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March 14, 2005

Comments

Ross

Other than ending economic protectionism, what, if anything, do you think Britain and other western nations should do to help African countries develop more?

Abiola Lapite

1 - Stop lending respectability to crooks and incompetents who call themselves leaders by pretending that their pleas for debt relief and additional aid have real merit, or that they'd put the money to good use. Indiscriminate charity rewards misrule, and one should therefore expect it to encourage more of the same.

2 - Don't give a dime to anyone mouthing Chavez or Mobutu style nonsense about land nationalization, or who refuses to open up key sectors of the economy like telecoms or energy to foreign investment or private competition. Why subsidize economic stupidity?

3 - Stop insisting on the sacrosanct nature of current borders, and the importance of "stability" above all else. Ethnicity is at the root of Africa's problems, and until the issue is addressed directly, no progress will be possible. Just look at the following condensed history of Nigeria to see what I mean:

http://www.pbs.org/wgbh/commandingheights/lo/countries/ng/ng_full.html

It's much the same story one sees across the continent: ethnic strife leads to bad government, and an emphasis on "sharing the national cake" above all else, even above economic growth.

http://www.sunnewsonline.com/webpages/politics/2004/Oct/7/politics-7%20-10%20-%202004%20002.htm

There really is nothing mysterious about Africa's problems. What's mysterious is that anyone should expect a patient to thrive when his underlying ailment isn't even being acknowledged.

Chuckles

This confirms what was put out in another post about the risible nature of the borders and the function of the State as a mere plunderer and pillager etc

http://odili.net/news/source/2005/mar/14/209.html

Here are goods imported by enterprising, hardworking Nigerians, siezed by the State and auctioned off to its officers. How can any innovative enterpreneurship thrive in this kind of atmosphere?

[...Our source said among the legislators are those who want the overtime cargoes not just for themselves, but also for relations and girlfriends.

According to the source, the Customs, Abuja Headquarters, has since the beginning of this year been witnessing visitors’ influx who come with notes from lawmakers, asking for auction vehicles and containers...]

This is depredation at its very worst, the local industries that this kind of nonsense is supposed to benefit never actually rise up. What is the point in setting up all these barriers to exchange?

Abiola Lapite

Few devices have done more harm to the Nigerian economy than the various import and export barriers put up by successive governments. If by some feat of magic I'm ever made ruler of Nigeria, one of my first deeds in office will be to abolish the customs office outright: no more customs, no more import licences, no more import or export taxes for *anything* whatsoever. The second thing I'd do is privatize all the ports, making sure to give long-term leases only to well-capitalized foreign operators with the knowhow to appease foreign states concerned with smuggling of contraband items.

Pearsall Helms

"Stop insisting on the sacrosanct nature of current borders, and the importance of "stability" above all else. Ethnicity is at the root of Africa's problems, and until the issue is addressed directly, no progress will be possible."

I 100% agree with this. About a year ago I met a friend of one of my cousins, a woman who was working in the Congo for the UN. I asked her why there was so much effort being made to maintain the arbitrary 'state' that King Leopold had cobbled together, and if it wouldn't be a good idea to admit that Congo (and really, pretty much all of Africa), as it is constituted now on the lines drawn on a map in Berlin 100 years ago, will never, ever work. She replied with all the 'stability' 'sovereignty' sort of stuff.

Bureaucratic inertia, innit.

Abiola Lapite

" She replied with all the 'stability' 'sovereignty' sort of stuff."

The funny thing about this is that the UN wouldn't be in the Congo if it really were a bastion of "stability", or if anyone truly exercised sovereignty over the whole place ...

Conrad Barwa

Abiola,

I disagree with some fundamentals that you have raised in your piece on the Nigerian situation; as I am doing some work currently on debt swaps and the credit policies of various Paris Club countries towards their debtors I feel that I should point out some differences I have with your analysis.

Oil is at $53 a barrel, so what is the Nigerian government doing budgeting using a $30 benchmark and projecting a fiscal deficit? And why hasn't NITEL still been sold, so many years after it was supposed to have gone on the market? Who will buy that hulking monstrousity for such a large sum, while we're at it?

This is somewhat separate from the issue of debt relief and are internal domestic policy issues. It does however, overlook almost all packages of debt relief, except perhaps for the HIPC one and certainly will cover the Nigerian case – which is that such relief is always conditional and linked to existing SAP and other market liberalisation programmes. This has been the past record and from TB’s Commission on Africa’s finding seems pretty much to be the case presently as well. Since Nigeria, isn’t small or indebted enough to qualify for unconditional treatment it certainly will have to fulfil various criteria if any debt relief package is reached. There is no reason why economic restructuring cannot be integrated into any such final arrangement. This is not a credible argument against debt relief per se; simply one against carrying it out badly.

Nigeria has not been in a better position to pay down its debts since 1990, and yet here is the country's President talking nonsense about foreign debt as a "political and moral issue"; what makes this particularly risible is that it was Obasanjo himself who began the rapid accumulation of said debt during his previous tenure from 1976 to 1979!

The vast bulk of Nigeria’s debts were accumulated in the 1980s and the 1990s. The big spending spree began with the civilian Shagari government in 1980s; the total debt stock increased from $5 billion to $25 billion between 1980-86 during the tenure of the Babangida and Shagari governments. Part of this was due to the downturn in revenue off oil rents but a lot of it was also due to poor financial planning, expensive and ultimately unviable capital expenditures and sheer looting. The principal loan amounts that Nigeria borrowed were estimated to be (by the Nigerian FM) $17 billion of which she has repaid $18 billion since 1980. Unfortunately, Before Obasanjo was elected in 1999, his predecessors, all military dictators, simply failed to service the debts. As a result, creditors imposed penalties on Nigeria, and added compound interest. The result of which is that of the $32 billion owed by Nigeria $20 billion stems from the devastating accumulation of arrears and penalties. Thus it could be argued that Nigeria has repaid the original loans borrowed, and that the outstanding debts are what some academics call “phantom” debts – i.e. they are just inflated compound interest added to the debt. While there is no international law (similar to commercial bankruptcy law) to govern relations between sovereign debtors and international creditors – nevertheless there are “unwritten rules” – written by creditors. These rules require governments to keep up repayments regularly, and if they fail, Paris Club creditors have the power impose penalties and compound interest.

