“March 24, 2021
President Muhammadu Buhari, GCFR
President & Commander-In-Chief
Federal Republic of Nigeria
THE PARIS CLUB REFUND
PUTTING THE RECORDS STRAIGHT
Here is an extract from “The Punch” newspaper of July 12, 2020.
“Since 2005, I have been at the forefront of the campaign to exit Paris Club. The then-President Olusegun Obasanjo bought into the idea because we had overpaid and there were many questionable debts and projects that needed to be unravelled and stopped.
With the support of the Finance Minister at the time, Ngozi Okonjo-Iweala, we took the step to exit. But even at that point, the Federal Government’s figures were wrong, which meant that states and local governments were hugely indebted to loans that they didn’t take or that they had already paid off. And that was where my role became very important. How does one tell a state like Abia that had paid off its debts that it owed over $700m? It is either the records were deliberately not kept or they were intended to mislead people. Yet, their money was being used to service foreign debts.
Again, it was the listening ears of Obasanjo that made it possible to ensure the right things were done. He was the one that authorised my company along with the old Gongola state (now Adamawa and Taraba states) to be used as a test case with the support of the Ministry of Justice, Ministry of Finance, Debt Management Office, Accountant-General’s office and Central Bank of Nigeria. Of course, they realised we were saying the right thing and with that, refunds became mandated. Many ministries sat with us almost on a daily basis for three months and came up with the same conclusion, so it was a big revelation.
It was actually during President Buhari’s administration that refunds were made to the various states and local governments. Though it was President Obasanjo that began the process of reconciliation, the actual refunds were made in President Buhari’s government. So, we must also acknowledge the fact that if they (Buhari’s administration) didn’t want it to happen, it wouldn’t have happened. They agreed to refund over $5bn to states and LGs.”
It is the Consultants (from U.K. and the U.S.) who worked with us on these sensitive matters who are entirely baffled that regardless of our efforts and independent assessment of the issues, Nigeria was bamboozled. Some of the debts with which Nigeria was burdened and thereafter hoodwinked go back to the days of the “cement armada” scandal when our nation was nearly choked to death with imported cement which it would have taken us twenty-seven years to consume !!
Besides, two decades thereafter, the undersigned was part of the Port decongestion Committee which was mandated to physically examine the containers that had cluttered up our ports. Alas, some of the containers when opened yielded nothing but saw dust.
Tragically, the entire episode of Nigeria’s debts has been redolent with massive documentary frauds.
In the belief that we have a sacred responsibility to correct the false narrative, we are obliged to dig into our archives and retrieve our records of what actually transpired. The documents will be made available.
First and foremost, way back in 1993 when I was Chairman and Chief Executive of KPMG Nigeria, I was seated next to the Managing Director of Warburg Merchant Bank, Mr. McKenzie at a dinner in London. In the course of our conversation, he revealed that he would be retiring in a matter of weeks. However, he was somewhat in anguish over the fact that his bank had been appointed to manage Nigeria’s London and Paris Club debts but all his reports to the Nigerian government were ignored entirely. Nobody seemed to care. I assured him that upon my return to Lagos I would take up the matter with the Government.
Incidentally, at another dinner, the Chairman of Standard Bank, Lord Anthony Barber pulled me aside to inform me that his bank had a huge amount (about £100 million) which had been languishing with his bank in a deposit account for several years but nobody seemed interested in knowing what the money was doing in his bank or the terms thereof.
That was what prompted me on my return to Nigeria to alert the then Minister of Finance, Chief Anthony Ani about these developments. I also forwarded the documents which Mr. McKenzie had handed over to me. It was a huge mess and it was self-evident that dollar transactions had been jumbled up with pound (sterling) transactions and thereafter co-mingled with French Francs and Deutschmarks by the creditors. Besides, there were two worrying features – first and foremost, debts owed by the Nigerian Government and its agencies had been mixed up with private sector debts.
