Nigeria and the Paris Club: A deal worth celebrating?
Over the last quarter-century Nigeria paid about $40 billion on initial loans of about $20 billion, but owed about $33 billion. Nigeria has now begun a 3-part $12.4 billion dollar payment to the Paris Club after which $30 billion of debt owed the Paris Club will be cancelled.
Facts about our external debts:
(a) Nigeria’s full external debt obligations are $3 billion a year – $2.3 billion to the Paris Club and $700 million to other creditors.
(b) We do NOT currently pay $3 billion a year, having negotiated a lower annual payment level of $1 billion to the Paris Club (not $2.3 billion), for $1.7 billion a year total.
(c) Under the agreement, the Paris Club compiles the difference between our full payment level and our current payment level as “arrears” we still owe.
(d) The debt cancellation deal involves paying $6 billion on the arrears, getting an $18 billion write-off, and buying-back the remaining $12 billion discounted to $6 billion.
(e) If the Paris Club wrote off $18 billion and we did not buy back the remainder, interest payments on the remnant (by the Finance Minister’s words) would be $1 billion a year.
The presence or absence of the number "$33 billion" on the books is not as important in practical economic effect as the amount of available spending (i.e. not earmarked for debt) in the Nigerian federal budget. Though the full annual payment owed the Paris Club is $2.3 billion, we currently pay $1 billion a year. As such, when Nigeria completes the Paris Club debt cancellation deal, the overall budget will remain the same size, but $1 billion will be transferred from debt-servicing to non-debt spending. The deal would free $1 billion in federal budget expenditure, $20 billion in 20 years, as it has been described.
But if invested and/or rolled-over in financial instruments at a rate of 3.6%, $12 billion would be worth about $24.5 billion in 20 years with compounded interest. Zero-risk US investments in late 2005 ranged from 3.75%-4.00% to 4.5%-7%, exceeding the 3.6% necessary to more than double $12 billion in 20 years. With a slightly higher degree of risk, some instruments earned 7%-9%; a long-term approach moderates risk and some mutual funds have paid an 11% rate over 50 years despite ups and downs in the markets. Basically, $12 billion in 2005 is worth much more than $20 billion in future value over 20 years. Nigeria is paying more in a three-installment lump sum than we will gain in freed spending over the next 20 years.
The government asserts the $1 billion a year in freed budgetary will be spent on health, education, capital spending and infrastructure. The government’s foreign partners say the money will help Nigeria alleviate poverty (under World Bank monitoring). While detailed discussion of Nigerian economic development would take too long; a comparison of current and potential budgets is a good proxy to analyze the value of the addition. The Lagos State Government's annual budget, at about $1.3 billion, is inadequate for the metropolis' development needs; the state’s budget would still be insufficient if it was doubled, and $1 billion a year is not enough to double it. But the debt deal does not give $1 billion a year to Lagos State. The "savings" accrue to the federal budget, shared by Nigeria's 36 states and 130 million people, and represents less than $10/person-a-year in added spending.
Some would say that even if insufficient, an additional $1 billion each year is better than nothing. But Nigeria has other policy options, some of which would yield higher benefits than $1 billion a year in freed spending. Fractional lending and other banking processes would instantly transform $12 billion in funds into much more than $12 billion in private sector loans to the micro, small, and medium sectors, to nascent entrepreneurs who could be self-employed instead of unemployed or under-employed, and to big business; the effects of this capital infusion into economic activity on GDP growth, on poverty, and on socio-economic development would exceed the plausible gains of an extra $1 billion a year in freed federal expenditure. Converting the whole sum into investment capital is not the only way $12 billion could be used to unlock economic activity, and optimal use of the funds would likely involve a diverse basket drawn from multiple options.