In 1999, after a democratic election, Nigeria began to repay her debts – for the first time in many years. Because of the build-up of debt during the dictatorships – the repayments were heavy. Just before Obasanjo’s election the IMF/World Bank had defined Nigeria as a HIPC – a Heavily Indebted Poor Country – which would have entitled the country to substantial debt cancellation. However, after the election, Paris Club creditors changed their minds about Nigeria’s HIPC status – and the suspicion remains that they recognised they were far more likely to collect debts from a democratically elected government than from military dictatorships – and therefore struck Nigeria off the HIPC list.

As for the ‘better position’ argument; I remain sceptical. Nigeria faces serious economic and social challenges; and if there any real commitment to meeting MDG then some form of debt relief has to be on the agenda, along with domestic reform and increased investments in health and education. In 1999 health spending represented 0.2% of GDP, or national income. Repayment of debts represented 3.4% of GDP. In 2000, debt service payments were 4 times the government’s budget for education, and about 12 times the budget for health. In 2001, the proportions were 6 and 17 times respectively for health and education. By 2004, the amount devoted to debt service payments was 5 times that spent on education and 13 times that spent on health. The mortality statistics for Nigeria make grim reading, some 70,000 children are dying each month, AIDS is a concern particularly in the north with its high HIV infection rates. As for Nigeria even though its adult infection rate is low (5.1%), with such a large population (133 million) its number of HIV-positive citizens is among the highest on the continent, and by some way the largest contingent of sufferers in the West Africa region. The monitoring of HIV/AIDS in Nigeria remains inadequate for a nation of its size and wealth. Poor monitoring in a nation with such high social mobility and large population flows allows an unchecked epidemic of understandable concern.

The fact that Nigeria, along with the rest of West Africa, has now developed a generalised epidemic (rather than one restricted to certain core groups), means that the entire population of the country is at possible risk of HIV/AIDS. The epidemiology is complex on a local level, however. Rates vary dramatically between Nigeria’s federalised states, from a low of 3% adult infection in regions of the South East to 17% in the North. The fact that HIV/AIDS is higher in Muslim Nigeria could be a potential source of tension, as this population already outweighs the Christian community, which largely resides in the south and traditionally controls the state. Potential flash-points between a politically dispossessed but highly infected majority, and a politically connected but uninfected minority, are easy to imagine, and within Nigeria’s teeming millions could create enough opportunities for enmity to spill over into violence.

As in the rest of West Africa, HIV-1 has now displaced HIV-2, and so Nigeria has real potential to expand its infected adult population to Southern African levels. Double-digit inflation of Nigeria’s AIDS burden could create tens of millions of AIDS victims, and a potential political crisis for a nation of any size. The epidemic seems to be more rampant in rural populations than in urban in Nigeria; this is fortunate as Nigeria contains at least one ‘super-city’- Lagos- of 15 million and a dozen other cities of more than one million. Nigeria has rapidly urbanised, and so any increase in the urban share of HIV/AIDS would lead to a large increase in HIV/AIDS. Given the large number of people in Nigeria that political instability would effect- and the knock-on effect that this would have throughout the West African region- the ability to effectively and peacefully govern in the presence of HIV/AIDS must be taken as a cause for concern.

Here Obasanjo verifies the old aphorism according to which it is the debtor who calls the shots when the debts are large enough: he makes no effort whatsoever to disguise the fact that he's making a threat.

This simply isn’t true on a number of different levels. First of all, Nigeria isn’t Mexico or Argentina, it simply can’t exert that kind of leverage. Secondly, no creditor country seriously expects its Nigerian debts to be paid back; the discounts that Export Credit Agencies are willing to offer on acquired Nigerian debt reflects this and this has been the case long before Obasanjo came on the scene and dates back to the early 1990s when Nigeria stopped paying its dues and started accumalating penalties and interest payments at an alarming rate. The idea of Obasanjo making a threat is laughable; given the absolute lack of impact this has on the creditors concerned.

The end result of all that hand-wringing by Jeffrey Sachs, Tony Blair and Gordon Brown: an utterly unaccountable government constituted almost entirely of thugs and looters gets to play the sympathy card even as it continues to ship billions of dollars off to Western banking havens. African rulers are never slow to pick up on calls for aid to be divorced from accountability: who can blame them for taking advantage of others' messianic fantasies?

This is a greatly distorted view. Firstly, I can’t speak for Sachs but Brown and Blair aren’t doing this because they suddenly have ‘got religion’ on the issue. There are real benefits from taking any such step and since unconditional debt cancellation is virtually ruled out; there will be benefits through reforming and improving access to its domestic sector that exist. Secondly there are obviously domestic political considerations at play here; piccies with Saint Bob and Bono are priceless given the current standing of the Labour govt and its wholesale repudiation in action if not words of most of the pillars of Labour policy over the last century since New Labour came into office in 1997. Not to mention the one-upmanship game that Gordon Brown and Tony Blair are engaged in for their own power struggle – it isn’t an accident that Brown has steamed ahead in a high visibility campaign to African countries and forums, undercutting a favourite Blair pulpit and as one Whitehall mandarin sarcastically put undermining any attempt by Blair to humiliate him by offering him the Foreign Secretary’s post by showing that he can already effectively do that job while he is chancellor. Attributing ‘messianic’ aspirations to these politicians is risible and can only be done by someone who actually takes their rhetoric at face value. What we are seeing here, is power politics in some of its crudest manifestations.

Umm, perhaps the fact that your corrupt regime makes all the aforementioned look like nuns by comparison? And this from the former head of Transparency International ...
I don’t think that some of the countries on that list are much better than Nigeria, Pakistan being a prime example. In fact South Asia as a whole isn’t any less corrupt than Nigeria and parts of it are much more so. The real difference lies in the fact that Asian corrupt cliques tend to keep their money within the country rather than send it abroad and that the more advanced and diversified economy can better withstand the debilitating effects of such corruption. Aside from this is the fact that in some areas such as SE Asia, corruption is seen to be growth-inducing rather than growth-inhibiting; what matters in this view, is less the level of corruption but the type of corruption, that exists. In anycase, I think a case can be made that Nigeria has improved from the days of Abacha et co. but 20 years of systematic corruption won’t be eliminated within a few years. What matters is the direction that policy is moving down, rather than the speed. Unless you somehow think that Nigeria is becoming even more corrupt than it was in the 1990s, I can’t see how expecting drastic changes within the constraints of the existing political systems and the time frame in consideration; is being realistic.

