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It is with great pleasure that I address you today on two issues: the Report of the National Political Reform Conference which has just completed its assignment, and the debt relief granted to Nigeria by the Paris Club of nations.
It is with great pleasure that I address you today on two issues: the Report of the National Political Reform Conference which has just completed its assignment, and the debt relief granted to Nigeria by the Paris Club of nations.
You will recall that when I inaugurated the Conference on February 21, 2005, about five months ago, I made it very clear that history was providing us with another opportunity to build new bridges of tolerance, accommodation, dialogue, patriotism, and unity while strengthening old fabrics of our association and relations in our country. I also pointed out that since we have put in place a comprehensive economic reform agenda, it was only natural that a political reform programme be initiated in order to have a holistic environment for repositioning our dear country for peace, security, stability, growth, development and sustainable democracy.
I had pointed out at the same time that the Conference was an opportunity for Nigerians to get together to discuss issues of national importance with a view to reaching some common ground in support of our political growth and development. Equally important, I mentioned that this Government had no hidden agenda beyond fostering the national good, promoting unity and harmony, and ensuring that we collectively discuss those issues that continue to mediate our path to unity, stability and progress. The conference, in sum, was meant to bring together Nigerians from all walks of life, irrespective of regional, ethnic, religious, age, gender or class divisions and differenciations to deliberate on all issues affecting the development and progress of Nigeria.
I am glad that in large measure, these objectives and more have been achieved. You will of course recall that I held consultations with the leadership of the National Assembly before I inaugurated the Conference. This was because I knew that whatever may be the essential recommendations of the Conference Report that would touch on the Constitution, amendment of existing laws or the making of new laws would have to come to you. This was also why I had strongly advised that members of the National Assembly should steer clear of the Conference since they would be receiving and considering the final Report.
I believe that the Conference has done its best. It has provided an opportunity for delegates to make new friends, exchange ideas, build new networks, share critical information on specific issues, discuss all issues including those that had hitherto been regarded as so-called no-go areas, and thereafter produce a final report. It is my opinion that no matter how we look at it, the Conference was a success. We in government were not naïve enough to have thought that there would be no disagreements, rigorous discussion and debate of national issues, and that there would be no political posturing and some grandstanding. Of course, the use of walkout in this age when the entire world is voting for negotiation, dialogue, give-and-take, consensus, and understanding is unfortunate.
I personally do not consider walkout a desirable element of democratic practice. I believe that many that were involved in such situations were being manipulated and misled by persons who had little understanding of the goals or purposes of the Conference and who might be mixing up the powers and functions of the Conference with those of the Legislature.
I am pleased that though the Conference has come to an end, it has generated and unleashed new discourses that will only deepen political awareness, strengthen political engagements, and enrich our political lexicon. I believe that it has also confirmed how much we need one another and that we should never take one another for granted.
New friendships and relationships have been fostered. Nigerians have learned to know Nigeria and other Nigerians better. Every participant must have learned something thereby improving and enhancing his or her knowledge and experience. We have shown to ourselves and to the outside world the strength and resilience of our democracy and that we can agree to disagree and agree in an atmosphere of harmony without bitterness, acrimony, trading of insults, issuing of threats, or intimidation.
What we may regard as non-negotiable today, may become easily negotiable tomorrow provided we remain on the path of democracy, dialogue, respect for one another, love, avoidance of arrogance, and commitment to the ideal of one united and indivisible nation. Democracy is a process, not a destination and we must remain committed to that process. We must be democratic in our thinking, our utterances, our organisations and systems and our actions. We must set our hearts and minds on one ideal only- the best for Nigeria.
I must stress the point, unpalatable as it may be, that the conference, was called for the good of our dear country; to promote unity, stability, security, progress, development and prosperity.
The excessive concentration on North or South rather than on Nigeria would probably have disappointed some patriotic and nationalistic Nigerians. I will like to console those who feel that way. Nigeria has come to stay and will surely outlive the backsliders who seem not to be able to work for the future but remain myopic, visionless, retrogressive and parochial. The truth is that Nigeria cannot be pulled down, we are, as a people moving forward, and we can only pray that agents of reaction and crises will realize that the country is greater than any of us and that unless we work for peace and progress today to assure the future, history and posterity will hold us accountable. Any part is less than the whole and if we care for and look after the interest of the whole, every part would be catered for. This is the simple reality and truth.
I see one commonality, one identity, one goal, one aspiration, one objective, one spirit, and that is Nigeria. Anything less, that is being propelled or perpetuated by any individual or group is unwholesome and a great disservice to our fatherland. For past, present, and future leaders to be so engaged is ungainly, diminishing and diabolical. However, the responsibility has now come to the National Assembly to move our quest for political unity, harmony, stability, and development forward.