In any case, the infusion of $1 billion a year in freed federal spending will likely be temporary, and will probably not add up to $20 billion in 20 years. Economic reality and current economic policy dictate Nigeria will take on new domestic and external debt after the cancellation deal. Nigeria's state and federal governments are borrowing even now and will borrow in the future. We will not (and should not) simply spend the future surpluses from oil and gas surpluses; much of that must be saved and accrue interest. We are not exactly selling state-owned firms and other assets at bumper prices, and once we have sold everything we can sell, what then? The new debt will be serviced, and payments on the new debt will displace some of the $1 billion freed by the Paris Club deal. The discrepancy between the future value of $12 billion and the 20-year sum of the funds freed by the deal is even greater.
The government distinguishes between the amount paid on the arrears ($6 billion) and the amount paid to buy-back $12 billion in debt after the $18 billion write-off ($6 billion). The government would also argue that the $12 billion payment, and attendant discussion of related policy options and future values, must be measured against the full $2.3 billion per year we should be paying the Paris Club. Both statements are accurate, but neither statement changes the fact we would lose $12 billion in savings only to free $1 billion a year in spending.
I am not saying that the deal is "bad" per se. I am arguing we should have sought a better deal, one which keeps our savings (the $12 billion payout), prevents us from making the $2.3 billion yearly payments, and avoids the build-up of arrears. The Group-of-Eight (G8), the Paris Club, and the Bretton Woods agencies have invested much in creating and presenting an image to the global public of working for debt relief, poverty alleviation, and African economic growth, and Nigeria used their desire on sustaining this image to push for a deal on our debts.
The Paris Club has never wanted to just erase the debts of a country they perceive as oil-rich. It always seemed unlikely Nigeria would get full, unconditional, uncompensated debt cancellation, and the deal we got came with a price. Creditors are interested in a flow of cash into their palms, and not with making it so difficult that you are forced to repudiate or default. Indeed, the Paris Club had agreed to take $1 billion a year instead of $2.3 billion after prior negotiations, though they still compiled the arrears. With global campaigners pushing for total and uncompensated cancellation for Nigeria (and perhaps with the Nigerian government using full cancellation as an opening demand in the bargaining), we could have enticed the Paris Club with a chance to keep their flow of money while giving Nigeria a better deal in terms of our current development needs. We push for cancellation, but settle for a deal that eases our debt situation without harming our drive toward transformational economic development.
Instead of canceling all of the debts, the Paris Club could have written off the $6 billion in arrears and fixed/confirmed Nigeria's annual payments at $1 billion, with the reduced interest rate device or other appropriate combination of old or new measures. If the lower payments were made the new full rate, there would be no build up of arrears. The special rate could be set to expire after a fixed grace period of at least 20 years. It would mean the Paris Club would give up $26 billion over the next 20 years in annual payments, leaving them better off than the current plan where they lose $24 billion in principal as well as future payments above the principal. Nigeria would be better off too, keeping $12 billion in savings, losing no more from the budget annually than current levels, building up no new arrears, and gaining the breathing space to pursue economic development.
The counter-argument is that Nigeria would still be left with debt, which would be repayable at the old levels after the grace period. Like all Nigerians, I view our external debts as a swindle; we borrowed $19 billion, repaid $42 billion, and owe $30 billion. But Nigeria's priority is to transform our country from its status over the last 100 years as one of the wealthier "African-type" economies, to being (for lack of a better description) one of the 15 biggest economies in the world. In the 19th and 20th centuries, several nations completely transformed their economies in 20 years, with the Peoples Republic of China being the latest. We should set ourselves the same 20-year target and adapt our policies thereto. In 20 years we can build a Nigerian economy that is strong enough to deal with and pay down debt without outside assistance – $30 billion in debt is actually small for an economy as large as Nigeria’s could be in 20 years. Most countries that would be our economic contemporaries actually owe so much more than $30 billion but handle their debts without seeking cancellation because they have the economic mass to deal with it. To build this sort of economy, the highest possible cuts to debt servicing outflows had to be balanced with securing the highest possible amount of savings (i.e. possible investment).
