Debt Relief, Loot Recovery and Constitutional
Reform in Nigeria
Testimony by Mobolaji E. Aluko, PhD, President, Nigerian Democratic
Movement (NDM) [Professor & Chair of Chemical Engineering, Howard
University] Before the US Congressional Subcommittee on Domestic and
International Monetary Policy, Committee on Banking and Financial
Services
May 25, 2000
Introduction
Mr. Chairman, Honorable Members of Congress on the Subcommittee on
Domestic and International Monetary Policy of the Committee on Banking
and Financial Services, ladies and gentlemen:
It gives me great pleasure and it is a privilege to testify before
you today on ways in which the United States and its other partners in
the international community might be able to assist Nigeria in creating
sustainable economic growth after so many wasted years under tyrannical
and unprogressive military rule. Due to the short time that I have, I
will be direct and state that those ways include as foremost (i) debt
relief, including outright cancellation; (ii) loot recovery from Western
banks and (iii) constitutional reform.
Debt Relief
During the period 1986 to this year 2000, the exchange rate between
the US dollar and the Nigerian Naira changed from US$ 1 equals about 2
Naira to $1 = 100 N. Furthermore, its internal debt increased from N36.5
billion in 1986 ($0.36 billion in today's dollars) to about N400 billion
($4 billion) today.
During this same period, Nigeria's external debt increased from $11.5
billion in 1986 to $33.2 billion in 1990, $33.4 billion in 1991 and then
fell to $29.5 billion in 1994. It rose to $32.6 billion in 1995.
Currently, it is placed at about $30 billion dollars, or about 70% of
its 1999 estimated Gross Domestic Product, and of which about $14
billion is payment on arrears. During this period it has, at an official
level, tried everything to manage the debt: debt rescheduling, debt
conversion, debt-buy back and curtailed new borrowing, yet it has seen
little or no relief. The strategy is just not working and cannot work.
For the US, the dollar figures quoted above are not large, but for
Nigeria, they are insurmountable, but go to accentuate the fact that
Nigeria with its monoculture of oil and its 120 million population, is a
poor country, even though it is oil-rich. In fact, the current 2000
National budget of Nigeria which the Executive and the legislature are
still haggling over is roughly N600 billion ( roughly $6 billion), which
is what the District of Columbia is budgeting to spend on its schools in
the coming year. But this Year 2000 budget means that 120 million
Nigerians will have to starve for about 5 years if it is to use up all
of its money to pay off its external debt if all interest payments were
to be frozen today.
What all of this means is that if Nigeria is to EVER hope to reap any
"economic dividend" which President Obasanjo so much harps upon and
improve the lives of its citizens, it is imperative that Nigeria be
granted a mixture of :
(i) IMMEDIATE stoppage on interest payments; (ii) OUTRIGHT
cancellation of a substantial portion of its debt; and (iii) An
institutional RE-DIRECTION of some portion of the debt under
international supervision to definite projects such as health (AIDS and
malaria), water provision and education within the country.
In general, these tally with the Jubilee 2000 recommendations for the
cancellation of debts of developing countries which are commended to
this sub-committee, with some modifications depending on each country.
As a keeper of my African brothers and sisters, I should not, must
not talk just about Nigeria alone without talking more generally about
Africa's debt burden as a whole owed by its governments to multilateral,
bilateral and commercial donors, which currently stands at about $350
billion. Of the 41 nations identified by the World Bank as Heavily
Indebted Poor Countries (HIPC), 33 are in Africa. The Cologne meeting of
the G-7 promised relief, and in 1999 the U.S. is to be commended for
taking the first steps to meet its obligations. However, the United
States must exercise greater political will and a serious commitment to
find the funds to make deep debt relief a reality, and must appropriate,
not just authorize, to raise the current level of funding in the foreign
operations bill from a paltry $75 million to the needed $435 million for
this year. The fact of the matter is that if the United States
government contributes its fair share to the international debt plan,
and you and your colleagues approve $810 million over the next 3 years,
this will encourage all creditors to do their part, and $90 billion in
debt can be written off for 33 of the world's poorest countries. This is
because due to US's leadership, every dollar that you contribute to the
HIPC trust fund will leverage more than $20 dollars from other
international creditors and regional development banks. More than 17
countries have already made a contribution and several others have made
pledges to the trust fund contingent on the U.S. contribution. They are
waiting for your action!
Loot Recovery
I am sure that at the back of the mind of everybody listening are the
questions: how did Nigeria incur these debts in the first instance, and
what has the country got in return? How can we ensure that debt relief
will not result into more bad behavior, if that was what cause all the
debt in the first instance?
Despite all of the debt, Nigeria remains an under-developed country
with very weak physical infrastructure and an outrageously low human
development index. Although a lot of money was spent on education,
particularly in mid-70s to early 80s, much of the money owed was spent
on conspicuous consumption and unproductive salary increases in the
public sector. However, more outrageously, for the overwhelming portion
of the debt, it is estimated that over the years US $98.8 billion is
stashed away by Nigerians in foreign banks, illegally acquired money by
its leaders, family members and cronies. During the Gulf Crisis of the
early 90s, about $12 billion of Nigeria's oil windfall went missing. In
five years alone (1993-1998) General Abacha and some members of his
family are now confirmed to have salted away as much as $5 billion in
Swiss, German, UK and American banks, among several other countries.
