your expectations 100%, even if it is 1 % , relief na relief my people,
though this is 60% and what sense is there if after my lender says i should pay
$40k out of a years $180k and he tells me to pay the $40 for another full
year...That lender must be coming from Aro. If it were your money Mr Prof would
you through it away.
We need to be free of debt and start afresh. We dont have to follow America that
has more domestic debt to tackle. Nigeria works differently, we need to have a
sense of freedom from this second slavery and pray that the oil windfall
continues for at least 2 years then all these permutations my prof is doing can
come to play.
REACTION VIA NAIJAPOLITICS
AUGUST 25, 2005
NIGERIAN $12 BILLION DOLLAR
EMIT
(Bolaji Aluko And Erroneous
Assumptions)
Let me give summarized analysis of Bolaji Aluko’s
many erroneous assumptions premised on faulty variables.
- Bolaji Aluko has never
mentioned the qualifying terms for Paris Club debt relief per "Naples Terms".
Qualification is automatic for every debtor country but contingent on being
certified eligible for International Development Association (IDA) financing
from the World Bank. In addition, the nation country’s GDP per capita will be
equal to or less than $755 dollar. From CIA fact sheet report, Nigerian GDP
for 2004 is $1000 per capita. Per World Bank record prior to June, 2005
Nigeria was classified as a country eligible for a blend of International Bank
for Reconstruction and Development (IBRD) and IDA funds. Hence, Nigeria was
not qualified for debt reduction of 67%. That Nigeria was finally declared
eligible was a huge concession by the Paris Club after intense pressure from
one of the power brokers, Britain.
- As qualifying criteria,
Nigeria agreed to pay its arrears of $6 billion dollars to Paris Club as soon
as the board of the IMF approves the Policy Support Instrument (PSI). PSI is a
formalized detail of contractual agreement between recipient and lender
countries. Payment of the arrears is non-negotiable. Bolaji Aluko never
mentioned payment of arrears as implicit in prior frame of qualifying
reference making debt reduction of up to 67% "Naples Terms" limit possible for
Nigeria.
- If Nigerian debt stock was
reduced by 67% "Naples Terms", with down payment of $6 billion arrears,
Nigeria will be left with $8 billion in debt stock owed to Paris Club. Nigeria
was give concessionary offer and accepted to buyback the remaining debt stock
of $8 billion at a market-related discount estimated at $6 billion dollars.
Bolaji Aluko never informed the readers that if Nigeria were to buyback $8
billion debt stock within a period of six months after the approval of PSI by
IMF Governing Board, the country would have saved $2 billion dollars.
- Under "Naple Terms" there is
a restrictive provision that recipient countries will not return to the Paris
Club for further debt restructuring after receiving debt relief. From the
foregoing, Nigeria opted for exit scheduling from Paris Club debt obligations,
which ought to be the most reasonable and viable option for clean break from
debt trap she hitherto was encapsulated in. Therefore, if Nigeria were to
reschedule retirement of $8 billion outstanding debt stock, and should there
be within this amortized period a case of any unforeseen circumstance that
will lead to defaults in debt payments, Nigeria will not return to Paris Club
for debt restructuring.
- Interest rate payment on
debt stock is not uniform but varies according to world financial lending
market interest rates. Under Ronald Reagan in the 80’s, interest rate rose up
to 20% and most developing countries could only pay interests on loans and
defaulted on scheduled principal payments. Periodic payments may not
necessarily be equivalent uniform payments but progressive. It could be in
uniform or regularly varying series. Therefore, Bolaji Aluko is making
assumptions based on inelastic interest rate applied to debt stock applied
throughout the capitalization period for retirement, which is not the case.
- Bolaji Aluko has argued his
point as if debt stock forgiveness per “Naples Terms” is a right rather than a
‘goodwill clause’ under which participating creditor countries agreed to
undertake debt stock forgiveness. Nigeria is not a member of Paris Club of
creditor countries and does not contribute a dime to the capital base of the
club. The World Bank and IMF of which Nigeria is a member country make IDA and
IBRD funds available to qualifying countries as contrasted with Paris Club
facilities, which are private.