Discussing proper policy for economic growth would be overly lengthy, but investment capital is one of many prerequisites. Nigeria is capable of internally creating/generating capital; the World Bank estimates Nigeria could have generated five times as much capital in the last 6 years with better policies. External capital (i.e. Foreign Direct Investment) is good when it complements growth-oriented internal-decision-making; foreign investors are not charities, will not build the economy from the ground up, and will opt for the easy investment with monopoly rents or quick short-term gains over long-term transformational investments. In truth $12 billion is insufficient to fully power Nigerian growth, but $12 billion more in capital is better than $12 billion less, and it is part of larger, on-going surpluses from crude oil – and natural gas will add an additional $2 billion-a-year in the near future. Nigerians at home and abroad hold an estimated $100 billion in assets outside the country, and the African continent beyond our borders loses billions a year to capital flight (funds that could be attracted to Nigeria).
South Africa has much better economic infrastructure than Nigeria, for example producing 66% of all electricity generated in Africa. The Johannesburg Stock Exchange is part of a domestic capital/financial market that dwarfs Nigeria's, their economy more solidly diversified, and their domestic corporations are swarming and taking over Africa. These are advantages in attracting foreign capital. South Africa is amidst huge new spending on infrastructure and public services, billions of dollars per year, on top of initial line-item and total budgets that were already huge compared to Nigeria. And unlike Nigeria’s privatization process, partial or full privatization in South Africa means huge sums for some of Africa's largest, albeit publicly-held, corporations.
The South African Motor Industry Development Programme indirectly subsidized the South African car manufacturing industry by about $1 billion a year from 1996-2002 and $2 billion a year in 2003. It is a market-distorting subsidy that raises the consumer cost of cars, but it has given an industry used to apartheid era protection the time to raise competitiveness and lower inefficiency. In 8 years, there has been $2 billion in new investment and production cost inefficiency over global standard has dropped from 60% to 29%, a good rate with 7 years left to the 2012 MIDP review. South Africa supplies the home market, exports 100,000 cars each year (compared to Nigeria's zero) and imports 120,000 cars; with greater domestic competitiveness, the export-import ratio may change by 2012.
With only a third of Nigeria's population, South Africa's national and provincial social welfare services are criticized by civil society for failing to spend their full budgets, and finishing the year with more than $1 billion left over; contrast this with Nigeria’s Poverty Alleviation Programme and National Poverty Eradication Programme.
And South Africa’s private corporations’ in-country and cross-border merger/acquisitions and expansion each year is worth so much more than $1 billion (tens of billions actually).
An extra $1 billion in freed federal budgetary spending will not take Nigeria to South Africa’s current position, much less exceed that position to join the ranks of Earth’s leading economies.
Nigeria needs vast improvement in public infrastructure. $1 billion in freed funds will not deal with the infrastructure development needs of the Greater Lagos area (including adjacent areas of Ogun and Ondo States), nor of the Niger-Delta alone, nor of the drier regions (where a plan to save Lake Chad by running a canal to a river in the Central African Republic has not moved beyond talk), as individual regions, much less combined. And there is much more to do, to erase the threat of erosion in the southeast (why fix southeaster roads if they will just erode away?), or of carbon-dioxide from Lake Nyos on the Cameroun border. This is just the top of the list.
Nigeria needs stronger public services. Private universities boom, and private sector firms reject graduates from entire categories of public universities. Primary and secondary schools are under-resourced in the age of the information economy. The police and soldiers fight openly in the streets while ocean-going ships vanish while theoretically under guard. "Vigilance groups" are tolerated by a populace that has no confidence or respect for the police. An aeroplane crashed just outside the biggest city in the country, and no one could find it for 14 hours. There was no disaster plan for the Ikeja blasts; no water for the aircraft fire in Port Harcourt … the list goes on.
The private sector under-utilizes and under-employs factors of production, capital, labour, our teeming potential entrepreneurs, and resources like land and minerals. We should get more value from every unit in use, create value from idle and wasting units, raise capacity utilization, expand capacity, and increase the size of the domestic market. Real entrepreneurs face bottlenecks and unnecessary costs, while the federal and state governments direct public funds and resources to secure guaranteed profits for politically favoured sectors, firms, and individuals.