I know of the existence of the National Assembly Joint Committee on the 1999 Constitution Review. I hasten to brief the National Assembly for you to see what part of the Report can be adopted, adapted or used to enhance your constitutional and legislative work. Whatever issues you consider of relevance that will enhance the Constitution; and whatever you consider relevant to existing or new legislation, I put the Report before you for your necessary consideration and action. Policy issues in the Report will be considered at the Executive level and appropriate action taken.
May I kindly request that you give this Report the urgent attention that it deserves. It is now my honour and pleasure to deliver the Report of the National Political Conference that sat in Abuja between February and July 2005 to the National Assembly.
Permit me to now move to the next item on which I wish to brief this august National Assembly. That is the issue of debt relief.
I am very pleased at this opportunity to brief you today on issues relating to our nation's debt profile, the contours and struggle for debt relief, the terms of the relief we were granted by the Paris Club, and the opportunities that this opens up for our dear country Nigeria. Let me start by thanking you, members of the National Assembly for your understanding, encouragement and support during the struggle for debt relief. It is the courage and vision that you exhibited in standing firm with the Executive that made it possible for us to carry out the arduous negotiations that resulted in this unprecedented relief for Nigeria. Let me say at this point that this pattern of cooperation and collaboration should not end here. We have more national and international challenges before us and only cooperation, commitment, mutual support and mutual respect can ensure victory for our ideas, initiatives and actions.
In this brief, in respect of debt relief, I will speak on the inherited debt overhang, the impact it had on our effort to grow and develop the economy, the struggle for debt relief, the results of this struggle, the benefits to our country and people, and the future. Of course, not all Nigerians know the truth, the importance or impact of debt relief, and the opportunities that it provides for our country.
But how did we get into the debt trap and what are the specifics? Let me refresh your minds as to the exponential explosion of our debt profile which was a mere US$0.57 billion in 1970. In fact, in 1979 when I voluntarily left office as military Head of State our total debt stock was US$3.2 billion with over US$5 billion in foreign reserve. The debt stock rose to US$18.5 billion in 1985 and to US$34.1 billion in 1995. It came down to US$30.99 billion in 2002 and today, it stands at about US$39.9 billion due largely to interest, surcharges and penalties rather than increased borrowing. For instance, between 1992 and 2000 principal arrears on our national debt was US$10.31 billion; interest arrears was US$4.45 billion; and late interest was US$5.18 billion. By the end of 2003, new arrears of US$ 3.78 billion was included in addition to principal arrears of US$1.22 billion, interest arrears of US$2.4 billion and late interest of US$.2 billion. It is obvious that even if we managed to pay the interest and charges alone, there was no way in which we could ever hope to pay the principal. This is why it is called the "debt trap."
Of the total debt stock, the Federal Government owes 75% and the States owe 25%. Also, of this total, we owe 83.16% to the Paris Club, while the balance is made up of multilateral and commercial debts.
I have always said that an individual or group could bring down a country easily but to rebuild could be an arduous task. This has been our experience. Those that ran up the huge national debt are indeed a minority but they had power and opportunity. They signed all sorts of agreements at outrageous interest rates; squandered loans obtained in the name of development; drew down on foreign loans without executing any jobs; and in other cases, stole or wasted such loans. To make matters worse for Nigeria, there was not one identifiable agency responsible for managing the debt, there was inadequate debt data recording system; poor information flow across agencies and levels of government, loan records were poorly kept; and not only did past governments pay little or no attention to debt management but the country also lacked a clearly defined debt strategy.
In addition, we must add political rascality, bad governance, bad leadership, abuse of office and power, criminal corruption, mismanagement and waste, misplaced priorities, fiscal indiscipline, weak control, monitoring and evaluation mechanisms, and a community that was openly tolerant of corruption and other underhand and extra legal methods of primitive accumulation.
Such criminal behaviour by the custodians of state power simply mortgaged the fortunes and future of our people and country. Unfortunately, today, we are all paying very dearly for the mistakes of the past and I believe that our current God-given opportunities and responsibilities enjoin us to ensure that it is not repeated. This is the only way to ensure that posterity and history will be kind to us. The distortions, decay and disarticulations that have undermined opportunities for stability, security, peace, growth, development and democracy in contemporary Nigeria are precipitates of past indiscipline, arrogance of power and misgovernance. Unfortunately, tendencies along these lines remain with us today and it is a challenge that we must all confront together. We must remain very alert and vigilant.
It is for the reasons of concerns, challenges and dangers posed by a huge debt profile that, after my success in the election of February 1999 and pending formal inauguration, I took the opportunity to travel to some important countries of the world to meet with their leaders in preparation for assumption of office. My main goals having been in prison for over three years were to re-establish contact with old friends, make new acquaintances, see at first hand, the state of development in the world, and get some commitments of support for Nigeria. I also wanted to send an early signal to the international community that Nigeria was now a different country with an in-coming government that was fully committed to the values of good governance, tolerance, inclusion, transparency, popular mobilization and participation, and democratic consolidation. As early as that time, I was already asking world leaders for debt relief for Nigeria in addition to wooing investors. The Executive made the argument, at that time, that some form of relief or forgiveness was necessary to enable us generate and deploy resources to developmental programmes.
