Jonathan’s government of borrowing

OLUSOLA FABIYI writes on the debt relief sought and got by former President Olusegun Obasanjo and the desire of the incumbent President Goodluck Jonathan to return to the creditors for loans  

June 30, 2005 was a remarkable day in the eight-year rule of Olusegun Obasanjo as Nigeria’s president. That day, Obasanjo addressed Nigerians on the debt relief his government secured from the Paris Club a day earlier. Dressed in a native blue agbadamade from local batik (kampala), Obasanjo, with a cracked voice laced with uncontrollable happiness, announced to Nigerians how happy he was to secure the relief for his country. Followers of events in the country, especially in the six years preceding the struggle for the debt relief, would understand why the then President was upbeat.  

Before achieving the feat, which was hailed in and outside the country, Obasanjo had been nicknamed Ajala travel by his traducers over his incessant trips outside the shores of Nigeria. In fact, some referred to him as the de facto minister in charge of foreign affairs. This was because of his penchant for traversing the globe, where he made direct personal appeals to the political leaders of the wealthy creditor-nations of the world to give Nigeria and other African countries a debt relief. The trips made many people to refer to him as a “junketing” president. But the ex-general did not cave in. And like a determined snail climbing a tall tree, he was able to achieve success. Accordingly, Obasanjo’s efforts saw Nigeria’s $30bn debt to the Paris Club partly written off, saving the country $18bn. As a result of the debt cancellation and an innovative Debt Buy Back Scheme, Nigeria was able to exit the Paris Club, thereby bringing the country’s external debt burden down from $35bn to $5bn.

But Obasanjo did not achieve that feat alone. He accomplished that with the support of the then Minister of Finance, Dr. Ngozi Okonjo-Iweala. The former managing director of the World Bank shared in the glory of the negotiations that led to the largest debt relief deal in Africa, and the second largest debt cancellation in the Paris Club history. To her credit, Okonjo-Iweala spearheaded the drive to get Nigeria’s first ever BB-Credit rating in January 2006 from international rating agencies, Fitch, and Standard & Poor, a rating that placed Nigeria in the league of several emerging markets such as Brazil, Venezuela, Vietnam, Philippines and Turkey.

Like her principal then, Okonjo-Iweala was called several unprintable names. This she acknowledged in her interview with The Guardian of London while serving in Obasanjo’s government. She said, “When I became finance minister, they called me Okonjo-Wahala or trouble woman. But I don’t care what names they call me. I’m a fighter; I’m very focused on what I’m doing, and relentless in what I want to achieve, almost to a fault. If you get in my way, you get kicked.” Apart from being Okonjo-Wahala, she was also nicknamed ‘Madam Debt Relief’ after the success recorded in the debt relief policy.

The role she played in the debt relief of the Obasanjo government notwithstanding, Okonjo-Iweala is strongly behind the desire of the President Goodluck Jonathan-led government to further plunge the country into more debts. Already, the Federal Government has concluded plans to borrow $7.9bn (about N1.89tn) for the funding of pipeline projects in the country. The loan is to be sourced from the World Bank, African Development Bank and others. Jonathan, in two separate letters to the Senate and the House of Representatives recently, said the borrowing would cover pipeline projects captured in the 2012 to 2014 External Borrowing Plan. According to him, the development will see the government borrowing a total of $2.64bn (N396bn) annually.

The President urged the National Assembly to note “that the objectives of the projects conform to the transformation agenda of our administration and cut across various sectors of the economy. The initiatives are meant to put the economy on track through growth and employment.” He urged the National Assembly to approve the list of pipeline projects for inclusion in the Medium Term (2012-2014) External Borrowing Plan.

If the National Assembly agrees with Jonathan and gives the go-ahead to obtain the loan, the move will increase  the country’s foreign debt to $11.5bn. Already, the FG currently owes $3.5bn made up of $2.9bn multilateral loans and $597.65m from other commercial sources.

Okonjo-Iweala, who is the Coordinating Minister for the Economy and Minister of Finance, has not hidden her preference for foreign loans over domestic loans by insisting that the nation’s rising domestic debt profile was not healthy for the economy. As Managing Director of the World Bank, Okonjo-Iweala had criticised Nigeria’s debt structure on the grounds that the Federal Government was crowding out private sector borrowers from the debt market. She had reasoned that the government could do with more foreign sources than domestic debt. As at Dec 31, 2011, the domestic debt profile of Nigeria stood at N5.62tn, which was made up of N353.73bn in Treasury Bonds; Nigerian Treasury Bills, N1.73tn; and FGN bonds, N3.54tn.

However, the position of Okonjo-Iweala on domestic debts runs contrary to that of the Director-General, Debt Management Office, Dr. Abraham Nwankwo, who had explained that the nation’s growing domestic debt profile was necessary to deepen the market, as well as provide a vital source of funding for government budget deficits. He had said, “The DMO reintroduced the issuance of sovereign bonds in 2003, but started regular bond issuance in 2005 based on a programmed monthly issuance calendar. With external borrowing limited to concession windows, borrowing from the domestic market became the main source of raising capital by the FG for funding its activities. The policy shift towards the development of the domestic market was anchored on the desire to not only finance government budget deficits, but also provide the much needed platform for raising long term capital for funding public and private sector projects, insulate the domestic economy from external contagion, develop the domestic capital market and provide a benchmark for pricing other financial instruments in the system in line with global best practices.”

But will the President seek more loans in the future? His comments that his government would not be able to implement the Subsidy Reinvestment and Empowerment programme, which he promised during the protests against the removal of oil subsidy, might provide an answer to that poser.

The President, at the 58th National Executive Committee meeting of the Peoples Democratic Party in Abuja on Monday, expressed his surprise when he saw the party leadership distributing the SURE programme book to the attendees. He quickly ordered that the booklets be retrieved, saying that the items listed in it by the government were no longer feasible because of the non-implementation of his government’s subsidy removal policy. Jonathan, who looked worried, said that it would be wrong for the people to hold to the book as part of the promises his government  made without taking into cognisance that  the government did not achieve total subsidy removal. He said what the government achieved in January was a mere price increment on petrol and not total deregulation of the down stream sector of the oil industry.

But rather than resort to borrowing, the Congress for Progressive Change and the All Nigeria Peoples Party have called on the President to fight corruption and reduce the cost of running government. The spokespersons for the two political parties, Mr. Rotimi Fashakin and Mr. Emma Eneukwu respectively, said it would be better for the President to reduce the number of his ministers and political aides, which they said would enable the country to save money to implement productive programmes. Also, a political commentator and former personal aide to the late MKO Abiola, Olu Akerele, said the resort to borrowing by the FG was an indication that the government lacked innovative ideas.

He said, “In a country with many talents and abundant resources, why must we be asking for loans when we can either generate money or block all the loopholes in government? Why can’t we stop corruption that is walking freely in all government establishments? To me, these are the areas the President must focus on instead of looking for loans to mortgage the future of generation of Nigerian youths that are yet unborn.”   

As it is now, the government appears resolute in its desire to obtain the loan and most Nigerians seem to think otherwise. Would the country have had any reason to brand itself a democratic entity if the voice of the people would not count? That appears to the question for thought