There is so much to do. We could reduce on legal and illegal spending, and improve federalism and governance by going from 36 states to 8, from 774 local councils to 161, and by cutting the number of elected and unelected political officials by slightly less than half. And this is only the first step in a process of REAL reform from the minutiae to the macro sphere! Our many high-density cities should not have a shortage of quality housing (which earn rent for investors and pay taxes to government), while wealthy and middle-class citizens use potential investment resources to build country homes in locations where the building will be an unproductive asset, earning no rent, paying no taxes, and meeting no consumer demand – policy initiatives to change behaviour would include many things, including something as intangible as building a sense of certainty about Nigeria’s future as a united country (too many citizens, from every ethnic group and state, invest their savings unproductively in their hometowns, rather than risk political changes in other locales that might affect non-indigenes or recreate the "abandoned property" issue). Crude oil revenue has made us disinterested in securing and/or developing existing and potential federal revenue streams. It is likely that fiscal reforms on the revenue and expenditure sides, even on 2005 GDP levels, would produce the extra $1.3 billion to pay off the full debt servicing load of $3 billion without touching the oil and gas windfalls or lowering available spending in the current budget total – though making the full payments is not ideal – and we might even generate more than $1.3 billion, allowing an increase in budgetary expenditure. Policy-making for rapid and sustained growth is an art and a science, dynamic and fluid decision-making amidst constantly shifting options in an ever-changing atmosphere. There is no rigid blueprint, constant thought and flexibility are vital, and we should not bind, restrict or constrain our field of choice.
There is so much more to talk about, so much we need to do. It would have been nice if we could have achieved a more manageable debt situation without giving up any portion of our savings, but I guess there is nothing that can be done about that.
It is unfortunate that Nigerian politics in the last 6 years has been bereft of substantive policy debate. It is more unfortunate that ahead of the 2 years leading to 2007, substantive policy is the last thing on the minds of political operators. What we have got at best is geo-political and ethno-religious posturing, retreads of everything we are supposed to be moving beyond, reminders that our politics goes around in circles instead of moving forward. Perhaps the point of this essay is to suggest that we need to start thinking hard about national progress instead of just accepting our fate as if we do not have other options.
Facts about our external debts:
(a) Nigeria’s full external debt obligations are $3 billion a year – $2.3 billion to the Paris Club and $700 million to other creditors.
(b) We do NOT currently pay $3 billion a year, having negotiated a lower annual payment level of $1 billion to the Paris Club (not $2.3 billion), for $1.7 billion a year total.
(c) Under the agreement, the Paris Club compiles the difference between our full payment level and our current payment level as “arrears” we still owe.
(d) The debt cancellation deal involves paying $6 billion on the arrears, getting an $18 billion write-off, and buying-back the remaining $12 billion discounted to $6 billion.
(e) If the Paris Club wrote off $18 billion and we did not buy back the remainder, interest payments on the remnant (by the Finance Minister’s words) would be $1 billion a year.
The presence or absence of the number "$33 billion" on the books is not as important in practical economic effect as the amount of available spending (i.e. not earmarked for debt) in the Nigerian federal budget. Though the full annual payment owed the Paris Club is $2.3 billion, we currently pay $1 billion a year. As such, when Nigeria completes the Paris Club debt cancellation deal, the overall budget will remain the same size, but $1 billion will be transferred from debt-servicing to non-debt spending. The deal would free $1 billion in federal budget expenditure, $20 billion in 20 years, as it has been described.
But if invested and/or rolled-over in financial instruments at a rate of 3.6%, $12 billion would be worth about $24.5 billion in 20 years with compounded interest. Zero-risk US investments in late 2005 ranged from 3.75%-4.00% to 4.5%-7%, exceeding the 3.6% necessary to more than double $12 billion in 20 years. With a slightly higher degree of risk, some instruments earned 7%-9%; a long-term approach moderates risk and some mutual funds have paid an 11% rate over 50 years despite ups and downs in the markets. Basically, $12 billion in 2005 is worth much more than $20 billion in future value over 20 years. Nigeria is paying more in a three-installment lump sum than we will gain in freed spending over the next 20 years.