Secondly, interest (at compound interest !!) was being charged on accrued interest payments that were alleged to be in default.
It was against this background that the Minister of Finance set up a Committee consisting of Mr. Akinlose S. Arikawe and Mrs. Thelma A. Iremiren (who at various times were Permanent Secretary in the Ministry of Finance) and Mr. Stephen Oronsaye who was the Minister’s Special Assistant. They travelled all over the world, visiting the various creditors. Although I was not privy to their reports, I understand that they achieved considerable success in reconciling the debts.
As for the deposit lying fallow at Standard Bank, what became of it has always been a matter of speculation.
Anyway, I maintained a professional interest (as the Chairman & Chief Executive of KPMG Nigeria) in the trajectory of Nigeria’s escalating debts.
Perhaps, I should add that the facts were correctly stated by Aare Afe Babalola, SAN:
“The origin of Nigeria’s external debt dates back to 1958 when a loan of US$28 million was obtained from the World Bank. The funds, which were made available to the Nigerian Railway Corporation, were for a five-year tenor to improve Nigeria’s rail system and to build a new line into the North-eastern province for the purpose of expansion in production and trade. Later in 1964, the country obtained a loan of US$13.1 million from the Paris Club of Creditor Nations for the building of the Niger Dam. Subsequently, the much talked “jumbo loan” of $1 billion was obtained from the International Capital Market (ICM) in 1978, thereby setting the slippery slope of resort to huge foreign loans in motion and consequently changing the structure of Nigeria’s debts from mainly concessional loans to loans with harsher repayments terms.
Nigeria’s recourse to foreign loans first generated public outcry in 1985 when the then-military President, Ibrahim Babangida, obtained a $2.4 billion loan from the International Monetary Fund ‘to meet a critical balance of payments deficit’. Unfortunately, this trend has, till date, not abated with the external debt profile currently standing at N33 trillion as at March, 2020.”
At various stages during the regime of General Sani Abacha (1993 to 1998) my firm provided the government with reports which raised serious doubts about the authenticity of the debts. To make matters worse, our beloved country became a victim of its own naivety. We hired foreign consultants – Chase Manhattan Bank and others to reconcile our debts. These were the same creditors we allegedly owed huge sums !!
To make matters worse, the so-called reconciliation was merely the comparison/matching of the paper submitted by creditors with fake documents which had been fraudulently injected into the Central Bank of Nigeria’s computer system.
The nationals of a particular country took vast and notorious advantage of our nation’s reckless exposure to their advantage.
It is to the credit of General Abacha that he bluntly refused to honour the avalanche of dubious debts. He even publicly declared that the creditors should do their worst as he was ready to face any court anywhere in the world – be it the World Court or whatever.
What gave him the confidence was our report which tabulated what Nigeria had borrowed and what we had paid back. It showed clearly that we had actually overpaid our creditors !!
With that threat, the creditors were ready to grant huge discounts and concessions but following the death of General Abacha, they were back to their old game.
I would like to believe that the records of the discounts and concessions that were on offer would be available in the archives of the Ministry of Finance; the Central Bank of Nigeria and The Presidency.
While Chief Phillip Asiodu was the Secretary of Finance during the Interim Government which preceded the regime of General Sani Abacha, both the London Club and Paris Club debtors had indicated that they were willing to include Nigeria amongst the “HICs” [Highly Indebted Countries] which would qualify for the “Trinidad Terms”. Also available were “Toronto Terms” and the “Netherlands Initiative”.
To quote Francesco Abbate and Anh-Nga Tran-Nguyen (December 1992)
“In 1988, Paris Club creditors introduced the Toronto Terms, major policy advance in the rescheduling of the official bilateral debt owed by low-income countries. The implementation of the Toronto Terms has not, however, resulted in debt relief commensurate with the weak debt-servicing capacity of most low-income African countries.
