Home Opinion Nigeria and the price of sovereign innumeracy

Nigeria and the price of sovereign innumeracy

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By Chidi Anselm Odinkalu

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“Dishonesty both in thought and deed were the prime bases of the Nigerian troubles.” Robert Collis, Nigeria in Conflict, p.187 (1970)

MOST people with a sense of smell in the political economy would easily know that Nigeria is in serious trouble but many don’t know how bad it is. In the past week, two voices who should know have piped up about how bad the situation is. Penultimate Governor of the Central Bank, Sanusi Lamido Sanusi, lamented on a visit to Abeokuta, Ogun State in South-West Nigeria last week that the country is in an “even deeper hole than we were in 2015” and is living in “extra-time”. His Deputy Governor at the Central Bank, Kingsley Moghalu, in a separate assessment, said Nigeria is sitting on “a time bomb waiting to explode.”

 In the same interview, Professor Moghalu explains that “what went wrong didn’t start with the Muhammadu Buhari presidency. It only got worse in the Buhari presidency, astronomically worse.” In a country founded on short memories, the story of how Nigeria got into its current funk will be lost on especially the young people most of whom have not been afforded the capacity to cultivate a memory or sense of the history of the country.

So, a short primer on Nigeria’s long descent into sovereign insolvency is useful, not merely because it should inform choices ahead of a consequential poll in 2023 but, even more, it should remind us how a country that cannot count harms itself.

Nigeria is a crisis of a country that cannot count and because it cannot count, refuses to account. The first crises of post-colonial Nigeria arose with the 1962/63 national census, the federal elections of 1964, and the elections in the old Western Region in 1965. Successively compromised by dis-honest counting, these three events ultimately preceded the descent into military rule, mass atrocity and war between 1966 and 1970. As Robert Collis observes in his Nigeria in Conflict: “This atmosphere was….the main reason for the two coups and the civil war.”

The end of the civil war was quickly followed by post-Arab-Israeli (Yom Kippur War) Oil Boom. Many may not remember but from “December 1970 and September 1973, official oil prices jumped from $1.21 to $2.90 per barrel, while spot values topped $5.00”, representing an increase of over 413%. Following the Arab-Israeli (Yom Kippur) War of October 1973, the posted price would further rise by another 387% by the end of 1973. The country was awash with money that it did not know how to count.

In two years, from 1973 to 1975, Nigeria’s trade surplus suddenly spiked by 400% “from $1.5 billion in 1973 to a record $6 billion.” Nigeria’s military Head of State then,  Yakubu Gowon, still in his 30s and the country’s first four-star Army General, infamously boasted that “Nigeria’s problem is not money, but how to spend it.” There was a national census in 1973 which, as Karl Maier recalls, proved to be “farcical; the results were never published.”

Intoxicated with liquidity hubris, the government of General Gowon initiated an ambitious public infrastructure project that required massive importation of cement whose quantity we didn’t care to know. Led by rulers who were un-schooled in the complicated mechanics of international commercial credits, the country received an inundation of useless sand imports that it had not ordered and did not need.

The government “which needed 2.9 million metric tons for its own projects, ordered more than 16 million. The sudden demand came at a cost: Nigeria was paying about $115 for a ton of cement, nearly three times the world price at the time. The cement came from just about everywhere…. An oversupply of overpriced cement became the least of the government’s problems as half the world’s supply of the building material diverted towards Nigeria, vastly outstripping the Port of Lagos’ capacity.”

In reality, much of the import turned out to be overpriced sand. It necessitated massive commitments in demurrage, lost maritime contracts and revenues, and the leasing of port space in neighbouring countries. Nigeria lost a lot of money (no one has ever computed how much) and those that ran the country appeared to lose whatever marbles they had. In one of history’s most expensive piques of martial fit, Nigeria’s then military government repudiated its payment obligations under the original commercial arrangements. Sued before courts in several European countries (including England, Germany, Switzerland and Austria), Nigeria unsuccessfully pleaded sovereign immunity in support of its attempt to repudiate the contracts.