Notice how Obasanjo equates wealth with oil wealth, as if it weren't to be regarded as mere icing on a cake generated by the efforts of the Nigerian citizenry. For Obasanjo, it would seem, the only aspect of GDP worth taking into account is that which comes from oil rents, an attitude which is all too typical of a political elite for whom power is only about getting their share of said rents.

Actually, I thought it was because an incessant argument that is put against any relief effort for Nigeria is the fact that it is ‘oil rich’ and so doesn’t merit any special treatment. Obasanjo seems to be arguing that having oil wealth doesn’t make Nigeria a rich country or one that can easily deal with its current problems without any restructuring of its obligations. In that he seems to be making the reverse point to that which you impute to him – he is downplaying oil wealth rather than obsessing about it.

And how exactly did said debt stock rise, Mr. Speaker? Did it just do so of its own accord, or did your predecessors help it along by neglecting to pay it down during good times? Perhaps you might find it within yourself to ask a certain Ibrahim Babangida why he didn't use the $12 billion in extra funds which fell into his hands during the Gulf War for said purpose?

Quite amazing, so after having acknowledged that it was past military dictators who frittered away the wealth; you now argue that it should be Nigerian citizens who effectively have to pay for this. I don’t see why creditors who were stupid enough to lend to military governments that had no idea of competent economic management and who had a lackadaisical attitude towards debt repayment should expect to recoup their loans. It speaks volumes that this argument expects to discipline ‘debtors’ but does nothing to penalise delinquent lending by creditors.

Hell, let the bastards welsh on Nigeria's national debt for all I care; if it means no Nigerian government will ever be trusted with a loan again, then it will have been the single best thing the country's rulers have ever done.

Doesn’t this belie the so-called power that debtors are meant to have. The fact that default has such serious consequences for debtors speaks volumes about where the real power between debtor countries and creditors lie in the international financial market. I am also a little bit surprised at your rather cavalier attitudes towards the potential results of such an outcome – who do you think will pay for the real consequences of any default, Mercedes-driven politicians or the 90 million Nigerians living below the poverty line. We need to be realistic here.

As long as the fundamental problems of leadership aren't solved in Nigeria and elsewhere on the continent, nothing the likes of Blair, Brown or Sachs can propose will ever make a difference for the better.

This I think reveals the basic weakness of your whole argument. Granted that Nigeria’s political system needs to be reformed and that its political class leave much to be desired – who do you think is going to suffer if some form of debt relief and reform isn’t enacted. The same class or ordinary Nigerians; debt relief is no panacea and won’t even necessarily make things better – but it certainly won’t make things worse – at least I have never seen any credible argument for this position. But the current situation whereby inadequate payments lead to mounting arrears and debt service on debt acquired by repressive govts that had no intention of repayment, translating into valuable resources that could be better spent on much needed health and education projects cannot be allowed to continue. Even if the current regime is staffed full of as you call them ‘thugs, and pirates’ this is not any argument at passing the effective costs of debt repayment onto those who can least afford them – it is an argument to make sure that the benefits of debt relief reach those who really need it. A variety of instruments could be used for such a task; the GFTAM and UNAIDS are both looking at debt-for-AIDS swaps as a potential tool and Nigeria is up for its renewed AIDS grants this year. Interestingly despite all your talk of looting and pillaging of government; Nigeria is one of only 8 countries that has been identified in the first round by the Global Fund as being an A+ performers in terms of having utilised its past AIDS disbursements and so qualifies for early release of new funds. Obviously at least some parts of the public infrastructure are working somewhat effectively in Nigeria; we should route debt relief towards these sectors rather than indulging in overblown libertarian rhetoric.

Abiola Lapite

Conrad,

Your response is so long-winded that I won't even bother to give a point-by-point refutation. Let it suffice to say that not only do I know Nigeria's economic history at least as well as you do, and not only do I have at least as much knowledge of the bond markets as you do - having actually worked on Wall Street for some years - but I also have plenty of relatives still living in Nigeria, and could not possibly be any less concerned about their welfare than you are. Your response is as stuffed full of condescension as it is uninformed and riddled with illogicalities, and I'd appreciate it in future if you saved the pompous lecturing for someone who appreciated that sort of thing a lot better than I do. It is the height of cheek for you to dare to lecture me about my supposed misreading of the personal and leadership qualities of people many of whom I've actually met in the flesh, let alone taking it upon yourself to teach me what happened in a country I was living in during the very period I was living there.

Ach, your long-winded rant is a prime example of just the kind of parachute expertise I despise! What next, are you going to deign to lecture me on how best to prepare ogbono soup, or the fastest way to get from Isolo to Ebute Meta?

Lance

Abiola,
Conrad comment was a very thoughtful critique of your arguments and your reply is just a cop out.

Abiola Lapite

You think whatever the hell you want, I don't really care; I'm not going to waste my time responding to a pompous, illogical rant which runs on forever and deigns to teach me about the problems facing a country I know intimately. Life is too short, and my time too precious, to bother wading through such nonsense.

If Conrad wants a thoughtful response, he'll find that brevity and humility are his friends, and as for you - let's just say that few things irritate me more than people whose only contribution to any discussion is to act as self-appointed score-keepers.

captainblak

I think Conrad's critique was well thought-out. It was long but not boring. Oh, and I applaud Nigeria's stance.

One thing is very clear: none of the creditors gave these loans with the expectation that they'd actually be used for what they were intended. This is a long-running thread where they'd give the loans to unscrupulous government officials and behind the scenes, help them turn the funds around to deposit them back in the West.

Perhaps Nigerians will usher in a new era of intra-continental cooperation.

Abiola Lapite

"I think Conrad's critique was well thought-out. It was long but not boring."