Recognising the inadequacy of the Toronto measures, the governments of the United Kingdom and the Netherlands have recently put forward proposals for massive debt reduction. The U.K. proposal known as the Trinidad Terms, consists of reducing the stock of Paris Club debt by two-thirds and rescheduling the remaining one-third over twenty-five years, with interest payments capitalised during a five-year grace period; debt service would then grow as a function of the debtor’s export capacity. The Dutch proposal calls for full forgiveness of official bilateral debt owed by the least developed and other low-income countries facing severe debt problems, provided they are implementing sound economic policies.
The debt-service profiles resulting from the implementation of the Toronto and the Trinidad terms (the latter with two different rates of growth of debt-service payments, 5 percent and 8 percent) demonstrate that the debt-service reduction under the Trinidad terms is substantial. In fact, the Trinidad terms are concessional; the resulting grant element would amount to about 67 percent, while the combined grant element of the three Toronto options is only 20 percent.
Moreover, under the Toronto terms, debt-service obligations generally must be rescheduled repeatedly, sometimes every year (the assumption used in the chart). The resulting debt service would increase sharply from Year 9—reaching a level slightly below the debt service due in the absence of debt relief—and would peak in Year 14 at a level almost four times higher than the debt service under the Trinidad terms.”
In essence, some of us were somewhat blindsided (caught off-guard) when against the 67 per cent write-off which Nigeria had been negotiating in 2000, we settled for only 60 per cent write-off in 2005 and also handed over the U.S. $12 billion from our reserves.
I presume that the records are in the custody of The Presidency and/or The Ministry of Finance and the Central Bank of Nigeria.
Time and Space will not permit me to dwell on the events that followed the “DEBT FORGIVENESS” and the subsequent mismanagement (perhaps deliberate !!) and miscalculation of what was actually owed by the Federal Government and what was to be debited to the States. In the confusion that was inevitable, bogus refunds provided a bonanza for “consultants”.
A separate chapter would have to be reserved for the activities of Jeffery Schmidt and Robert Minton and their two companies – Predelit and Triolis which literally made a killing by buying Nigeria’s debt instruments on the secondary market and reselling them at a huge mark-up to the Nigerian government !!
I vividly recall my encounter with Mr. Naseem Goan who had purchased U.S. $1.5 billion of promissory notes (debts allegedly owed by the defunct Gongola State) and was willing to discount it heavily even if it meant buying cocoa, which had not even been harvested in Nigeria at crazy prices, to be exchanged/sold for dollars just to suck money out of Nigeria, regardless of the fact that even if you sold all the assets (including cattle, goats etc.), there was no way Gongola State could have accumulated such a massive debt not to talk of repaying.
Having witnessed all these, (and seeing the same mistakes being repeated) some of us are entitled to wonder whether the juice was worth the squeeze in lamentation (or nostalgia) over our VANISHING COUNTRY.
Separately, in the belief that it would be of interest to you, we are willing to provide you with our firm’s involvement with the tracing and subsequent recovery of the “ABACHA LOOT” for which we have not been rewarded with recognition or payment of our fees.
For: J.K. Randle Professional Services
Bashorun J.K. Randle, FCA; OFR
I am tempted to suggest that the Society of Women Accountants of Nigeria should come to the rescue of the Auditor-General of the Federation [AGF] who has been having a running battle with the National Assembly on one hand and with MDA [Ministries, Departments and Agencies].
Here is a random selection of the queries raised by the Auditor-General of the Federation.
“There are several anti-corruption policies, programmes and agencies in Nigeria. Some of the institutions established to combat corruption are the Nigeria Police, Code of Conduct Bureau and Tribunal, court, Independent Corrupt Practices and other related offences Commission, Economic and Financial Crimes Commission and Financial Action Task Force. Others include Nigeria Extractive Industry Transparency Initiative, Fiscal Responsibility Commission, Bureau of Public Procurement, Office of Attorney General and Minister for Justice, and the Accountant General and Auditor General of the Federation.
