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Obasanjo in N/Assembly, Says Debt Relief Real

Posted by From Josephine Lohor, Kola Ologbondiyan and Donald Andoor in Abuja on 2005/07/27 | Views: 568 |

Obasanjo in N/Assembly, Says Debt Relief Real


President Olusegun Oba-sanjo yesterday chided those still doubting the debt relief granted the country by the Paris Club of Creditors and said that "the debt relief for Nigeria is real."

* Bill to regulate foreign loans underway •Nnamani: Terms must not hobble economic devt


President Olusegun Oba-sanjo yesterday chided those still doubting the debt relief granted the country by the Paris Club of Creditors and said that "the debt relief for Nigeria is real."

Obasanjo, while presenting the report of the National Political Reform Conference and a brief on the debt relief to a joint session of the National Assembly said "we are also working on a bill that would regulate the process of obtaining foreign loans by all levels of government. This will include pegging the interest on such loans to ensure concession".

But Senate President Ken Nnamani, who presided at the session held in the chamber of the House of Representatives, commended Obasanjo’s success at negotiating the debt relief and noted that "it is important that we sustain the momentum of negotiation and bargain hard to make sure that the terms of any debt relief do not hobble our economic development and stagnate measures to reduce poverty and improve human and social capital".

Obasanjo, who devoted 18 of the 24-page report to debt relief, explained that "such amount of write-off by the Paris Club in terms of procedure and sequence is unprecedented for a country that is not in chaos or that is not being rewarded for offering strategic military support."

Reeling out statistics to explain how the nation got into "the debt trap", Obasanjo who gave the details of "exponential explosion of our debt profile," recalled that the debt situation "was a mere $0.57billion in 1970. In fact, in 1979 when I voluntarily left office as military Head of State our total debt stock $3.2billion with over $5billion in foreign reserve.

"The debt stock rose to $18.5billion in 1985 and to $34.1billion in 1995. It came down to $30.99billion in 2002 and today, it stands at about $39.9billion due largely to interest, surcharges and penalties rather than increased borrowing. For instance, between 1992 and 2002 principal arrears on our national debt was $4.45billion; and late interest was $5.18billion. By the end of 2003, new arrears of $3.78billion was included in addition to principal arrears of $1.22billion, interest arrears of $2.4billion and late interest of $.2billion.

Revealing the events that led to the debt relief, Obasanjo recalled 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."
"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, sustenance 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.

"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 the opportunities for growth, development, harmony, and democratic sustenance. The consequent inability, violence, alienation from the state, insecurity and backwardness could precipitate conditions that would cost creditors much more than the debts in the future.

"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," among others.

"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.

"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 Exchequer, Gordon Brown went a long way to enrolling the support of other creditors.

"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 $6billion of the $30billion owed, following which there will be a stock reduction on Naples Terms while we 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 per cent on our current Paris Club debt. We shall pay off the 40 per cent balance through a buy back operation. The total write off is about $18billion which compares very favourably with the recent $40billion write off of debts for the 18 highly indebted and poor countries of the world by the Paris 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 year. We are taking advantage of a window of opportunity which the Paris Club of nations offered us," Obasanjo told the lawmakers amidst repeated ovations anchored by the Ministers who thronged the chamber.

The president noted that "of the total debt stock, the Federal Government owes 75 per cent and the States owe 25 per cent. Also, of this total, we owe 83.16 per cent 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."

Urging members of the National Assembly not to relent in their efforts at ensuring stability and peace in the nation, Obasanjo said, "one way of doing this is to ensure quick passage of bills that are before you or that are coming to you for consideration and enactment into law.

"The Fiscal Responsibility Bill, the Procurement Bill, Tax Reform Bill and other Bills associated with the reform agenda need to be in place to ensure that we move rapidly away from the past. We are reviewing the balance of the debts with a view to finding ways of settling them based on repayment terms. We are also working on a bill that would regulate the process of obtaining foreign loans by all levels of government. This will include pegging the interest on such loans to ensure concession."

But comic relief was introduced to Obasanjo’s presentation when a young public officer dragged a king-size Ghana-Must-Go bag into the chamber.
The officer’s action, which caused apprehensions among senators and House members alike caused rancorous musings thus forcing Obasanjo to halt his presentation and looked in the direction of the aisle as senators and the members shouted "Ghana-Must-Go;" "GMG".

The officer and a Sergeant-at-Arms however dipped their hands into the GMG and raised up copies of Obasanjo’s presentation up for everybody in the chamber to see amid laughter and banters.

Obasanjo paused and quickly remarked that, "I realised the apprehensions of House members and Senators when suddenly in a midst of a very serious matter like this, Ghana-Must-Go was dragged into the chamber.

"I crave your indulgence. The report of the National Political Reform Conference (NPRC) goes into about 30 volumes and I’ve asked for two sets and the complete or part goes into one big Ghana-Must-Go.

"They are supposed to have been brought here but I can’t carry it. If taken to the Senate President or House Speaker’s office, you know… It’s a good thing that it is brought here and it is also a good thing that you have shown apprehensions," Obasanjo said and continued reading the text of his address.

Earlier in his opening remarks, Senate President Nnamani said that "it is important that we sustain the momentum of negotiation and bargain hard to make sure that the terms of any debt relief do not hobble our economic development and stagnate measures to reduce poverty and improve human and social capital."

"We deserve substantial debt relief and we deserve it on terms that will allow Mr. President sustain the present economic reform. We encourage Mr. President and his team to work harder to thwart any conspiracy against debt relief for Nigeria," he said.

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