The government asserts the $1 billion a year in freed budgetary will be spent on health, education, capital spending and infrastructure. The government’s foreign partners say the money will help Nigeria alleviate poverty (under World Bank monitoring). While detailed discussion of Nigerian economic development would take too long; a comparison of current and potential budgets is a good proxy to analyze the value of the addition. The Lagos State Government's annual budget, at about $1.3 billion, is inadequate for the metropolis' development needs; the state’s budget would still be insufficient if it was doubled, and $1 billion a year is not enough to double it. But the debt deal does not give $1 billion a year to Lagos State. The "savings" accrue to the federal budget, shared by Nigeria's 36 states and 130 million people, and represents less than $10/person-a-year in added spending.
Some would say that even if insufficient, an additional $1 billion each year is better than nothing. But Nigeria has other policy options, some of which would yield higher benefits than $1 billion a year in freed spending. Fractional lending and other banking processes would instantly transform $12 billion in funds into much more than $12 billion in private sector loans to the micro, small, and medium sectors, to nascent entrepreneurs who could be self-employed instead of unemployed or under-employed, and to big business; the effects of this capital infusion into economic activity on GDP growth, on poverty, and on socio-economic development would exceed the plausible gains of an extra $1 billion a year in freed federal expenditure. Converting the whole sum into investment capital is not the only way $12 billion could be used to unlock economic activity, and optimal use of the funds would likely involve a diverse basket drawn from multiple options.
In any case, the infusion of $1 billion a year in freed federal spending will likely be temporary, and will probably not add up to $20 billion in 20 years. Economic reality and current economic policy dictate Nigeria will take on new domestic and external debt after the cancellation deal. Nigeria's state and federal governments are borrowing even now and will borrow in the future. We will not (and should not) simply spend the future surpluses from oil and gas surpluses; much of that must be saved and accrue interest. We are not exactly selling state-owned firms and other assets at bumper prices, and once we have sold everything we can sell, what then? The new debt will be serviced, and payments on the new debt will displace some of the $1 billion freed by the Paris Club deal. The discrepancy between the future value of $12 billion and the 20-year sum of the funds freed by the deal is even greater.
The government distinguishes between the amount paid on the arrears ($6 billion) and the amount paid to buy-back $12 billion in debt after the $18 billion write-off ($6 billion). The government would also argue that the $12 billion payment, and attendant discussion of related policy options and future values, must be measured against the full $2.3 billion per year we should be paying the Paris Club. Both statements are accurate, but neither statement changes the fact we would lose $12 billion in savings only to free $1 billion a year in spending.
I am not saying that the deal is "bad" per se. I am arguing we should have sought a better deal, one which keeps our savings (the $12 billion payout), prevents us from making the $2.3 billion yearly payments, and avoids the build-up of arrears. The Group-of-Eight (G8), the Paris Club, and the Bretton Woods agencies have invested much in creating and presenting an image to the global public of working for debt relief, poverty alleviation, and African economic growth, and Nigeria used their desire on sustaining this image to push for a deal on our debts.
The Paris Club has never wanted to just erase the debts of a country they perceive as oil-rich. It always seemed unlikely Nigeria would get full, unconditional, uncompensated debt cancellation, and the deal we got came with a price. Creditors are interested in a flow of cash into their palms, and not with making it so difficult that you are forced to repudiate or default. Indeed, the Paris Club had agreed to take $1 billion a year instead of $2.3 billion after prior negotiations, though they still compiled the arrears. With global campaigners pushing for total and uncompensated cancellation for Nigeria (and perhaps with the Nigerian government using full cancellation as an opening demand in the bargaining), we could have enticed the Paris Club with a chance to keep their flow of money while giving Nigeria a better deal in terms of our current development needs. We push for cancellation, but settle for a deal that eases our debt situation without harming our drive toward transformational economic development.
