Debt Relief for Nigeria- the role of Ngozi Okonjo-Iweala
Ngozi Okonjo-Iweala is a ‘Distinguished Visiting Fellow’ of Center for Global Development (CGD).
Working with Nigeria’s minister of finance Ngozi Okonjo-Iweala (now a member of the CGD board of directors and distinguished visiting fellow), CGD played a vital role in reducing Nigeria’s debt stock by $30 billion. The Center spearheaded initial efforts to change Nigeria’s classification within the World Bank in 2005, making the country eligible for a Paris Club debt buyback. Todd Moss, who led CGD’s efforts, then proposed a “discounted buyback” within the Paris Club. The final deal was the first from the Paris Club to include this type.
“…the debt relief was also caused by one Nigerian woman (Ngozi Okonjo-Iweala).”
— IMF Managing Director Christine Lagarde
The spokesman of President Muhammadu Buhari’s re-election campaign, Festus Keyamo, and that of the Abubakar Atiku campaign, Segun Sowunmi, went head-to-head on Channels Television’s Sunrise Daily on Monday, to try explain to Nigerians why their respective principal is more qualified to lead the country come 2019.
Among the many claims made by Keyamo in trying to demarket Atiku, was that the Olusegun Obasanjo administration, in which Atiku served as the second in command, did not do anything special to merit Nigeria’s debt cancellation in 2006.
Keyamo implied that Nigeria could have had its debt cancelled anyway whether it took any stop or not.
“Let Nigerians not go away with the impression that there’s some kind of wizardry in negotiating debt forgiveness. It’s a lie. The G8 at that time took a policy to forgive debt in Africa. There was no wizardry on the part of Nigeria. 18 countries benefitted (from that policy),” Keyamo said.
And to buttress his ‘facts’, Keyamo invited Nigerians to google “G8 debt forgiveness 2004/2005” and see evidence that the debt forgiveness was an unmerited gift to Nigeria.
Kingsley OBIEJESI in his article ‘FACT CHECK: Keyamo’s claim that Nigeria’s debt cancellation came on a platter is false‘, wrote:
CLAIM 1: Countries that benefitted from the G8 debt cancellation
Contrary to Keyamo’s claims, Nigeria was NOT one of the countries that benefitted from the G8 debt cancellation initiative of June 2005 to which Keyamo alluded.
According to an International Monetary Fund factsheet, the idea, which was tagged the Initiative for Heavily Indebted Poor Countries (HIPC Initiative), was a collaboration between the IMF, the International Development Association (IDA) of the World Bank, and the African Development Fund (AfDF), to cancel 100 percent of the debt claims of “countries that had reached, or would eventually reach, the completion point—the stage at which a country becomes eligible for full and irrevocable debt relief”.
The countries that benefitted were 38 in all, and they were as follows: Afghanistan, Burkina Faso, Burundi, Central African Republic, Chad, Democratic Republic of Congo, Ethiopia, The Gambia, Ghana, Guinea-Bissau, Liberia, Madagascar, Malawi, Mali, Mozambique, Niger, Rwanda, São Tomé and Príncipe, Sierra Leone, Tanzania, Togo , Uganda, Benin, Bolivia, Cameroon, Comoros, Republic of Congo, Côte d’Ivoire, Guinea, Guyana, Haiti, Honduras, Mauritania, Nicaragua, Senegal, Zambia.
Also, Cambodia, Tajikistan, benefitted from the initiative even though they were non-HIPC countries, but they had a per capita income below $380 and outstanding debt to the IMF.
Keyamo was right that the G8 reached a decision to forgive indebted countries, but he was wrong that they were all African countries and that Nigeria was one of them. Only 14 of the countries are in Africa, and Nigeria was clearly not one of them.
CLAIM 2: Debt forgiveness came on a platter
The G8 debt cancellation did require some efforts or ‘wizardry’ as Keyamo put it on the part of benefitting countries. The IMF stated that there were requirements to be met before countries could have their debts forgiven them.
According to the IMF factsheet, “to qualify for debt relief, the IMF Executive Board also required that these countries be current on their obligations to the IMF and demonstrate satisfactory performance in macroeconomic policies, implementation of a poverty reduction strategy, and public expenditure management.
So Keyamo was also wrong on this claim. The countries that had their debts forgiven had to meet a set standard which only a handful of countries could meet.
There was some “wizardry” in Nigeria’s Paris Club debt release.