Let me address some of the issues raised by
Bolaji Aluko to be followed with my editorials.
BOLAJI ALUKO:
The above plans are offered, based on my deep
opposition to paying up so much money to our creditors all at once, particularly
when we know that we have paid what we owe several times over, over all these
years. For example, according to reliable information, the total amount borrowed
by Nigeria from members of the Paris Club from 1965 to 2001 was of the
equivalent of US$13.5 billion. By December 31, 2001, Nigeria had paid the
equivalent of US$41.273 billion to service the debt but still owed the Paris
Club member countries the equivalent of US$22.092 billion.
OLISA H. OSITA:
Our Nigerian experience teaches us that the
resultant deterioration in the balance of payments will always widen the
external import-export gaps. What Nigeria has done in the past to similar
situation was to roll over debts by contracting new loans to liquidate maturing
loans, and many instances abound where new loans were taken only to service
interest and thereby worsening external debt. Nigeria exhibited in the past
chronically inadequate capacities for domestic savings thus undermining the
achievement of high investment rates. The challenge facing Nigeria is how to
extricate itself from multilateral debt trap.
Nigeria is a mono economy and the price of its
commodity is dependent on indeterminate external factors outside her control.
Hence, it would be ill advised on her part to carry substantial debt burden
over-hang with no cushioning effect of soft landing in case of unforeseen
factors that will negatively impact its balance of payment. It is imperative and
inescapable to factor cycles of boom and bust into its every equation when
engaging in risk analysis of pros and cons.
It is highly illogical, as being suggested by
Bolaji, for any one to contend that Nigeria has paid what it initially borrowed
several times over and counting. One only has to take cognizance of time value
of money and its compounding interests and it will easily become apparent the
implications of debt stock rescheduling, penalties on default payments to
understand the vacuity of the above statement. Value of asset or loan or debt is
expressed in terms of present worth or future worth with compounding interests.
A reference to arithmetical summations of cumulative periodic payments is crass
over-simplification and meaningless in terms of investment analysis. Commercial
banks pay out interests on deposits per compounding interest rates. When a
debtor defaults on payments as Nigeria has chronically done, how would her
lending commercial banks pay interests on depositors and investors? We must
start thinking like members of global financial market participants rather than
traders in Tejuosho Market.
BOLAJI ALUKO:
We must think BOLDLY and not TIMIDLY. Let me
repeat: to emit $12 billion within a year is bad financially, is bad
economically, is bad developmentally. Yes, it may be a simple political move to
make, but it will earn us SERIOUS DISRESPECT internationally, you watch. [Of all
the 34 countries given Naples terms treatment, NOT A SINGLE one emitted money
like this ! So why Nigeria ?
OLISA H. OSITA:
The admonition to think boldly and not timidly is
a pure empty statement. Nigerian realities inform our consciousness that
contemporaneously her economic managers are ill equipped, poorly trained and
insufficiently skilled to manage her economy inter-phasing with complex global
market forces and geopolitics of world financial institutions. It is not an act
of thinking boldly for Nigeria to plan at this stage in her development of
sending man to space. It will be a project condemned to failure even before the
idea is conceived in the first place. It is a fundamental Nigerian problem, and
a kind of sickness that it cannot self-evaluate, self-asses her capacities,
capabilities and competencies before plunging herself into a deep sea of complex
projects. Here are some of our examples of the recent past in case we have
problem with amnesia.
Nigeria in the 70’s embarked on import
substitution program. On paper it looked bold and wonderful. In retrospect, we
know what a self-inflicting catastrophe we brought to bear on our economic
health due to disconnect in realistic economic planning. Where are such projects
as ANAMCO in Enugu (Mercedes Assembling of trucks); Volkswagen of Nigeria
assembly plant in Lagos; Multi billion dollar Adlaja Steel Plant; Rolling Mills
at Jos, Osogbo and Katsina; Iwopin Paper Mills; Aluminum Smelting Plant etc?