Instead of canceling all of the debts, the Paris Club could have written off the $6 billion in arrears and fixed/confirmed Nigeria's annual payments at $1 billion, with the reduced interest rate device or other appropriate combination of old or new measures. If the lower payments were made the new full rate, there would be no build up of arrears. The special rate could be set to expire after a fixed grace period of at least 20 years. It would mean the Paris Club would give up $26 billion over the next 20 years in annual payments, leaving them better off than the current plan where they lose $24 billion in principal as well as future payments above the principal. Nigeria would be better off too, keeping $12 billion in savings, losing no more from the budget annually than current levels, building up no new arrears, and gaining the breathing space to pursue economic development.
The counter-argument is that Nigeria would still be left with debt, which would be repayable at the old levels after the grace period. Like all Nigerians, I view our external debts as a swindle; we borrowed $19 billion, repaid $42 billion, and owe $30 billion. But Nigeria's priority is to transform our country from its status over the last 100 years as one of the wealthier "African-type" economies, to being (for lack of a better description) one of the 15 biggest economies in the world. In the 19th and 20th centuries, several nations completely transformed their economies in 20 years, with the Peoples Republic of China being the latest. We should set ourselves the same 20-year target and adapt our policies thereto. In 20 years we can build a Nigerian economy that is strong enough to deal with and pay down debt without outside assistance – $30 billion in debt is actually small for an economy as large as Nigeria’s could be in 20 years. Most countries that would be our economic contemporaries actually owe so much more than $30 billion but handle their debts without seeking cancellation because they have the economic mass to deal with it. To build this sort of economy, the highest possible cuts to debt servicing outflows had to be balanced with securing the highest possible amount of savings (i.e. possible investment).
Discussing proper policy for economic growth would be overly lengthy, but investment capital is one of many prerequisites. Nigeria is capable of internally creating/generating capital; the World Bank estimates Nigeria could have generated five times as much capital in the last 6 years with better policies. External capital (i.e. Foreign Direct Investment) is good when it complements growth-oriented internal-decision-making; foreign investors are not charities, will not build the economy from the ground up, and will opt for the easy investment with monopoly rents or quick short-term gains over long-term transformational investments. In truth $12 billion is insufficient to fully power Nigerian growth, but $12 billion more in capital is better than $12 billion less, and it is part of larger, on-going surpluses from crude oil – and natural gas will add an additional $2 billion-a-year in the near future. Nigerians at home and abroad hold an estimated $100 billion in assets outside the country, and the African continent beyond our borders loses billions a year to capital flight (funds that could be attracted to Nigeria).
South Africa has much better economic infrastructure than Nigeria, for example producing 66% of all electricity generated in Africa. The Johannesburg Stock Exchange is part of a domestic capital/financial market that dwarfs Nigeria's, their economy more solidly diversified, and their domestic corporations are swarming and taking over Africa. These are advantages in attracting foreign capital. South Africa is amidst huge new spending on infrastructure and public services, billions of dollars per year, on top of initial line-item and total budgets that were already huge compared to Nigeria. And unlike Nigeria’s privatization process, partial or full privatization in South Africa means huge sums for some of Africa's largest, albeit publicly-held, corporations.
The South African Motor Industry Development Programme indirectly subsidized the South African car manufacturing industry by about $1 billion a year from 1996-2002 and $2 billion a year in 2003. It is a market-distorting subsidy that raises the consumer cost of cars, but it has given an industry used to apartheid era protection the time to raise competitiveness and lower inefficiency. In 8 years, there has been $2 billion in new investment and production cost inefficiency over global standard has dropped from 60% to 29%, a good rate with 7 years left to the 2012 MIDP review. South Africa supplies the home market, exports 100,000 cars each year (compared to Nigeria's zero) and imports 120,000 cars; with greater domestic competitiveness, the export-import ratio may change by 2012.
With only a third of Nigeria's population, South Africa's national and provincial social welfare services are criticized by civil society for failing to spend their full budgets, and finishing the year with more than $1 billion left over; contrast this with Nigeria’s Poverty Alleviation Programme and National Poverty Eradication Programme.
And South Africa’s private corporations’ in-country and cross-border merger/acquisitions and expansion each year is worth so much more than $1 billion (tens of billions actually).
An extra $1 billion in freed federal budgetary spending will not take Nigeria to South Africa’s current position, much less exceed that position to join the ranks of Earth’s leading economies.