Negotiations continued after Nigeria missed out of the HIPC initiative. These negotiations culminated in the Paris Club writing off $18 billion or 60 per cent of the total $30 billion being owed it by Nigeria in October 2005. The group, at the time, also promised to raise the amount of the debt to be cancelled to $20 billion or 67 per cent.
Among other explanations that led to the partial debt cancellation, the Paris Club said the gesture was in recognition, as well as part of its contribution to Nigeria’s efforts at economic development, adding that “It would also help Nigeria in its fight against poverty”.
“Creditors welcomed Nigeria’s willingness to conclude a Policy Support Instrument (PSI) as soon as this new instrument is approved by the board of the IMF, to pay all its arrears towards Paris Club creditors and to treat them equitably,” a statement issued by the Paris Club read at the time.
To enjoy debt relief, Nigeria was considered alongside other poor countries because of its celebrated performance of the current reform.
Similarly, working with the World Bank and IMF, Nigeria successfully argued its case for the use of debt service funds for education, health, agriculture, water and power – areas which are related to the Millennium Development Goals (MDGs) and crucial to the well-being of Nigerians.
Obasanjo and Iweala used their international leverage to get debt reduction for Nigeria.
According to Centre for Global Development, before 2005, Nigeria did not qualify as an ‘IDA-only’ country within the World Bank—a prerequisite for debt relief.
“Obasanjo had in April 1999 after his election initiated a relentless campaign for debt relief for the country. The crusade gathered momentum as he went ahead to appoint an economic team led by Okonjo-Iweala to oversee the reform process. The implementation of the economic reform programme provided the anchor for government\’s renewed efforts to persuade the creditors to listen to Nigeria’s case for debt relief.
The Paris Club statement read: “The representatives of the Paris Club creditor countries met in Paris on June 29, 2005 and expressed their readiness, consistent with their national laws and regulations, to enter into negotiations with the Nigerian authorities in the months to come on a comprehensive debt treatment. They took note of the economic reform programme implemented by the Nigerian authorities since 2003 and of their willingness to take advantage of exceptional revenues in order to finance an exit treatment from the Paris Club.
“This announcement takes place after Nigeria has recently been declared eligible to International Development Association (IDA) only borrowing status and at a time when Nigeria has decided to renew closer relations with the international financial institutions. Creditors welcomed Nigeria’s willingness to conclude a policy support instrument (PSI) as soon as this new instrument is approved by the board of the IMF, to pay all its arrears towards Paris Club creditors and to treat them equitably. “
According to Advocacy International:
In the absence of any framework of justice for the resolution of international debt crises, the Nigerian government could only rely on the goodwill of powerful creditors. President Obasanjo and his formidable Finance Minister, Mrs Ngozi Okonjo-Iweala, then began a sustained campaign to persuade creditors to write off Nigeria’s debts. By this time the debt had become a major political issue inside Nigeria.
Keyamo’s claim that the 2005 debt pardon to Nigeria by the Paris Club required “no wizardry” is at best misleading, and at worst, FALSE.
The Obasanjo administration, under which the former Finance Minister, Okonjo-Iweala worked, worked hard to qualify for the debt cancellation.
This much was also acknowledged by former Minister of Environment, Amina Mohammed, who resigned from Buhari’s cabinet to take up the role of the United Nations Deputy Secretary-General.
While having a televised chat with the current Managing Director of the IMF, Christine Lagarde, Mohammed said, “One of the reasons that we succeeded with the debt relief that Nigeria got from the Paris creditors was because we had the MDGs (Millenium Development Goals)”. But Lagarde cuts in, “I would add something, it [the debt relief] was also caused by one Nigerian woman (Ngozi Okonjo-Iweala).”
“I was on the other side of the table for that negotiation,” Lagarde continued, “and she [Okonjo-Iweala] carried the water for Nigeria.”
Mohammed agreed with Lagarde, but added, regrettably, that though “It took her (Okonjo-Iweala) a few years to convince people, we are now back again [in debt] in my country”.
“This watershed deal was the result of months of tireless work by both Nigerian officials and the creditors. CGD is proud that its work contributed to this historic outcome. A September 2004 CGD working paper, Double-Standards, Debt Treatment, and World Bank Country Classification: The Case of Nigeria, argued for Nigeria’s reclassification as an ‘IDA-only’ country within the Bank—a prerequisite for debt relief. This overdue change in status, announced in June 2005, enabled Paris Club negotiations to begin in earnest.” – Center for Global Development (CGD).