Whatever. It's an overlong load of patronizing tosh from someone I could be giving lessons on debt finance to, on a country I know better than he ever will. If you find it "well thought-out", that only speaks for poor judgement on your part.

"One thing is very clear: none of the creditors gave these loans with the expectation that they'd actually be used for what they were intended. This is a long-running thread where they'd give the loans to unscrupulous government officials and behind the scenes, help them turn the funds around to deposit them back in the West."

Care to substantiate this conspiracy theory with some citations? How terribly convenient to blame the lender for being duped ...

Chuckles

Conrad Barwa,

1. The first argument against debt relief (which you referenced from Abiola's post) is in fact credible. But besides that, Abiola's comment was made against the backdrop of a news article that had in fact referenced the sale of NITEL. It seems you misread the train of thought there. But back to debt relief, why should anyone grant debt relief to those with the means to pay but shirk? That is the point of the price of Oil.
A recalcitrant, profligate debtor who goes on spending binges is not exactly the kind of debtor you would want to grant relief *even* if the chances of recovery were minimal at best. Since debt servicing is factored into the budget every year, implicitly or explicitly at both 3 tiers of government, it makes a lot of sense to query the rationale of budgeting at $30 and then projecting a fiscal deficit.

2. You are wrong about the accumulation of Nigerias debt. Like Abiola rightly pointed out, it was the OBJ government; after the Murder of Murtala Mohammed who started the spending spree, which followed neatly into Shagari's government. Shagari himself was elected in 1979. The unviable expenditures you talk about started with Obasanjo (think useless refineries) and even with Gowon in previous years (think FESTAC, think Useless Cargoes of Cement)...This were all things that happened under the Gowon and Obasanjo regimes. They were internally systemic to those regimes since no significant debt had been accumulated by the execution of the civil war. Oil prices spiked and revenue increased by about 400% during the mid-70s until a stagnation in the early 80s. Contrary to your analysis, the debt in 1980 was about $9bn - due particularly to the profligacy of the OBJ and Shagari admins of yesteryears. In 1985 and 86, the IMF loans were rejected. To say that OBJs predeccesors failed to service the debts is laughable, since the SAP program of the Babangida years severely reduced the chances of him doing anything serious about the debt profile. With budget deficits doubling, IBB rescheduled. Abiola's point therefore remains. Oil reveues in Nigeria NOW are at a surplus.

a. Why are deficits still being projected?
b. Why no debt servicing; since the conditions that informed the actions of previous MILADs no longer exist?

3. That $20 bn stems from accumulated arrears is really beside the point, since it is still a debt, based on the conditions. "Phantom Debts" is an oxymoron. You either owe, or you dont, based on the conditions. Nigeria owes. Between 1985 and 2001, Nigeria spent $32 bn on debt servicing. This again disproves the notion that MILADs werent settling. The point is that profligate spending and unaccountability simply wasted any values of the amounts borrowed. Period. Why should any debt relief be granted for this?

4. Again, the digression into statistics and percentages of GDP is still beside the point. The issue here again, which you seem to have missed is that the State has had the means to settle in the past, and wasted it. The State now, has the means to settle, at least, some honourable amounts, yet the administration prefers to indulge in shameless posturing about this issue! If the debt isnt serviced with the windfall, then what are the revenues going to be used for? More motorcades?

5. Your projections based on religious/population distributions are suspect, since you grossly overestimate the significance of the North-South population/political divide or even the Muslim/Xtian one. Come on! Anyone here ever heard of a Nigerian Middle Belt? Such population stats are urban legends. No credible census lends claim to any of that. But even more so, the rise of Nigeria's AIDS burden is of no consequence to the issue of the debt, or of political stability: Since the polity is already quite unstable. You also repeat the myth of a domino effect in West Africa due to the ripples in Nigeria. This is nonsense. What happened to all the projected Ghanaian refugees of a while back, when they were repatriated from Nigeria?

6. The aphorism used by Abiola is quite apropos. Since Abiola isnt talking about "leverage" in the sense in which you use it, but simply the threat of refusal. The tune in question has the lyrics "Do your worst, I aint paying" - not some magical kind of international political leverage. Obasanjo is in fact making a threat - and there is no need to read anything malevolent into the word. He is simply saying he wants to shirk. While it is true that hopes of full repayment are nonexistent, it is ludicrous to conclude that OBJ doesnt have an audience that he is addressing.

7. Blair and Brown mayn't have "religion" on the issue; but they are using the language of religion - "Africa is a scar on the conscience of the world" etc etc. Plus, why shouldnt "Messianic" aspirations be attributed to those who use the language of Messiahs? Plus, what precedent is there for reformation? What is the basis for such a hope?

8. Again, you miss the point with regards to corruption. South Asian countries may in fact be corrupt, but the activities of Nigerian regimes outweigh whatever obtains in S. Asia. The very fact that South Asian regimes keep capital within the country already bespeaks the different mindsets possessed by the two parties. Thus, what we have in Asia is a Medicci type of corruption, that may in fact have a positive social surplus, but Nigerian State officers arent only corrupt, they are also depredatory. Thats 2 strikes against them; and it makes the Asians look like Nuns by comparison.

9. There is a high probability that Nigeria, is in fact more corrupt now, than in the days of Abacha. There are several indicators of this:

a. The same Abachaists are in power
b. There is still the same absence of accountability.
c. Abdusalami who transferred power to OBJ looted more on a per period of time basis than did the Abachas
d. The Civilians who profited from the corruption in previous regimes are the State governors now.
e. The crook, IBB, is running for President.

I think you only need to read Newspaper accounts of the PDP convention prior to the 2003 election. According to journalists, the black market in Dollars in Abuja was completely dry because delegates were demanding "motivation" in dollars.

I suspect you are the one being unrealistic here. Expecting that the same gang of crooks, with their Western collaborators will have reformed overnight really requires a leap of faith.

10. OBJ is in fact obsessing about oil wealth since his point is that you cant expect him to sacrifice the Lamb which gives him milk, wool and meat on the altar of debt servicing; thus betraying the mindset that Abiola critiqued. You dont seem to know this character OBJ at all. Back in the days, OBJ met Castro and asked him for advice (this is a true story) - Castro replied, find a golden calf and watch it with all your might. OBJ went back to Nigeria and told the boys, Oil is our golden calf. I suspect that some bckground knowledge about thought, culture and psychoculture of African politicians and the elite is needed on your part.