At the legal and policy levels, we have the following: Mutual Legal Assistance Treaty Agreements; extradition treaties for corrupt persons; electoral laws against vote-buying and selling; whistle-blower policy; and the Treasury Single Account. Using technology, Nigeria is fighting corruption with the Integrated Payroll and Personnel Information System and Bank Verification Number while there is also a campaign against vote-buying and selling as well as a media campaign against bribery and corruption.
The Auditor-General for the Federation, Adolphus Aghughu, last week, blew the whistle on corruption when he said that the Ministries, Departments and Agencies of the Federal Government failed to account for a total sum of N4.97tn in 2019. Aghughu said the MDAs failed to substantiate the sum after an audit of their financial statements. He made this known while laying the 2019 audit report to the National Assembly. While many of us might have heard of the office, many do not know precisely what it does or is meant to do.
In case you missed it, the Office of the Auditor-General for the Federation is a separate and independent entity whose existence, powers, duties and responsibilities are provided for under Section 85 of the Constitution of the Federal Republic of Nigeria 1999. Section 85(2) of the Constitution provides that the Public Accounts of the Federation and of all offices and courts of the federation shall be audited and reported on by the Auditor-General who shall submit his report to the National Assembly. And for that purpose, the Auditor-General or any person authorised by him in that regard shall have access to all the books, records, returns and other documents relating to those accounts.
Similarly, Section 85(4) of the Constitution stipulates that the Auditor-General shall have the power to conduct periodic checks on all government statutory corporations, commissions, authorities, agencies, including all persons and bodies established by an Act of the National Assembly. Furthermore, Section 301 vests the Auditor-General of the Federation with the power to audit the account of Area Councils in the Federal Capital Territory. Section 85(6) of the 1999 Constitution states that “in the exercise of his function under the Constitution, the Auditor-General shall not be subject to the direction or control of any other authority or person”.
In accordance to Section 85(5) of the 1999 Constitution, the Auditor-General shall, within 90 days of receipt of the Accountant General’s financial statement, submit his report to each House of the National Assembly (Senate and House of Representatives); and each House shall cause the report to be considered by a committee of the House of the National Assembly responsible for Public Accounts. The main function of the Public Accounts Committees is to review whether public money was spent or not for the approved purpose and with due regard to efficiency, economy and effectiveness. Much of its work is based on the Auditor-General’s report. The committees hold public sittings to review audit findings. These public sittings are usually attended by the Auditor-General and his team as well as the Accounting Officer (Permanent Secretary) of the audited ministry or office. The ministry or office is expected to defend itself on issue(s) reported on and explain what they have done in respect to the report.
Thus, what Aghughu went to do last Wednesday at the National Assembly is constitutionally backed. Reading the snippet of the 2019 report of the Auditor-General revealed that Nigeria is not indeed winning the war against corruption. According to him, “From the audit carried out on the 2019 Federal Government Consolidated Financial Statement, unsubstantiated balances amounting to N4.97tn were observed. The N4.97tn unsubstantiated balances are above the materiality level of N89.34bn set for the audit. In auditing, materiality means not just a quantified amount but also the effect that amount will have in various contexts.”
Just imagine what the N4.97tn can do in fixing the country’s infrastructural deficit. The Auditor-General also opened the book of lamentation and reeled out some of the challenges his office is facing. He groaned that his office lacked the capacity to function effectively and efficiently especially relating to the detection of mismanagement of public funds by the MDAs. Some of the challenges mentioned include the absence of a Federal Audit Service Law, which is a big challenge as far as effective and efficient public sector auditing are concerned. This is a law that is needed as a basis of fiscal sustainability. Another problem incapacitating optimal functionality of the Office of the Auditor-General of the Federation as far as thorough and appropriate auditing of financial statements of the MDAs is concerned is gross underfunding. The AGoF also mentioned office accommodation as part of the problems. According to him, staff members in the Lagos office are about to be evicted due to a series of litigation. There is also the problem of insecurity seriously affecting the office’s scope of coverage.
To be continued…