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Nigeria: Call for New Debt Deal Date distributed (ymd): 011121 Document reposted by APIC
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Region: West Africa Issue Areas: +economy/development+
SUMMARY CONTENTS:
This posting contains a press release and selected excerpts from a new report from Jubilee Plus (UK) entitled "Drops of Oil in a Sea of Poverty - the case for a new debt deal for Nigeria." The full report, in PDF format with tables, graphs, and other additional data, is available at: http://www.jubileeplus.org/analysis/reports/Nigeria.pdf
Despite its massive debt burden, Nigeria is not one of the countries included in the creditor initiative for debt reduction for Heavily Indebted Poor Countries (HIPC). It was excluded from the list of HIPC countries in 1998 on the grounds that it was a "blend" country eligible for non-concessional as well as concessional loans.
For additional background and sources on Africa's debt, see http://www.africapolicy.org/action/debt.htm
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Jubilee Plus Press Release
Drops of Oil in a Sea of Poverty - the case for a new debt deal for Nigeria
13 November 2001 Contact: Kwesi Owusu tel: 0207 089 2838 kowusu.jubilee@neweconomics.org
Jubilee Plus, Cinnamon House, 6-8 Cole Street, London SE1 4YH, UK tel: 0207 089 2865; fax: 0207 407 6473; e-mail: info.jubilee@neweconomics. org; web: http://www.jubileeplus.org
The demands of past debt on the democratic government of Nigeria is handicapping its capacity to resolve growing internal social and ethnic tensions, says Jubilee Plus, in a new report.
In a report to be issued on 16th November 2001 - "Drops of Oil in a Sea of Poverty - The case for a new debt deal for Nigeria" - Jubilee Plus notes that debt service payments of US$1.4 billion per annum is crippling Nigeria's capacity to confront critical socio - economic and political challenges. Nigeria ranks 151st out of 174 countries in the HDI poverty index but its creditors are still demanding 15 times in debt service what it is able to spend on poverty reduction. For Nigeria to meet poverty reduction targets set by the United Nations for the year 2015, it needs to spend about US$11 billion per year on social services - well above present levels and nearly double what we consider to be reasonable given the taxing capacity of its poor population.
The report notes that whilst Nigeria's oil revenues have provided welcome relief to the country's hard-pressed finances, they cannot be said to enrich Africa's most populous nation. "Revenues net of production costs and foreign company earnings are approximately US$11 billion, which for a population in excess of 111 million equates to net revenues of only US$100 per person, per annum or 27 cents a day" says Kwesi Owusu, head of Jubilee Plus' Africa programme and author of the report.
Nigeria's democratic government is carrying US$14 million of debt racked up by previous dictatorships and large amounts of Nigerian reserves are deposited in foreign banks as a result of capital flight. General Abacha alone stole and deposited US$4 billion in Western banks - in London, Washington, Frankfurt and Zurich. Oil companies such as Shell, Mobile, Texaco and Chevron also owe huge ecological debts to Nigeria as a result of the degradation of the Niger Delta, the main oil producing area, according to the report.
Jubilee Plus is proposing a new concordat between Nigeria and its creditors, based on an independent and transparent process overseen by civil society. "The essential elements of the deal must include a public agreement on what proportion of the outstanding debt must be immediately cancelled, what resources Nigeria should realistically devote to servicing the debt, what losses creditors should bear, including an equitable distribution of the costs amongst all creditors and arrangements to protect the environment" says Kwesi Owusu.
Notes for editors;
- The report "Drops of Oil in a Sea of Poverty - The case for a new debt deal for Nigeria" is available from http://www.Jubileeplus.og
- Nigeria is Africa biggest debtor and owes US$28.5 billion to its external creditors, according to the Debt Management Office (DMO), set up by the Nigerian government. The IMF puts the stock of debt at US$31.9 billion.
- Nigeria's GDP per capita is US$853 per capita compared to US$22,093 for the UK, US$26,251 for Canada , and US$24,575 for Australia. Maternal mortality is amongst the highest in the world, with 700 women dying out of every 100,000. 10% of infants die at birth.
- Nigeria's largest oil spill was an offshore well blowout in January 1980 when an estimated 200,000 barrels of oil (8.4 million) spewed into the Atlantic Ocean from a Texaco facility and destroyed 340 hectares of mangrove. Nigeria flares more gas than any other country in the world - about 75% of its total gas production, contributing a high percentage of the world's total emissions of greenhouse gases.
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Executive Summary
Jubilee Plus' exclusive report on Nigeria's foreign debt is submitted for publication as the death toll mounts in the plateau State capital of Jos, another tragic reminder of the incidences of sectarian violence that threaten Nigeria's young and fragile democracy.