11. Your argument about the MILADs again falls short of the mark. The Nigerian State is a continuing entity. All that stuff about "expecting Citizens to pay" is just bullshit. The State borrowed the money and the state must repay! Oh, I see...These Military governments were incompetent; which is why the same fellows who populated these governments are now in power? Puhleeease! The Creditors werent stupid, since in many cases, they backed the coups that brought these crooks to power. The State owes. Acting in their capacity as officers of the State, looters have pillaged and plundered. These same looters are now in power. Should they be excused? Certainly not. Even OBJ himself admits this!
The Citizens have a responsibility to bring the powers of society to bear upon such miscreants. But because Nigeria and other Afrian States are colonial States whose roots arent in the administered society, the hopes for this are slim. In any case, it isnt the citizens that will be paying, since the State has already taken everything from them. Any settlements will most likely come out of the pockets of the elite.

12. In fact, Abiolas dismissive attitude of typical of Nigerians who in fact know what is going on the country.
They know for instance that:

a. Any loans secured will make little difference and since they already have nothing, they cant effectively settle any debts. The middle class is fleeing the country fast, leaving the poor (who dont have anything) and the rich(who have it tall) to take care of whatever debt relief is in place. You honestly think any debt servicing will come out of taxes? Ha!
b. It in fact doesnt belie the power that debtors have since in fact the imputation of that power is only with respect to debts actually existing. Abiola was referring to future debts.
c. I am not suprised about your suprise at the Cavalier response. Again, some background knowledge is needed. What is certain is that should the debt be serviced, the bulk of the monies wont be coming out of the pockets of the poor. How are you going to get the money from them? Tax them? Deny them the construction of imaginary infrastructure and other white elephants?

13. Again, you fudge on the point. If debt relief is no panacea, then why propose it in the first place? If Debt relief isnt going to solve any economic problems, then why propose it? Abiola's point is that debt relief wont solve anything while lousy leadership is in place. This is a valid point and it is the keystone. To this you reply, "Well, it sure wont make things worse" - But this is ridiculous. Why should relief be granted when neither you, nor I, nor Sachs nor Brown can guarantee that it will make things better within the current State structure?

14. Again, you are lacking in background knowledge. What more could Nigerians possible suffer in the absence of relief? In fact, it is likely that relief will increase the problems, providing avenues for future corruption, lending, white elephants etc - all within the present State structure; a structure which is tinged by ethno-national divides. Look, Poor Nigerians wont suffer if relief isnt granted and they wont gain if it is - not in the present Political climate. So the crux of your argument collapses right there.
I am really amazed at all this "money that could be spent on health" talk. When the debts were absent, tell me, how much money was spend on health? Even now that debt servicing is not up to 5% of GDP, spending on education has been contracting and spending on health has been contracting, has well as spending on public works. So where is the balance of 90% of GDP going? Personnel payments? Civil services payments? How much does that amount to? No! The money is finding its way to Luxembourg, Jersey and Switzerland. So long as the criminals who loot the treasury are walking free, neither debt relief, nor any amount of aid will make things better.
There are no costs to be passed on and no benefits to be passed on.
That your article is full of apologetics for the Nigerian State is baffling. You speak of utilization of AIDS disbursements while failing to take account the role that NGOs and private Initiatives have to do with regards to use, as opposed to State rackets.
Yes, some parts of public infrastructure are working - not within the context of the Nigerian State but within the context of ethno-regional administrations.
I lived in Nigeria for a long time. I saw how citizens would tar Government abandoned roads, how citizens would raise money to buy transformers and cabling for their neighborhoods, how citizens would organize public works projects, usually on ethno-regional affliations.
That public infrastructure works in some places in Nigeria is no testament to its State or its worthiness as a debtor, it is in fact, a testament to its incompetence, in lieu of the background knowledge, i.e. that it is State and regional governments, as well as community associations that are making these things work!

15. Methinks that the rhetoric here is largely on your part. With this kind of information:

http://odili.net/news/source/2004/dec/30/509.html
(An estimated $100bn looted and stashed)

Oh...and Obasanjo was saying the other day that he knew that 3 government officials could personally settle the $32 bn debt.

The idea that debt relief is making ordinary Nigerians suffer or that debt relief will somehow improve their lives in the light of this crop of vicious politicians and their smiling, oil palmed Citibank counsellors is one of the stupidest economic ideas to be propounded about Nigeria/Africa in the current discourse.

http://allafrica.com/stories/200503140581.html

Good overview of how Nigeria got into this mess. Note the declining oil revenues of 1994-95 which increased arrears. What nobody is talking about is that this period was immediately AFTER Babangida's pocketing of the Gulf War oil windfall.

Debt relief, my foot. Serve them sulphur and brimstone on a platter of gold.

captainblak

[Care to substantiate this conspiracy theory with some citations? How terribly convenient to blame the lender for being duped ...]

The proof is in the scale of corruption.
Say a Nigerian military dictator who has never formed a viable company in his life wants to deposit a couple billion dollars in a Western bank. These banks are required to establish some papertrail. You will not have me believe that this happens without the original creditors not knowing that the money they lend is disappearing and further, just what bank is getting the windfall. The creditor doesnt really care about this because it's not the repayment he is in interested in but the leverage it gives him in relation to the debtor nation.