These are projects Nigeria financed with secured loans with nothing to show for
them in return. Now Bolaji Aluko wants us to invest billions of dollars in
overseas capital market and monitor its performance when we are incapable of
managing domestic water and electricity supplies. What about Nigerian Airways
for crying out loud? Which banks in Nigeria are success stories besides the
Federal Government infusion of capitals for rescuing them from insolvency? It is
a matter of prudence, courage, maturity and commonsense to learn how to crawl
before attempting to walk. Any thought that is not backed up with action is
useless. Failure to learn from experience is a stern and stuff of juveniles.
BOLAJI ALUKO:
What that exact mix will be should be the
subject of our discussion, not nitpicking on whether certain annual payments are
one kobo short or not.
OLISA H. OSITA:
Bolaji Aluko calculated that paying $4 billion
annually would retire $30 billion debt stock in ten years. He also submitted for
the audience that cumulative amount to be paid in ten years would be $42.7
billion.
My own calculation shows that $4.5 billion annual
payments will retire $30 billion loan in ten years. I calculated that in ten
years, Nigeria would have paid out $66 billion dollars.
That is, Nigeria will be paying $500 million
dollars over Bolaji Aluko’s calculated annual payment figure. Furthermore, that
in ten years, Nigeria would have paid out $23.3 billion dollars over Bolaji
Aluko’s calculated figure.
Bolaji Aluko calls these disparities in figures
nitpicking and for decency l will respect that. Suffice it to say that
intellectual humility is superior to unrestrained inflated egos. Einstein made
many mistakes through out his career and each time he never ceased to gracefully
thank those who pointed to his errors or corrected them. We know for certainty
that Einstein’s stature never diminished because he humbly acknowledged his
errors. In contrast, many thought of him as the greatest scientist of the last
century.
Here in California, any practicing professional
engineer that puts his or her Professional Engineer’s License stamp and signed
on engineering capital project with such discrepancies as aforementioned above
will have that license revoked or suspended. My main reason for drawing Aluko’s
attention to his many misleading figures he published on this subject was to
prevent him from feeding such figures to gullible Nigerian public. That’s all.
BOLAJI ALUKO:
Since, for example, my friend Dr. Chamberlain
Peterside has been advertising himself as a financial guru here - and I know
that he is - why can't he tell us what he would do with $12 - 14 billion ?
Forget about kleptomania and instabilities in Nigeria, assume that the leaders
in Nigeria will leave it with him to manage it as best as he can, with a 0.1%
fee for returns below 20% and 0.4% fee on interest earned on returns above 20% -
what would he do? Would he not be able to build a team of great financial
advisors around himself?
OLISA H. OSITA:
I am not holding brief for Dr. Chamberlain
Peterside, because from his writings it is clear that he can defend himself more
than anybody could. I do not know Mr. Peterside and l have never met him but l
have read some of his posts in this forum. But for Bolaji Aluko to say that he
has been advertising himself as a financial guru here, is so snide and very
unbecoming. People come to this forum voluntarily to share their viewpoints and
ideas with other like-minded persons. What obligation does Dr. Peterside has
towards Bolaji Aluko for him to be commanded and treated like one of the
students he mentors? No doubt that Bolaji Aluko has always over-estimated
himself and his worth. We shall leave his contrived prejudices to him for now.
In summary, there seems to be a pattern emerging
from this debate. Most of the people who served under IBB seem to be against
Nigeria paying off her over-hanging debt burden. Could it be because they are
suspecting and scheming for the second-coming of IBB and wanted Nigerian
accumulated foreign reserves to be at his and cronies’ disposal for another
round of kleptomaniac spending and robbery? Those spewing the gospel that
Nigeria does not need to pay off her debt with Paris Club and earn release from
debt trap to put all her energies into providing infrastructures to improve the
well-being and standard of living of pauperized Nigerians are not advancing any
convincing argument. For instance, the ratio of all Nigerian debt (Paris Club;
London Club; Commercial Financial Institutions and domestic) and GNP will be
around 80-90%. This is precisely why there is no fund left after paying the
debts and recurrent expenditures for investment in capital development projects
that will employ our youths from colleges and universities. As for Bolaji Aluko,
he has been teaching for too long a time and has no bare-knuckles practical
experience of realities on the ground. We can forgive him for being out of
touch.