Nigeria needs vast improvement in public infrastructure. $1 billion in freed funds will not deal with the infrastructure development needs of the Greater Lagos area (including adjacent areas of Ogun and Ondo States), nor of the Niger-Delta alone, nor of the drier regions (where a plan to save Lake Chad by running a canal to a river in the Central African Republic has not moved beyond talk), as individual regions, much less combined. And there is much more to do, to erase the threat of erosion in the southeast (why fix southeaster roads if they will just erode away?), or of carbon-dioxide from Lake Nyos on the Cameroun border. This is just the top of the list.
Nigeria needs stronger public services. Private universities boom, and private sector firms reject graduates from entire categories of public universities. Primary and secondary schools are under-resourced in the age of the information economy. The police and soldiers fight openly in the streets while ocean-going ships vanish while theoretically under guard. "Vigilance groups" are tolerated by a populace that has no confidence or respect for the police. An aeroplane crashed just outside the biggest city in the country, and no one could find it for 14 hours. There was no disaster plan for the Ikeja blasts; no water for the aircraft fire in Port Harcourt … the list goes on.
The private sector under-utilizes and under-employs factors of production, capital, labour, our teeming potential entrepreneurs, and resources like land and minerals. We should get more value from every unit in use, create value from idle and wasting units, raise capacity utilization, expand capacity, and increase the size of the domestic market. Real entrepreneurs face bottlenecks and unnecessary costs, while the federal and state governments direct public funds and resources to secure guaranteed profits for politically favoured sectors, firms, and individuals.
There is so much to do. We could reduce on legal and illegal spending, and improve federalism and governance by going from 36 states to 8, from 774 local councils to 161, and by cutting the number of elected and unelected political officials by slightly less than half. And this is only the first step in a process of REAL reform from the minutiae to the macro sphere! Our many high-density cities should not have a shortage of quality housing (which earn rent for investors and pay taxes to government), while wealthy and middle-class citizens use potential investment resources to build country homes in locations where the building will be an unproductive asset, earning no rent, paying no taxes, and meeting no consumer demand – policy initiatives to change behaviour would include many things, including something as intangible as building a sense of certainty about Nigeria’s future as a united country (too many citizens, from every ethnic group and state, invest their savings unproductively in their hometowns, rather than risk political changes in other locales that might affect non-indigenes or recreate the "abandoned property" issue). Crude oil revenue has made us disinterested in securing and/or developing existing and potential federal revenue streams. It is likely that fiscal reforms on the revenue and expenditure sides, even on 2005 GDP levels, would produce the extra $1.3 billion to pay off the full debt servicing load of $3 billion without touching the oil and gas windfalls or lowering available spending in the current budget total – though making the full payments is not ideal – and we might even generate more than $1.3 billion, allowing an increase in budgetary expenditure. Policy-making for rapid and sustained growth is an art and a science, dynamic and fluid decision-making amidst constantly shifting options in an ever-changing atmosphere. There is no rigid blueprint, constant thought and flexibility are vital, and we should not bind, restrict or constrain our field of choice.
There is so much more to talk about, so much we need to do. It would have been nice if we could have achieved a more manageable debt situation without giving up any portion of our savings, but I guess there is nothing that can be done about that.
It is unfortunate that Nigerian politics in the last 6 years has been bereft of substantive policy debate. It is more unfortunate that ahead of the 2 years leading to 2007, substantive policy is the last thing on the minds of political operators. What we have got at best is geo-political and ethno-religious posturing, retreads of everything we are supposed to be moving beyond, reminders that our politics goes around in circles instead of moving forward. Perhaps the point of this essay is to suggest that we need to start thinking hard about national progress instead of just accepting our fate as if we do not have other options.
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1 Response to "Nigeria and the Paris Club: A deal worth celebrating?" 
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said this on 27 Sep 2008 7:52:34 AM EDT
The issues raised are a demonstration of the insincerity of our leaders (nothing to show for monies "borrowed") and the selfishness of our so-called creditors.
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