Abacha's son, currently on trial in Nigeria for other suspected crimes,
recently confessed to moving $700 million in cash from his home in Abuja
through several such banks, all on behalf of his father, no questions
asked.
It is mind-boggling. One wonders how these large sums of monies from
developing countries are moved between banks in Western countries
without eyebrows being raised, when within the US, for example, a bank
has to report to the US Reserve Bank if more than $9,999 is transferred
from a single account!
However, not all the loot was acquired by Nigerians alone. Some of
the schemes ostensibly used to reduce the debt, particularly the
debt-buy-back schemes, were in fact avenues for loot acquisition both by
Western individuals and banks in the West. In this respect, my
organization the NDM has recently passed onto the US State Department
and the Internal Revenue Service a thick document of dubious-looking
schemes from 1988 to 1993, involving US individuals and some otherwise
reputable banks involving as much as $6 billion dollars of Nigerian
bought-back debt - in promissory notes, government debts and
multilateral debts. This is detailed in the so-called "Fashanu Report"
after a UK-based Nigerian ex-soccer star named John Fashanu who has
taken it upon himself to expose some of the suspected funny financial
criminality and international sharp practices, and who has also been in
touch with British and Swiss government officials with the same
document. One does not know exactly how much of these monies in the
Fashanu Report were looted or laundered, but a close investigation of
the deal files might reveal the extent.
The Obasanjo civilian regime has made an anti-corruption crusade one
of its watchwords, and it must be encouraged by the United States in
that direction. It has, (together with the Abubakar military regime
before him) already reported recovery or freezing of some of the loot
(as much as $2 billion total so far), especially from and in Swiss
banks, some directly from the Nigerian crooks and their partners, but
there is greater need of multilateral cooperation with Nigeria and
relaxation of secrecy laws to speed these recoveries. None has been
reported from the US so far, but there must be some bodies buried here
as noted above.
If we can recover a substantial part of this loot, it can be used to
pay back some of our excruciating external debt. A multilateral approach
is clearly needed, because in this digital age, money is readily
transferred across capitals with the click of a mouse. If we can plug
the complicity of Western individuals and banks in the raping of
developing countries such as Nigeria, maybe the continent of Africa will
not be described as "hopeless" according to the recent alarmist
characterization by The Economist magazine.
Constitutional Reform
Nothing in the economic realm happens properly outside the law, and
the source, the well-spring of that law is the constitution of the
country.
During the years of military rule in Nigeria, government was run by
decree, by fiat. The various military governments suspended various
portions of the most recent constitution, and even those unsuspended
portions were followed only capriciously and in the breech. For years,
we had the oxymoron: "Federal Military Government of Nigeria." Each time
the military transited out of governance, we were left with a new
Constitution with a heavy stamp: "Made in the Barracks" without
citizens' ownership as can be obtained for example from a referendum.
Since May 29, 1999, Nigeria now once again runs a Civilian Federal
System of governance with separation of powers between the Executive,
the Legislature and the Judiciary similar to that of the United States.
However that is where the similarity ends. Whereas in the United States,
the original states sat together to form a union, and more states were
later formed as part of the union as additional territory was acquired
and populations grew, Nigeria's colonial legacy coupled with decades of
military rule has provided the country with an inverted false Federalism
which is difficult to manage, and which has become ossified in the most
recent 1999 Constitution. Parties are sanctioned by the state, not
through free association. Without ideological differences between the
parties, the electorate is left to choose, if at all, between
personalities, who then go on to cut private deals in parliament. The
quickest form of punishment in parliament for any infraction now seems
to be impeachment or threat of such, and there is a fundamental
confusion in the minds of legislature as to their role in law-making and
executive functions. Consultation by the Executive of the legislature
for advice-and-consent is perceived to be a necessary nuisance. The
Federal might is suffocative of state rights, which in turn are
suffocative of local government rights. There is too much power and too
much money in the center to the detriment of the states where the money
is derived. The weak physical and financial infrastructure makes it
virtually impossible to run such a relatively big country from some
central command, a familiar structure inherited from years of military
rule.
The constitutional requirement that will enable changes to occur is
onerous: 2/3 of the National Assembly and 2/3 of the State Assemblies.
In a country still riven with ethnic, religious and socio-economic
divisions, it is most unlikely changes that are necessary NOW will come
any time soon. Both the Executive and the Legislature recognize the need
for constitutional reform - each has been a victim in one way or the
other of the present 1999 Constitution, and are "learning" it as they go
along - but are pursuing parallel paths in engaging the nation in this
important task.
Demands for a national conference of nationalities and civil society
of some sort for settling of the National question as well as a
comprehensive root-and-branches reform of the Constitution are loud, but
are rather hastily and haughtily dismissed by the Executive and
legislative leadership - who feel threatened by such a device - as
recipes for disintegration of the country. One fears that by the time it
is recognized that a sovereign national conference - my preferred option
and recommendation to this body for consideration - is absolutely
necessary, that time might be too late.
The US and the international community has the obligation to nudge
all parties to a dialogue, so that UN hard-hats do not find their way to
Nigeria some day. As Nigeria goes, so goes West Africa. ...