Olisa H. Osita
California
ALUKO'S RESPONSE TO OLISA OSITA VIA
NAIJAPOLITICS
AUGUST 25, 2005
Olisa Osita:
Thank you for your rejoinder. At least you stay engaged on this important issue.
Nevertheless, you represent a particular brand of the Nigerian - and out of true
deference to Nigerians - a particular brand of ALL human beings who, when
emptied of additional significant points to make, resort to abuse and ad hominem
attacks, hoping to drag you down in the same gutter with them and thereby lose
focus.
I shall not accept your temptation, and shall try all within my power to stay
within decorum and decency in closing out this particular line of argument with
you.
I will begin from some of your final "points" (if one can call them that) and
work myself back to the beginning ones that you made.
1. Out-of-touchedness and length of teaching and bare-knuckle experience
I have been teaching at Howard University since 1984 - even at 21 years, that is
NOT AS LONG as many professors all over the world who have been teaching for
much longer time. I do not boast when I say that as for things Nigerian, I am
"in touch" as many if not most Nigerians would attest to. Finally, if
"bare-knuckle" experience means investing billions of dollars - or else what
other meaning
could it mean in this context ? - maybe you can give us a short list of those
who should participate in this particular discussion of debt and Nigeria.
2. Chamberlain Peterside
Nothing brings out your pettiness and penchant for formenting malice more than
this your remark. Chamberlain IS MY FRIEND, after he being a friend of my cousin
(who introduced us about three years ago now) for quite some time. I have MET
HIM a number of times, and we chat on the phone maybe once or twice a week when
either one of us is in the US. We have steered little business here and there to
each other - no big money yet, but we respect each other.
So for you, as typical, to make a mountain out of my stating that he "advertises
himself" here - and then I go on to express my confidence that he can manage
$12-14 billion confidently - just shows the kind of malicious and trouble-formenting
framework within which your mind works. It is the kind of childish pettiness
that sometimes makes one wonder why one is in the same forum with you.
"Nuff said about that.
3. Babangida supporters and anti-emission
Another petty penchant that you exhibit here and as always is simple blackmail.
Could you name THIS LONG LIST of IBB SUPPORTERS and those who are hoping for his
return in 2007 who are against paying up this $12 billion so soon ? Are Dr. Ayo
Teriba, Simon Kolawole, Mr. Okpe Mudiaga Odje, Odia Ofeimun, Prof. Sam Aluko,
Bolaji Aluko, etc. part of this list ? But simply because Dr. Chu Okongwu, a
respected economist who served in IBB's cabinet, was the first to DECONSTRUCT,
in a teacherly and logical manner, what was being touted by the Obasanjo
administration as incontrovertible DEBT RELIEF as really being a call to
negotiate with still a lot of work to be done [see his essay:
http://nigerianmuse.com/important_documents/?u=Okongwu_debt_relief_nothing_to_celebrate.htm
] the blackmail attempt, typical of the Obasanjo regime - which you have
villified in more ways than one - is therefore to silence those opposed to the
emission by tarring them with the IBB brush.
It is so childish that it needs no further comment. It is a blackmail that will
not work.
4. Lack of grace in admitting error or gratitude in accepting clarification
There are a number of Netters here who, over the years, I have noticed a certain
lack of grace that is so glaring that they repeat so often that I believe that
it is part of their character. You lead that pack.
Here it is: they ask a question or two, and you spend quite some time responding
to them. If they find nothing to come back at you on, they just keep quiet, not
thanking you for taking the time to
respond to them, or NOTHING. But if there were SOMETHING that they find wrong,
they will come SWINGING on that one thing, not minding whether 9 other things
that you had responded to them to was correct.
Take the present issue. I gave some figures in my Quarterbacking, and you
rightly made some calculations and came up with different figures. Okay, I could
be wrong when dealing with so many numbers, even in the simplest manner (for
example I calculated 40% of $4 billion as $0.16 billion instead of $1.6 billion
!) and I have been wrong before and admitted so [I once crossed Nassarawa States
figures for Lagos State, not before being accused of deliberating understating
Lagos State figures!]