Abiola Lapite

Chuckles,

Thanks for showing the patience to wade through Conrad's post and explain just why it's deserving of scorn. All that talk about debt relief, AIDS treatment and so on is the height of unreality given a country in which the government can:

launch a satellite (despite the existence of private operators for hire like Space Imaging),
http://www.spacedaily.com/2004/040302115821.w3a5tryu.html

host an international beauty contest,
http://archives.cnn.com/2002/WORLD/africa/11/22/nigeria.missworld/

hold the All African Games,
http://news.bbc.co.uk/2/hi/africa/3163464.stm

continue pouring money into the black hole called Ajaokuta,
http://news.biafranigeriaworld.com/archive/2004/aug/25/122.html

drive 15-SUV Mercedes motorcades,
http://www.guardian.co.uk/international/story/0,,1430932,00.html

spend weekends at "Owambe" parties in London,
http://www.usafricaonline.com/jelendu.nigeriaconfu.html

etc, etc. Also telling is that Babangida, that prince of thieves, is on close terms with Obasanjo despite being unable to explain where $12.2 billion in windfall revenue went, and that while Obasanjo is willing to admit Babangida's culpability, he refuses to look any further into the issue.
http://www.sunnewsonline.com/webpages/news/national/2004/april/23/national-apr23-001.htm

Does all of the above speak of an elite which will suddenly make AIDS, hunger and illiteracy its prime concerns, just as soon as current debts are forgiven? One has to be a real sucker to buy said possibility, especially given the odds that Babangida will be back in power in 2007 ...

PS: The following article, by yet another Nigerian, makes for hilarious reading - at least as long as you're a foreigner with no personal connection to the events and people described.

http://www.zmag.org/content/showarticle.cfm?SectionID=2&ItemID=4516

Yup, debt relief is what's killing Nigerian AIDS victims and leaving its infants without schoolbooks or decent meals ...

captainblak

So unilateral repudiation will doom the chances of a future more accountable Nigerian state if it is used now by present officials to enrich themselves even further, but if hypothetically speaking, unconditional debt relief was provided as an option by the creditors, what really is the objection?

Abiola Lapite

"So unilateral repudiation will doom the chances of a future more accountable Nigerian state "

That you actually believe in the theoretical possibility of an "accountable Nigerian state" shows that you still don't appreciate just how corruption is rooted in the constitution of the state: the truth is that as far as the behavior of most of its citizens is concerned, "Nigeria" is a mere geographical fiction, with the real focus of loyalty on one's own ethnic group, and the endemic corruption is no more than a consequence of this reality. Either you use your chance to steal the maximum share of the "national cake" for yourself, your relatives, people from your village and others from your ethnic group, or some guy from another group will do the looting at the expense of you and yours; it's pure science fiction to expect anything to change this reality.

"if hypothetically speaking, unconditional debt relief was provided as an option by the creditors, what really is the objection?"

The objection is that it will enable the current rotten elite to bankroll itself in office even longer, staving off the day when Nigerians will have to sit down and talk amongst themselves about the fundamental issues that face them; easy credit made life much easier than it had to be for Shagari, Buhari and Babangida.

Chuckles

You know, it is just so sad, just so sad, when people who could actually make a difference flitter away time and resources with determined attempts at ignoring the obvious.

Of course, we are waiting for the said Satellite to come crashing down somewhere in the Bight of Benin. The Miss World pageant was horribly botched (again, this bespeaks the "Elephant in the Room" approach to the entire absurdity of the ethno-regional foundations of most African States).

Now, Nigeria wants to host the World Cup and the Olympics. More money to siphon, methinks.

Look at this State governor boasting about how he had 76 SUVs before becoming a governor. For sure he must have been of them Abacha lackeys.

http://www.sunnewsonline.com/webpages/news/national/2005/jan/24/national-24-01-2005-003.htm

A Nigerian commentator takes on that particular issue:
Note how the commentator captures the sentiments of Nigerians.
http://odili.net/news/source/2005/jan/28/8.html

Africans are not without feelings or opinions about these outrages. There are just structural limitations to what they can do!

I think, that there is a deeply patronizing and paternalistic attitude to this whole thing. The idea that Africans cant help themselves etc and as such, they have to be "rewarded" for good governance e.g. The entire NEPAD scam or they are children insisiting to Mommy that they want to reform (c.f. Nigerian Finance Minister's recent comments).

Nothing could be further from the truth, since one can hardly credit these State with the purpose of governance in the first instance. But I suppose it is too much for the West to stop cahooting with criminals. After all, one must take the world as one meets it and the problems of Africans are just reflective of their natural State - thats the kind of realist crap that keeps getting out there.

Western economists etc arent that dumb. So I keep asking myself, why, why do they keep buying into this kind of crap? I suspect that the reason is that stereotypes have blinded much of their analyses of Africa - so they expect to do business with the "Big Chief" and "Big Men" types that are the stuff of Racist anecdotes littered in colonial lore. They kind of accept this stuff as natural i.e. this is how those Africans have always lived, the big man at the top and all the little rain dancers at the bottom, and this stereotype carries over into their policy making.

"There is no hope of Africa being democratic...We need the big men of Africa on our side" - That was FDR about 50 years ago. With that kind of mindset, such nonsense as debt relief and deluge-type foreign AID is par the course.

When these people (Western policy makers) meet OBJ and IBB and their likes - I wonder, do they really ask them about corruption? Do they question them about all the money in the foreign accounts? Where is the morality in all of this? Where is the simple decency and dignity?

When Bush entertains the types of Teodoro Obiang - what prick does his Christian conscience make?

Naaaaaaaaah - Forget it. They are in cahoots!

Abiola Lapite

Ali Modu Sheriff is a real champion! It takes real effort for a guy who's governor of one of Nigeria's most backward states to outdo the governor of Lagos in ostentation! What's the literacy rate in Borno again, something like 10 or 20 percent?

The reason he's getting away with this is that the money doesn't come out of the wallets of Borno residents, but from a magic source of inexhaustible funds called Abuja; if he had to live on the meagre tax receipts from his constituents, they'd have some reason to hold him at least minimally accountable.

Abiola Lapite

Oh, and he drives *Hummers* too.

http://www.sunnewsonline.com/webpages/news/national/2005/feb/19/national-19-02-2005-001-main.htm

What a class act: only the best for this guy!

Chuckles

You just touched on something else - The entire absence of any form of fiscal federalism in Nigeria.

The Northern Sharia states certainly see no problem with squandering the receipts from VAT on the sale of alcohol in other states!

Yes, Abuja! That wonderland source of the "National Cake" - which people have been consuming since 1914 but has shown no sign of diminishing. A truly magic cake!

How many times have I heard political types in Nigeria campaign on the basis of "securing for their constituents a decent share of the National cake"?

