I have just finished reading a 280 page book titled THE DEBT TRAP IN NIGERIA—Towards a Sustainable Debt Strategy. It was jointly written by Ngozi Okonjo-Iweala while she was Vice President and Corporate Secretary of the World Bank Group, Charles Chukwuma Soludo while he was Executive Director, African Institute For Applied Economics, University of Nigeria, Nsukka and Mr. Mansour Muktar while he was a Senior Economist with the Africa Region of the World Bank.
The book was a fall out of an international Conference to brainstorm the thorny issues of a sustainable debt strategy that is compatible with growth and development.
The Conference was held in Abuja between May 17 and 18 2001 and organised by the Debt Management Office (DMO) then under the leadership of Mr. Akin Arikawe from Igbotako in Ondo state in collaboration with the African Institute for Applied Economics(AIAF),Enugu, and with financial support by the U.K. Department for International Development(DFID), while the Crown Agents provided logistical support.
The Secretary to the Government of the Federation then, Chief Ufot Ekaette now ailing, also participated in the conference as well as Dr. Goke Adegoroye, who was then Director Special Duties in the office of the Secretary to the Government of the Federation and myself.
Others who attended the conference at that time were Mallam Nasir El-Rufai, who was then Director General Bureau For Public Enterprises, Chief Onyeama Ugochukwu, Dr Oby Ezekwesili, Mr Steve Oronsanye, the Principal Secretary to the President, President Olusegun Obasanjo and Vice- President Atiku Abubakar, the then Senate President, Pius Anyim, Theo Thomas and Paul Spray of the United Kingdom’s Department for International Development and others.
In the book, Dr. Okonjo-Iweala wrote” poverty in Nigeria is deep and pervasive, with about 70 percent of the population in absolute poverty. Infrastructure decay is significant, corruption is endemic, and institutions of governance, and accountability are grossly weakened. The new democratic government, therefore, has a monumental task of re-engineering the society, rebuilding basic infrastructure and institutions, fighting corruption, and most importantly, restructuring the economy for faster economic growth and poverty reduction.
She wrote further that “weak institutional/legal and administrative capacity to design and manage public resources is identified as central to the economic mismanagement and to the debt overhang problem itself. The situation is made more difficult in a decentralized revenue sharing environment where the state and local government structures and framework are even weaker than at the federal level.
Given the weak institutional capacity, and inefficient public sector, the absorptive capacity of the economy is itself a major problem. In essence, there is a mismatch between the need to pump in financial resources to tackle the myriads needs of the economy and society, and the institutional and administrative capacities to manage such resources to avoid waste.
Private sector and non-government channels, and should be more vigorously explored, while the public sector is being streamlined and strengthened. This points to massive capacity building efforts to enable the implementation of essential public sector roles”.
Other people who contributed to the book include Mr. Cyril Enweze, Vice President, African Development Bank, Mr Callisto Madavo, Vice President, Africa Region, The World Bank, S. Ibi Ajayi, Professor of Economics, University of Ibadan, Mr Graeme Wheeler, Vice President and Treasurer, The World Bank, Mike Obadan, Director-General, National Centre for Economic Management and Administration, Ibadan, Jeffery Sachis, Professor of Economics, Director, Centre for International Development, Harvard University,Paul Collier, Director,The World Bank, Matthew Martin,Director,Debt Relief International and Ann Pettifor, Coordinator,Jubilee 2000 plans.
It is believed that it was from the conference, that the powerful caucus called THE DREAM TEAM of President Obasanjo’s Kitchen Cabinet was born. The caucus was the most powerful body in the Second term of President Obasanjo. THE DREAM TEAM challenged the status quo and almost took over government completely if not for the bond between Chief Ekaette and the then Chief of Staff to the President, Major General Abdullahi Muhammed(rtd.).
In his submission, Professor Soludo declared in the book “with a per capita income level of US$300, Nigeria is one of the poorest countries in the world. Low capacity utilization of installed plant and equipment (around 30 percent for Nigeria) raises questions about the justification for new investment. In many countries, commercial banks are awash with excess liquidity, without much profitable investment outlet. At the heart of low absorptive capacity are issues related to the small size of the economies, availability of foreign exchange, risk and uncertainty, and mismanagement.
Evidently, poverty and inequality are deep and severe in Africa and Nigeria. But so are other challenges of underdevelopment.
The preceding argument would counsel against recourse to borrowing in the short to medium terms. Answers to two questions would help to make this position clearer. First, what happened to the nearly US$300 billion in oil revenues in the last three decades? We know that much of it was wasted and stolen, with the average Nigerian getting impoverished. What did we do with the various oil windfalls during the Shagari and Babangida regimes?
Second, what did Nigeria achieve with the billions of dollars it borrowed in the past? Not much either. For example, a survey of some 145 projects funded by US$14 billion revealed that about 18 of them never even got started, and yet the loans were fully drawn, and many others remained uncompleted, and of those that were completed, many were nonperforming.
So let us first of all work on efficiency. And make no mistake about it: Nigerians need democracy dividends very quickly. However, reckless borrowing and spending to satisfy short-term political interests but jeopardise the long-term economic interests of the poor is not the way to do it.
A key issue in addressing issues of efficiency of resource use will be research to understand the level and determinants of the economy’s absorptive capacity. We need to understand the size and structure of spending that can be undertaken without dislocating the macro balance.
Paradoxically, a major challenge during this period of oil boom is how to restrain the state institutions to manage them effectively. What Nigeria cannot afford is a repeat of the history of wasteful spending. Beyond the need to address issues of efficiency, a second reason for resisting any further borrowing is to signal the dawn of a new era. Nigeria suffers from a reputational problem, and government credibility is badly tarnished by past behavior. The hysterics of such past behavior lingers. The government needs to send a strong signal that it will no longer be business as usual”.
On May 29 2004, Professor Soludo was appointed the Governor of Central Bank. He served till May 28 2009. Dr Ngozi Okonjo-Iweala served as the Nigeria’s Minister of Finance from 2003 to 2006. She was reappointed in July 2011 and served till May 2015 making her the longest serving Minister of Finance in Nigeria to date. Equally, Mr Mansour Muktar became Minister of Finance between December 17 2008 till March 2010.
The three authors of the book served in three key finance portfolios in Nigeria.
The expectation was that if given the opportunity the authors would transform Nigerian Economy into Eldorado.
They served no doubt, but there was no change.