We received some sympathy, cynicism, rejection, discouragement, tacit support, and in some quarters, at best a listening ear.
In all honesty, the general response was enough to discourage anyone. The reasons for the mixed bag of generally negative responses were the recent past of Nigeria that was characterised by wanton human rights abuses, bad leadership and mis-governance, corruption, the appropriation of the state and its use to perpetrate violence, and almost general ostracization in the global community. But we were not daunted. We adopted two strategies. The first was to make contact with the global community and educate them as to the emergence of a new leadership, our return to democracy, commitment to democratic practice, and the relationship between debt relief, sustainance of democracy, and local political effectiveness. Our second strategy was to carry out far-reaching and result-oriented reform programmes in Nigeria to support our global claims anchored on a vigorous and unrelenting campaign for relief.
In the course of speaking and meeting with world leaders and multilateral organizations, we left them in no doubt as to our resoluteness and commitment to obtaining debt relief. We were not defensive about the past and did not try to rationalise the mistakes of past leaders. We concentrated on our policies and programmes while making a case for the relationship between debt relief, peace, security, stability, growth, democracy and prosperity in a highly populated nation of an estimated 150 million people like Nigeria. In fact, we drew attention to our numerous Pan-African and international responsibilities on behalf of humanity at our own expense that needed to be acknowledged or rewarded. We made a case for our commitment to peace and security in the Niger Delta, the Gulf of Guinea through the Nigeria-driven Gulf of Guinea Commission, and in West Africa in particular which until recently remains the most unstable sub-region in Africa.
Our strategy was to be calm, confident, and through research and logic show the negative and unwholesome impact of debt and debt servicing obligations on quality of life, stability, peace, capability of government to deliver on public services, and democratic consolidation. We were able to demonstrate that debt repayments and debt servicing obligations take away funds from development and deepen the vulnerability of government. Relying on comparative data, we showed that no African nation can fully service, much less repay its debt. The consequence of such a development would be that the debt overhang negates opportunities for growth, development, harmony, and democratic sustainance. The consequent instability, violence, alienation from the state, insecurity, and backwardness could precipitate conditions that would cost the creditors much more than the debts in the future.
We also drew attention to support provided by the international community for other states with lesser than impressive reform programmes and political and security commitments like Nigeria. Our Team made sure that we explained in clear terms that our oil wealth not withstanding, on a per capita basis, it comes to less than 50 cents per Nigerian per day which makes us a poor country indeed.
Finally, we showed in very clear terms that monies saved from debt relief would at the federal level go to pro-people and pro-community development areas such as education, health care delivery, agriculture and food security and infrastructure such as roads, electricity, water supply and transportation. With our improved credit worthiness and image, there will be more private investment in Nigeria to provide employment for Nigerians, create wealth and reduce poverty. This would reduce crime, corruption, social decay and community dislocation. We gave commitment on fighting corruption and instituting a regime of transparency, accountability, openness and probity.
In the course of this campaign, we attended scores of meetings, workshops and conferences making a case for Africa and Nigeria. In the past two years, the Minister of Finance took every opportunity to campaign for debt relief with her colleagues, the 19 members of the Paris Club to whom we owe most of our debts and to other stakeholders. We equally took advantage of opportunities with the G8, the World Bank, IMF, and other bi-and multilateral organizations to make the case for debt relief for our country. I personally took this campaign to all possible fora and never minced words in making a good case for debt relief at the conferences of the World Food Programme (WFP), FAO, International Labour Organization (ILO), South Summit, Africa-Asia Summit, World Economic Forum, as well as at meetings with leaders of the United Kingdom, United States, France, Japan, India, China, Indonesia, Sweden, Norway, Finland, and The Netherlands, all in our effort to get a better deal on the debt issue.
I must confess that at some point it looked like we were fighting a lost battle. I know how many times my Honourable Minister of Finance wept for Nigeria. I recall the visit of a senior IMF official where we were told point blank that debt relief for Nigeria was more or less a pipe dream. In December 2000, Nigeria signed the Agreed Minute with the Paris Club thus paving the way for the signing of Bilateral Debt Rescheduling Agreement with each creditor country. With 19 members in the Paris Club you can imagine how strenuous this exercise was. It was completed in December 2004. At some point we were offered only 30% which we considered to be rather too small and too inadequate.