This "Go Up To Abuja and Fetch the Cake" is so rampant. Imagine a State like Lagos soliciting for Federal funds...Chronic oil dependency, ethno-regional cake sharing etc etc etc.

To think that the Yoruba bloc, or the Hausa-Fulani oligarchy (who till today celebrate the vicious Dan Fodio) will let go of the sectional rationale behind their cake consumption is ridiculous.

And yet, this is the wormhole into which people want to throw billions and billions of dollars?

There is a minimal requirement before I can take any development efforts seriously, and it is the punishment of looters. But since the IG of Police was himself caught pants down with his hands stuck in the icing bucket, I aint holding my breath!

Abiola Lapite

Yes, Inspector General Tafa Balogun's case is emblematic of the scale of the problem:

http://news.bbc.co.uk/2/hi/africa/4184257.stm
http://www.thisdayonline.com/nview.php?id=11910
http://www.nigeriavillagesquare1.com/Articles/oyesanya/2005/01/open-letter-to-tafa-balogun-of.html

What hope is there of good government in a country in which the head of the police is a far bigger thief than most of the crooks his men are supposed to be chasing? He isn't the first Nigerian police boss of this kind, either: I was a classmate of the son of a certain other one who hailed from the north, and whose wife was a parochial illiterate completely unaware that carrying a suitcase full of dollar bills just might have been a tad bit unseemly for a woman of her station ...

Really, one could play the game of pointing out thieving Nigerian politicians all night, the barrel's just so full of them. Maybe a few readers will now start to have an inkling of what's so ludicrous about the Nigerian government's calls for debt relief.

Chuckles

[...Really, one could play the game of pointing out thieving Nigerian politicians all night, the barrel's just so full of them...]

Yes, I already split my sides laughing. I remember the fellow who was caught with currency notes in lieu of carpeting in his FG furnished abode and he inquired of the investigators - "So what? Government Money in Government Propery. What is the problem with that?" I suppose this is a classic example, its become legend. And it was in the 80s too if I remember correctly.

Aaaaaaaaaaah....Africa...It exiles it brightest minds to live second class citizen lives in the West and replaces them with mindless touts. All the money devoted to propounding Sachesque theories would be better spend analysing the roots and psychoculture of Africa's political elite. Then *maybe* we would get somewhere.

Conrad Barwa

Abiola,

I am sorry if your found my tone 'condescending' or 'patronising' and I am certainly not going to claim that I know Nigeria better than you. Yes, my reply was long but I am afraid that is my style and it isn't something I just come and inflict on you with 'parachute' expertise. I certainly didn’t mean to irritate or exasperate you. I don’t think you really replied to any of my arguments; particularly where I think I did point out inaccuracies in your post. Statements such as ‘I lived for x years’ or ‘my cousin and uncles are still living in Nigeria so I must care more about the place than you’ or ‘worked for y numbers of years as a Wall Street banker and so can teach you a thing or two about debt finance” (not really an impressive proposition in my view since I have met several high-power financial bankers whose intelligence I wouldn’t rate) aren’t really arguments or replies to the points I raised. They say a lot about your personal history but not much about the issues at hand. I had hoped that by putting up such a long post you could at least isolate pieces of it and dismantle it to engage in some debate but this doesn’t seem to have happened. Luckily Chuckles has taken the time and effort to do so; so I will repay the courtesy and reply (briefly):

1. I don’t think anyone offered debt relief as a panacea or proposed that it can solve all the problems of Nigeria – or indeed any African country. Even the so-called ‘messianic’ Brown and Blair have included at least two other measures that would be needed externally more aid and a more remunerative trading system along with a host of domestic reforms. The Commission for Africa, is actually rather long on recommendations and guidelines for African states compared to what Western donors are meant to be doing. The proposition that debt relief can play an important role as PART of an effective debt management strategy is I think a sensible one and can contribute to development ALONG with several other reforms. To simply rule out debt relief seems to me to be wrong.

2. As for the Nigerian debt figures I am surprised that this is disputed; the link that you cite from allafrica.com contains in its text the very phrase that most of the external debt was accumulated under the Shagari and Babangida regimes as well as the figure of $5 to $25 billion over 1980-1986. I am happy to be corrected on this but from all the evidence I can see; it is quite clearly the case that the bulk of the external debts acquired by Nigeria were by govts that came to power after 1980.

3. I disagree with the point about phantom debts; but this is a legitimate point of disagreement. I hold and still do hold that when a position is reached that the bulk of the current debt is made up of late penalty fees and compounded interest; then some negotiation isn’t outrageous. Others can disagree.

4. I certainly don’t mean to suggest and am at a loss where it is taken from; that the State should be let off the debt and the money wasted. I suggested the possibility of a debt swap on a model followed elsewhere, most notably by UNICEF in the region to put into various health and education sectors. This doesn’t seemed to have elicited any response.

5. I don’t think Obasanjo’s threat is taken very credibly; simply because most of the Paris Club creditors don’t put much value on their Nigerian debts and don’t expect a substantial repayment. They will try to squeeze out what they can but nothing beyond that. They know, as Abiola implicitly admitted, that default also carries a cost, which most debtors are reluctant to pay.

6. Re Brown and Blair; I don’t understand the response. Use of religious language in political discourse doesn’t make one religious anymore than me speaking French would make me French. Religion has all too frequently been used for political purposes by people who are more interested in secular power rather than messianic redemption. The idea that Blair or Brown actually believe in the rhetoric they churn out is an odd idea.

7. I disagree partially about corruption in Nigeria and S.Asia; but what we are talking about is not LEVELS of corruption but different TYPES of corruption. A different argument altogether. The main reasons why in S.Asia this hasn’t led to more severe problems have got less to do with governments there being less corrupt but the economy and social structure being able to bear the costs – in India for instance more rapid growth rates and declines in poverty levels have been accompanied by INCREASES in corruption levels not declines. Still it hasn’t helped those states less fortunate, Bangladesh is comparable to Nigeria in most international corruption indexes frex.