It failed and, in so doing, changed international law on sovereign immunities. Armed with judgement debts that became due for payment together with accrued interest payments, various international creditors easily enforced their judgement debts against Nigeria’s assets overseas. By the turn of 1980, the country became unable, strictly speaking, to finance its foreign commitments.

As the English Court of Appeal put it with characteristic understatement in the most famous of these cases in 1977, this kind of mess could only have been caused by “some mis-management somewhere.” Rather than find out and fix the source of this obvious mismanagement, Nigeria’s leaders sought new frontiers for money without adjusting the way government business was conducted.

While the full import of this debacle was unfolding, the military turned over power to a civilian administration following elections in which the counting was characteristically “tainted by the sort of vote-rigging and intimidation that have marred all post-independence Nigerian polls.”

Faced with national bankruptcy, the civilian government of President Shehu Shagari declared “Austerity” in 1980. To ameliorate the resulting difficulties for working Nigerians, his Federal Government in 1981 established a task force, headed by then Transport Minister, Umaru Dikko, to import and distribute rice at subsidised prices to Nigerians. In today’s language, it would have been called “palliative”.

The quantities were undetermined. Cement Armada was now replaced by Rice Armada and a few more millionaires were made at the expense of the public interest. Import licensing for rice was in those days what the petroleum subsidy racketeering has become today.

In four years between 1979 and 1983, the country burnt a reputed four billion dollars on the Rice Armada and another $12 billion to sundry acts of official plunder. In those days, the Naira was stronger than the US Dollar.

Under the combined assault of these various difficulties, the Nigerian economy reportedly shrank at an annual average of two percentage points or a cumulative eight percentage points in the four-year period from 1979 to 1983.

The elections of 1983 were even more flawed than those of 1979. In a familiar reprise of our incapacity to count, the ruling party, the National Party of Nigeria, NPN, manufactured what it called a “landslide” characterised, as Karl Maier tells it “by rigging, violence, bribery, and wildly inflated voter turnouts.” Promising to put the country (and then President, Shehu Shagari) out of our collective miseries of leadership and institutional ineptitude, the military overthrew and replaced the civilian regime on December 31, 1983.

After the inconclusive interregnum of the innumerate Muhammadu Buhari, Ibrahim Babangida, another General, took over power in August 1985, with a promise to initiate dialogue with the Bretton Woods institutions to assist Nigeria with a facility of $2billion to alleviate its lingering balance of payments crisis.

In return, they required economic liberalisation. The fallacy was to assume that economic liberalisation could happen without political, institutional and ethical renewal of government and how it was constituted and run. To prolong himself in power, General Babangida contrived to corrupt politics and politicise corruption. In 1991, he made another unsuccessful attempt to conduct a national census.

Meanwhile, the General was unable to count or account for the enhanced earnings – windfall – that accrued to Nigeria from the spike in international oil prices that followed the first Gulf War between 1992-1993. A subsequent investigation led by the economist, Dr. Pius Okigbo, allegedly estimated that about $12 billion of these earnings were not accounted for, but the report remains officially not published.

In June 1993, when it seemed Nigeria had for once broken the curse of a people that could not count with an election that was widely viewed as credible, General Babangida inexplicably nullified the outcome. In the ensuing crisis, he was forced to “step aside” on August 27, 1993, whereupon he left the country in the hands of the hapless Ernest Shonekan, a lawyer and former Chief Executive of the United African Company, UAC, Nigeria PLC, then the biggest conglomerate in Nigeria.

The country had come full circle from its first contact with the British colonial expedition a little over a century earlier when, in 1886, the company started in 1879 by George Taubman Goldie as United African Company, UAC, received a Royal Charter to administer the Protectorate of Southern Nigeria.

Shonekan lasted all of 84 days, overthrown in November 1993 by General Sani Abacha, who, in under five years in power contrived to appropriate to himself an estimated 3-5% of the country’s GDP. No one has ever quite managed to put a firm figure on how much he actually stole but, according to the former Attorney-General of the Federation, Bola Ige, Abacha “and his collaborators are estimated to have embezzled assets of at least $5 billion.” The story was about to take off and Nigeria is still paying the price.

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