Poverty is a significant root cause of the ethnic and religious conflicts in Nigeria, as the struggles over scarce resources intensify within local communities.
Nigeria is a very poor country with a GDP per capita of US$853 per person compared with US$24,575 for Australia, US$26,251 for Canada and US$22,093 for the UK. Yet it is forced to to divert US$1.7 billion of its meagre resources annually to rich western creditors as repayment for US$28.5 billion debts.
Nigeria's oil revenues have provided welcome relief to the country's hard pressed finances but they cannot be said to enrich Africa's most populous nation. Revenues net of production costs and foreign company earnings are approximately US$11 billion per annum, which for a population in excess of 111 million people equates to net revenues of only US$100 per person, per annum; or 27 cents per day.
Jubilee Plus has had exclusive access to data on Nigeria's debt. This leads us to conclude that:
A massive 65% of projects, accounting for 76% of the value of funds loaned to Nigeria in our survey have failed. These account for loans totalling $2.6bn, approximately 10% of Nigeria's outstanding debt value, or 20% of outstanding principle.
About 50% of the total debt (US$14 billion) can be attributed to the cost of Nigeria falling into arrears. These are 'phantom' debts, added to by creditors as punishment for non payment.
Oil companies such as Shell, Mobil, Texaco and Chevron owe huge ecological debts to Nigeria as a result of the degradation of the Niger Delta, the main oil producing area. Jubilee Plus is calling for an internationally led scientific study of the long term effects of oil pollution in Nigeria, as the basis for a fair and adequate assessment of compensation claims for ecological damage. Western consumers of Nigeria's high quality oil are heavily indebted to Nigerians.
US$5.6 billion of Nigeria's debts, approximately 40% of the outstanding principal of US$14 billion are the result of loans given to Nigeria's military dictators; often given knowing that the money would be siphoned off and deposited in British, Swiss and US banks.
Large amounts of Nigerian reserves are deposited in foreign banks as a result of capital flight. General Abacha, the infamous dictator stole and deposited US$4 billion in Western banks in London, Washington, Frankfurt and Zurich. His eldest son, Mohammed Abacha and his associates are also on trial for corruption and money laundering as part of a Swiss investigation.
Finally, Jubilee Plus is proposing a new concordat between Nigeria and its creditors, based on an independent and transparent process overseen by civil society. The concordat should recognise the great ecological debt owed to Nigeria, and the urgent need for a substantial and meaningful reduction of the country's odious and unpayable debts. The essential elements of the concordat must include a public agreement on what proportion of the outstanding debt must be immediately cancelled, what resources Nigeria should realistically devote to servicing the debt, what losses creditors should bear, including an equitable distribution of the costs amongst all creditors and arrangements to protect the poor and the environment.
Jubilee Plus proposes that the new concordat must be negotiated by the parties through an independent arbitrator committed to a fair and just resolution of Nigeria's debt crisis.
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Conclusion: Debtors Must Eat (African proverb)
This brief outline of Nigeria's debt, based on our exclusive survey of a sample of the debts, leads us to the following conclusions:
* Nigeria is a very poor country that needs a substantial and meaningful debt cancellation to strengthen its nascent democracy.
* Debt service payments of US$1.7 billion a year must be diverted towards poverty reduction, to ease the local and regional tensions that threaten the stability of the country.
*Nigeria is a key peace keeper within West Africa. It is vital for peace and security in the region that she continues to play this role.
Poverty is a significant root cause of the ethnic and religious conflicts in Nigeria.
* The large amounts of Nigerian reserves deposited in foreign banks as a result of embezzlement must be returned. Measures against looted wealth and capital flight in general must be supported by both creditor and debtor countries. Governments and the international banking community must agree on effective measures to recover monies obtained from debtor countries by theft or embezzlement.
* A full and proper audit of Nigeria's outstanding public debt, as currently being conducted by the Debt Management Office in Abuja is critical to effective debt management. We are hoping that the dispute over how much Nigeria owes to its creditors will be resolved when the DMO completes its reconciliation exercise. Failing that Nigeria must propose an independent arbitration on the lines supported by Kofi Annan, United Nations Secretary General and backed by the latest UNCTAD report, to resolve the dispute .
Nigeria needs a new concordat with its creditors, based on an independent and transparent process overseen by civil society. The concordat should recognise the great ecological debt owed to Nigeria, and the urgent need for a substantial and meaningful reduction in the country's debt service obligations. The essential elements of the concordat must include:
* What proportion of the outstanding debt must be cancelled.
