Much Ado About Debt Repayment

One of nation’s former economic managers has seized the opportunity of the current economic downturn to highlight her achievements, which somewhat implies that we could have been in a worse situation. I refer to the recent comments attributed to the Former Finance Minister Mrs Ngozi Okonjo-Iweala on the global financial crisis.

The former Minister was quoted in the media saying , the debt relief granted under the Obasanjo regime is one of the most critical things that is currently helping Nigeria’s economy in the current economic climate. She also noted that the debt relief has lifted a burden from the neck of Nigerians. I agree that the debt repayment has helped improve our foreign reserve, and credit-rating, which has consequently opened to doors for some form of foreign investment. I however find it hard to believe that it has made any iota of difference to the life of ordinary masses. We should probably be asking if the economy has ever been better in the 20 years.

I do have great respect and admiration for Mrs Okonjo-Iweala. As we may recall Mrs Okonjo-Iweala was the ‘architect’ of President Obasanjo economic reforms. ‘Due process’ was the flavour of the day during her tenure as Finance Minister. Recent probe of the energy sector however indicates that, adherence to the principle of ‘due process’ by the Obasanjo administration is still very much questionable. She masterminded the repayment of the nation’s debt owed to the Paris Club of Nations.This consequently brought down Nigeria’s total foreign debt from $35 billion to $5 billion.

There are no economic indices to suggest that an average Nigerian is in anyway better off than he was during the pre-debt relief period. The money could have been spent in developing the nation’s infrastructure. In fact there were rumours that appointment of Mrs Okonjo-Iweala was a conspiracy between the World Bank and nation’s creditors to facilitate the debt repayments Is there anything fundamentally wrong with being in debt? It is common knowledge that successful businesses thrive on availability of credit.

The wealth of a nation can only be measured by the quality of life of its citizens and not by how much it owes or does not owe in debts. And the ‘quality of life’ can only be improved through sustained infrastructure development. The US is a good example. Also, the ability to manage and service debts is the most important thing and not the debt itself. We should remember that Nigeria’s debt ballooned to $35 billion as a result of default payments and penalty charges. We did actually stop borrowing from the Paris Club since 1992.

This implies that if we have been able to service our debts regularly, we wouldn’t owe as much in the first place. Therefore, if the $12 billion paid to the Paris Club was invested in the nation’s infrastructure, it might have helped put our feet on the path of economy recovery, and thus make it less onerous to service the debt. Let’s not be deceived, the fact that a nation is debt free, does not make it anymore developed.

Good leadership, political stability, sound economic polices, with underlining infrastructure growth are the key to long term sustainable development. These key principles are however lacking in Nigeria. Our leaders have either forced themselves into power through military coups or fraudulent electoral processes. Our economy has been tarnished by years of political instability and institutionalised corruption. We run a non-diversified economy that is 90% dependent on crude oil. The recent announcement by the Nigeria National Petroleum Corporation (NNPC) that oil revenue has fallen from an average of N330 billion ($2.2 billion) recorded in 2008 to an average of N150 billion about ($1 billion) in January 2009, is therefore a major concern.

The government has not been able to develop any sound economic policy. They make rash economic decisions that are devoid of any rational thinking. When faced with challenges, the government prefers to bury its head in the sand, and pretend its all business as usual.

Unfortunately, we are now drifting into a nation of Oligarchs. The economy of the nation is now concentrated in the hands of very few individuals, who have profited immensely from the inefficiencies of the government. They have amassed so much wealth through investments in services that should ordinarily be provided by the state. This situation only reminds me of the Russian experience following the collapse of the Soviet Union.