We had done our research and found that as far back as 1954, the London Conference had reduced Germany's debt stock by 50%. In more recent times, Iraq was offered close to 80% after the fall of Saddam Hussein, Poland's debt was cut in half and all interest written off; Yugoslavia was given a 66% debt reduction without conditionality; Russia was given a 50% debt reduction without conditionality; Kyrgyzstan got 50% reduction, and Pakistan, Afghanistan, and others in Eastern Europe received various percentages of debt relief without conditionality. Of course we knew that our case was different, our location and role in the global divisions of labour and power was different; our continent or sub-region was different, and our issues and place in the perceptions and calculations of strategic global players were also different.
We were confident that with hard work, consistency, and effective policy at home, we would change the minds of our creditors and obtain debt relief. Even when the House of Representatives came up with a Resolution calling on Government to stop servicing the debts and to declare a unilateral default, we were cautious. This was because while we appreciated the support and mood of the House of Representatives, we also knew that although the Resolution might have served some purpose, the international community was unimpressed and told us so. The international community also drew our attention to the fact that such a line of action would have been detrimental to the cause we had been pursuing. They reminded us of similar action by Argentina and the consequences. Hence, we stuck to appeals, meetings, dialogue, and demonstration of what we were achieving with our reform programme. This strategy began to yield results slowly. In fact, a delegation of the National Assembly that visited some key countries found that opinion had started to shift in favour of consideration of debt relief for Nigeria. We appreciate the efforts of the delegation.
At a point in time, we were offered 70% off our debt servicing rather than the debt stock and we rejected this because it would not significantly affect the debt level. But we also knew that with our reform programme that assisted us in obtaining IDA-only status from the World Bank as well as the completion of the Debt Sustainability Analysis (DSA) of Nigeria, the door would be open for us. The DSA, completed with the support of the IMF and World Bank, was to show in clear terms how Nigeria could never get out of the debt trap unless substantial debt relief was granted. In addition to this, the study showed that the Millennium Development Goals, designed to cut poverty in half by 2015 could never be achieved in Africa's most populous nation without debt relief.
Our home-grown reform programme, encapsulated in the National Economic Empowerment and Development Strategy (NEEDS), was monitored on a quarterly basis by the IMF, at the invitation of the government, in order to provide the global community with objective assessments and reports on how well we were doing and our positive ratings must have helped with the positive disposition of our creditors. Our commitment to good governance as well as our anti-corruption war showed positive results to the world and to our creditors in particular.
Negotiation with the G8 was the factor that finally opened the way. This was not an easy negotiation as the rules of the Paris Club operated in a way that required CONSENSUS among the 19 member-nations before debt relief could be granted. Given the traditional position of the Club that Nigeria was not a candidate for debt relief by any yardstick, we knew this was a gargantuan challenge that had to be overcome. That we are an oil producing country did not help matters especially in the context of rising oil prices and substantial improvements in our foreign reserve. But we were not deterred because we were convinced that a lot of policies and programmes were dependent on our obtaining debt relief. We also know that the debt issue is a political issue rather than an economic one.
The negotiations went on for months and, at times, at odd periods of the day and night including hundreds of phone calls and direct meetings. The understanding and support of our largest creditor, the United Kingdom, for our campaign for debt relief, in particular the strong and determined support of Prime Minister Tony Blair and the Chancellor of the Exchequer, Gordon Brown went a long way to enrolling the support of other creditors. In my recent trip to Europe, one of the Ministers we met did not hide her hostility to the idea of debt relief for Nigeria, based unfortunately, on old perceptions and stereotypes. But we had our arguments and at the end of the day, we succeeded in convincing the G8 that Nigeria deserved debt relief.
But the meeting of G8 Finance Ministers in early June of 2005 represented the breakthrough when in acknowledgement of the fundamental changes taking place in Nigeria, in support of our political and social reforms, in recognition of the courage with which we have fought corruption and economic indiscipline, and our commitment to fiscal prudence, they agreed to support a sustainable debt treatment for Nigeria within the framework of the Paris Club. The formal announcement of the decision to grant debt relief to Nigeria was made at the Paris Club meeting of June 29, 2005.
As I stated in my address to the nation on June 30, 2005, what we have now been given assurance to expect by the Paris Club is that Nigeria will clear its arrears of $6 billion of the $30 billion owed, following which there will be a stock reduction on Naples Terms while we will have to buy back the remainder. This will represent, for the first time, a total exit, if you like, total freedom from Paris Club debt.
The package in final terms that we are to expect would yield debt relief of about 60 percent on our current Paris Club debt.
We shall pay off the 40 percent balance through a buy back operation. The total write off is about $18 billion which compares very favourably with the recent $40 billion write off of debts for the 18 highly indebted and poor countries of the world by the developed nations. This, debt relief offered to us, I am pleased and proud to say, is the direct product of our relentless and persistent endeavour over the past six years. We are taking advantage of a window of opportunity which the Paris Club of nations offered us.