On the basis of the evidence presented here;
a) US$5.6 billion of Nigeria's debts, approximately 40% of the outstanding principal of US$14 billion (the remaining US$14 billion are largely interest arrears and penalties) are the result of loans given to Nigeria's military dictators; often given knowing that the money would be siphoned off and deposited in British, Swiss and US banks.
b) About 50% of the total debt (US$14 billion) can be attributed to the cost of Nigeria falling into arrears ie these are 'phantom', added to by creditors as punishment for non payment.
c) A massive 65% of projects, accounting for 76% of the value of funds loaned to Nigeria in our survey have failed. This accounts for loans totalling $2.6bn, approximately 10% of Nigeria's outstanding debt value, or 20% of outstanding principal, as about 50% of current debt stock is interest arrears and penalties. 6 Projects appear fraudulent.
* What resources the debtor country should realistically devote to servicing the debt. Nigeria's foreign debt represents 75% of GDP or 186% of export earnings. These ratios are too high for Nigeria, a poor but highly strategic country in Africa.
Oil revenues have provided welcome relief to the country's hard pressed finances but they cannot be said to enrich Africa's most populous nation. Revenues net of production costs and foreign company earnings are approximately US$11 billion per annum, which for 111 million people equates to net revenues of only US$100 per person, per annum.
* What losses creditors should bear, including an equitable distribution of the costs amongst all creditors. We are also proposing an internationally led serious scientific study of the long term effects of oil pollution in Nigeria, as the basis for a fair and adequate assessment of compensation for ecological damage. Statistics from the Nigerian Department of Petroleum Resources indicate that between 1976 and 1996, a total of 4,835 incidents resulted in the spillage of at least 2,446,322 barrels (102.7million US gallons), of which an estimated 1,896,930 barrels (79.7 million US gallons; 77% were lost to the environment.25 Nigeria's largest spill was an offshore well blow-out in January 1980 when an estimated 200,000 barrels of oil (8.4million US gallons) spewed into the Atlantic Ocean from a Texaco facility and destroyed 340 hectares of mangrove.
* Arrangements that ensure Nigeria's access to the working capital required for the continuation of its operations. Nigeria's development partners have to recognise the different requirements of the country's highly capitalised oil industry and its social sector, which needs a certain level of 'soft' capital financing.
* Arrangements to protect the poor, including the exemption from debt service of certain social service expenditures, such as health and education.
* The new concordat must be negotiated through an independent arbitrator or body committed to a fair and just resolution of Nigeria's debt crisis.
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Ecological debt is owed to Nigeria.
Oil companies such as Shell, Mobil, Texaco and Chevron owe huge ecological debts to Nigeria as a result of the degradation of the Niger Delta, the main oil producing area. Environmental degradation in Nigeria is estimated at US$5.1 billion. A great proportion of this relates to the Niger Delta which has been severely damaged by oil pollution.
Statistics from the Nigerian Department of Petroleum Resources indicate that between 1976 and 1996, a total of 4,835 incidents resulted in the spillage of at least 2,446,322 barrels (102.7 million US gallons), of which an estimated 1,896,930 barrels (79.7 million US gallons; 77% were lost to the environment. Nigeria's largest spill was an offshore well-blow out in January 1980 when an estimated 200,000 barrels of oil (8.4million US gallons) spewed into the Atlantic Ocean from a Texaco facility and destroyed 340 hectares of mangrove.
The small size of the oilfields in the Niger Delta with its extensive network of pipelines between the fields, as well as numerous small networks of flowlines has severely compounded the rapid deteriorating ecology in a region inhabited by over 7 million people. It has brought brackish water into fresh water areas and the flooding of farmlands and rain forest areas. Together with the dredging of waterways by oil companies moving heavy equipment to various operational locations, there is now cause for serious concern. 'The Niger Delta is sinking' pleads Governor Alamieyeseigha of Bayelsa State. Significantly, Nigeria flares more gas than any other country in the world about 75% of its total gas production, contributing a high percentage of the world's total emissions of greenhouse gases.
By the end of February 1998, about 14,000 claims for compensation for oil related damage had been submitted from individuals and groups and communities to Nigerian courts, totalling an estimated US$100 million. Considering the extent of ecological damage, this is a gross underestimate of the potential claim. Jubilee Plus is calling for a serious internationally led scientific study of the long term effects of oil pollution in Nigeria as a basis for a fair and adequate assessment of compensation claims. These claims should be ruled by an independent arbitrator and set against creditor claims for debt servicing.
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Message-Id: <200111211402.JAA19722@server.africapolicy.org> From: "Africa Action" <apic@igc.org> Date: Wed, 21 Nov 2001 09:51:46 -0500 Subject: Nigeria: Call for New Debt Deal
Editor: Ali B. Ali-Dinar
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