8. I don’t expect ‘over-night’ reforms. In fact, I explicitly said that it is more important to note the direction of change than the speed. If a country has been prey to systematic corruption for 20+ years it is going to take a long time to change. It certainly won’t happen quickly. I think at least some moves in the right direction have been taken here such as the formation of the EFCC, sacking of 5000 ghost civil servants, the Due Process Unit eliminating $700 million from govt contracts, the Public Procurement and Fiscal Responsibility bills which are being talked about. These are probably just drops in the ocean, but there is some movement going on. I am surprised that years of the same political clique being in power, especially below the national level; how anyone can expect that progress would be anything other than slow, fitful and erratic. Sure, it would be nice if there was a sudden cleaning of the Augean stables but this is unlikely to happen, short of some sort of revolution.

9. As for OBJ, on oil, if that is your opinion fair enough. I don’t know the man personally or follow his career; my viewpoint is that most Nigerian officials and advocates are pushing the ‘we have oil but this doesn’t mean we are rich line’ and the 50 cent quote is one I have seen from several other sources. I think the FM made a similar statement she was last in London. This is what I thought OBJ was addressing given his audience. As for the so-called ‘psycho-culture’ of the African elite; I have had this argument with Abiola before. He seems to think like many others that there is something special and unique about the degraded personalities and political culture in their respective countries. This is his right and yours needless to say. Having seen several members of this political class up close both in Africa and in Asia I am not impressed with this argument. Venal, myopic and incompetent political class and elites; tend to be well, venal, myopic and incompetent. There really isn’t anything all that special about them or about corrupt, brutal and predatory elites as collections of individuals. Most developing countries like to believe that there is something different about their political class; some depravity or narrow-mindedness that doesn’t exist elsewhere and is hard to get to understand for outsiders. I have not found this to be the case; but others are free to differ.

10. As for the point about Nigerians and the benefits of debt relief; I accept your points but I differ from the conclusions. Apart from anything else you say that creditors were stupid to lend the money in the first place and to back military governments – why then should they not be penalised for their stupidity? As for the proceeds from debt relief; as I mentioned earlier there are some instruments, which I think can play a role. With the Global Fund, a debt-for-AIDS swap is a distinct possibility and it is the Fund NOT me which has rated Nigeria’s performance as good. Since the GFTAM isn’t in the pastime of throwing away money; something in Nigeria must be working. Whether it is NGOs, local citizens or whatever is beside the point; these are targets where the proceeds from debt relief could be targeted. The UNICEF model and debt-for-nature swaps are good proto-types for a potential debt-for-AIDS or debt-for-education swap to take place in Nigeria and other African countries. The gains might not be massive, they might not take effect for some time but they would be there. Given that the international financial system would hardly collapse if debt swaps and relief did take place I am at a loss to understand why creditors who pursued ‘stupid’ policies should be rewarded.


Finally, yeah the stories about Nigerian politicians, policemen etc. caught with their hands in the till are quite funny. I am not suggesting that the current regime is some paragon of virtue or spotless; and I do think as you point out ‘punishment of looters’ is a basic requirement before progress can be made. What I am suggesting is that how long exactly are you going to wait for this to happen? Because from past record and coming from a country that is rife with looters, this is going to take a long, long time. In meantime, I can’t believe that there isn’t some marginal efforts and instruments which can’t be used to improve matters. Of which some level of debt relief is a part.

Abiola Lapite

Conrad, let me be blunt:

"Statements such as ‘I lived for x years’ or ‘my cousin and uncles are still living in Nigeria so I must care more about the place than you’ or ‘worked for y numbers of years as a Wall Street banker and so can teach you a thing or two about debt finance” (not really an impressive proposition in my view since I have met several high-power financial bankers whose intelligence I wouldn’t rate) aren’t really arguments or replies to the points I raised."

1 - Who said I was replying to the points you raised? My point was precisely that I wouldn't bother to reply as I didn't have the time to spare wading through everything you wrote.

2 - Your statement about how you "have met several high-power financial bankers whose intelligence I wouldn’t rate" is both a total non-sequitur and also highly arrogant. You aren't some objective assessor of intelligence whose judgement should obviously be deferred to, and whether or not you rate some bankers' intelligence highly has no bearing whatsoever on the central point: that I have hands on expertise on this subject that you don't, expertise I was paid for putting to work, so I don't need to be lectured by you on debt financing. I'm sure there are tens of thousands of doctors whose intelligence doesn't rate compared to mine, but I wouldn't presume to lecture a single one of them on how to treat their patients.

3 - As for "my cousin and uncles are still living in Nigeria so I must care more about the place than you", like it or not, it's an obvious fact that I have a far greater personal stake in the country's prosperity than you do. In consequence, I find it deeply insulting for you to lecture me on how debt relief is starving the Nigerian government of the funds it could use to do all sorts of wonderful things for long-suffering Nigerians: it is patronizing (do you really think you're telling me anything about AIDS in Africa I didn't know long ago?) and smacks of self-satisfaction, in that it suggests that you have a greater concern for the welfare of ordinary Nigerians than I do - otherwise, why the overlong lecture on good things going undone for lack of funds?

"As for the so-called ‘psycho-culture’ of the African elite; I have had this argument with Abiola before. He seems to think like many others that there is something special and unique about the degraded personalities and political culture in their respective countries."

If there isn't, why are so many African countries poorer than they were at independence? Why is it that their leaders' private fortunes tend to be so much larger as a percentage of national GDP than elsewhere in the world? I actually bother to base my judgement of people and places on objective factual measures, and maybe if you did the same you'd know to refrain from yet more hubristic statements like "Having seen several members of this political class up close both in Africa and in Asia I am not impressed with this argument." Your personal impressions are just that, personal, and the facts about Africa's leaders say that your personal impressions are a terrible basis on which to assess the real world.

The bottom line is that the worst possible way for anyone to approach me expecting a measured, well-thought out response is to presume to be introducing me to revelations on matters I've either been studying for many years, have earned my living doing or have actually lived through, to do it in a style that oozes of moral superiority, and then to close with political balderdash about "indulging in overblown libertarian rhetoric" - which tells me that the person writing it is an ignorant left-wing blowhard who thinks the world revolves around his self-evident genius. The prosaic truth is that your arguments reveal very little knowledge of elementary economic concepts, let alone of the subtleties of development economics or comparative economic history, so you can't seriously expect me to be bowled over by them.

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