On these debt figures, I have SINCE explained to you HOW I came up with MY OWN
FIGURES and ascertained that my figures where right. [It had to do with the fact
that I make my first down payment AT THE BEGINNING of the year before interest
is due, while you assume that the first payment is at the end of the first
year.]
But you never came back to accept or deny my explanations, but now you come up
with the deposition:
QUOTE
My main reason for drawing Aluko's attention to his many misleading figures he
published on this subject was to prevent him from feeding such figures to
gullible Nigerian public. That's all.
UNQUOTE
How come my figures are "misleading" and yours are not ? What did you come up
with before mine ?
5. Naples Terms and Nigeria
In fact you started out your diatribe by writing as follows:
UNQUOTE
Bolaji Aluko has never mentioned the qualifying terms for Paris Club debt relief
per "Naples Terms".
QUOTE
Yet in my Appendices I and II of my original essay, which I have now reproduced
by themselves in
http://groups.yahoo.com/group/NaijaPolitics/message/48849
I gave my reading audience the ability to READ the QUALIFYING TERMS themselves
so that they do not have to depend on me. What more can a decent man do ?
Now, if it is the first time that you are reading it, read the Paris Club
announcement SLOWLY and see where you disagree with Dr. Chu Okongwu's
observations of exaggerated claims by the Obasanjo
administration, an observation which Dr. Mansur Muhtar of the DMO all but
admitted to. [See his measured-response essay in:
http://nigerianmuse.com/important_documents/?u=Mansur_Mukhtar_debt_relief_celebrate.htm
]
You may disagree with Okongwu's non-emission argument, but who would you believe
after such a deconstruction - the Obasanjo administration or Okongwu ?
Secondly, PLEASE read the Naples Terms qualifications and terms EVEN SLOWER. IF
you look at the last Houston terms treatment of $24 billion of our debt in
December 2000, which again I have now broken out by itself in:
http://groups.yahoo.com/group/NaijaPolitics/message/48855
you will see that 98.5% was non-ODA (non-official-development-assistance)
credits, so we can virtually consider all of our debt as non-ODA, which is a
problem by itself.
But more importantly, the NAPLES TERMS allow for 5 OPTIONS to be taken by the
debtor, namely:
1. DR [23 year repayment, 6 year grace; progressive repayment. Top interest rate
is 7.96% progressing from 0.12% in the 13 semester]
2. DSR [33 year repayment with progressive repayment. Top interest rate is 5.06%
progressing from 0.16% in the first semester.]
3. CMI - seldom used but similar to DSR.
4. "Commercial" option - advised to refrain except in exceptional circumstances
5. Bilateral and voluntary agreements on debt swaps (up to 15-30 SDR million; 1
SDR = 1.5 US dollars) or 20% of outstanding debt.
Now tell me, Olisa Osita: which of these STANDARD terms talks about PAYING UP ON
ARREARS and exiting within ONE YEAR or less ? Was it Nigeria that suggested this
or the Paris Club ? Was it voluntary or extortional ? Why can't we discuss these
five options - including this $12 billion emission - rather than typify some
people as the enemies of Nigeria and friends of Babangida and all that rubbish ?
Finally, you make a lot about Nigeria's qualification for IDA financing. I have
provided in:
http://groups.yahoo.com/group/NaijaPolitics/message/48856
a table showing projection of IDA14 financing for countries around the world.
The best that Nigeria may expect from July 1, 2005 to June 30, 2008 is SDR 1.0
billion - or US$ 1.5 billion. So what is that all about ?
6. A Concession to Olisa H. Osita
There is one concession that I must make to you: at least you are willing to
engage in matters substantive to the development of Nigeria, even if your
personal prejudices, biases, jaundices and
other "diseases" get in the way when you present your case. For you, every
discussion is a personal clash of ego, where you want to show the other up, or
are concerned about being shown up; where a former "enemy" must not be conceded
to, and is a permanently completely wrong person.
That must be a terrible way to lead a life, and I am sorry that you choose that
path of life, otherwise you might be much more useful to society. The way it is,
you hide and live in fear - but let me assure you that you have nothing to fear
for your life from me.
Best wishes always. Do stay engaged, but take things less personal, kindly.
Bolaji Aluko
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