Nigeria’s 36 governors under the auspices of the Nigerian Governors Forum (NGF) are currently locked in a battle with the office of the Attorney General of the Federation (AGF) over the payment of a $418 million commission to some consultants.
The case is currently in court which is one of the arguments put forward by the NGF to the AGF for a stay of execution.
The genesis of this crisis could be traced to Nigeria’s external debt which ballooned in the 1980s from about $8 billion to $30 billion in 2005. Available data show that only $400 million was borrowed after 1985.
As of 1992, Nigeria had made $8 billion payments on this debt to the Paris Club of creditors. The increase in external debt, which was about $23 billion, accrued on the initial external loans through interest arrears, interest charged on these arrears, and penalties.
“Moreover, instead of applying Nigeria’s payments to post-1985 loans to make these performing loans (increase arithmetically), the creditors have applied the payments against arrears and penalties. Thus, the post-1985 loans continue to accrue their own interest and penalties without challenge from all the ministers of finance since 1985”, Victor Oguejiofor Okafor, a professor of African American Studies, Eastern Michigan University, said in his appraisal of Nigeria’s debt scourge.
The huge debt, accompanied with periodic payments for debt servicing, affected the government’s efforts at executing some developmental projects such as the much-needed infrastructure.
It should be recalled that during the time of the former president Olusegun Obasanjo, a process was initiated that led to the agreement with the Paris Club of Creditors to the effect that 60 percent of Nigeria’s debt or $18 billion, would be written off while the balance, $12 billion, would be paid by Nigeria one fell swoop to the creditors.
The period of negotiating with the Paris Club took a while and it was initiated by some concerned Nigerians who committed their resources to prosecute the case when most public officials were sceptical of the success of the legal initiative. The legal battle focused on over-deductions on external debts.
Seeing the progress being made, the state governments were convinced that positive results would come out of the legal battle, culminating in these public officials engaging more institutions and later signing agreements with the private law firms of the concerned legal practitioners to pay commissions to the consultants should they succeed. The commission amounted to $418 million.
How much was paid as refunds to states?
The repayment of the Paris Club refund spanned five years as it began in 2017. The first repayment to the 36 states was in early 2017 when N516 billion was paid back to the Nigerian sub-national governments. Also in late 2017, another tranche was paid amounting to N243.795 billion.
In 2018, the federal government paid $2.69 billion, which, at the prevailing exchange rate in that period, amounted to N523.5 billion. In 2019, the final tranche of the repayment which was N649.43 billion was made. In all, N2.233 trillion was repaid to the 36 sub-national governments from the Paris Club refund.
The controversy
The contentious $418 million is the commission that accrued to the private law firms that prosecuted the case to the logical end before Nigeria’s foreign creditors agreed to write off part of our debt and refunded the over deductions.
In November 2021, the Federal High Court Abuja advised the federal government not to proceed with the deduction of $418 million from the state governments’ accounts. The parties to the case included the Attorney-General of the Federation (AGF), Debt Management Office (DMO), Accountant General of the Federation and Ministry of Finance, the Central Bank of Nigeria (CBN), the Federation Account Allocation Committee (FAAC), as well as the Association of Local Government of Nigeria (ALGON).
But in a recent media chat with the public, the AGF said the governors’ ground for stopping the repayment was baseless as they had made part payment to the contractors before opting for out-of-court settlement.
“The governors felt the consultancy fee was too much and they wanted to stop it. Unfortunately, it is too late for them”, Musbau Lateef, a lecturer at the law school, the University of Hull, United Kingdom said.
Governments at the three tiers are currently facing liquidity squeeze. Debt servicing gulped N1.9 trillion in the first four months of 2022, which was N600 billion more than the N1.3 trillion revenues the Nigerian government generated in the same period. Consequently, both the federal government and the 36 sub-national governments are improvising to prevent the country from economic collapse.
Pressure is mounting on public officials as the rising inflation reduces the purchasing power of households and this is further worsened by the volatile exchange rate and high-interest regime which have increased the cost of borrowing for governments and businesses.
Source: norvanreports.com