Globalization And The Challenges Of National Development: The Case Of Post Debt Relief In Nigeria

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Globalization has become one concept that is riddled with contradictions and ambiguities. Amidst this uncertainty, it is clearly established that globalization is creating new threats to human security and development in rich and poor countries. It also poses a number of challenges, which Nigerian political scientists must address (Nnoli, 2003; Akin-Aina, 2004). Rather than strengthening the Nigerian economy, globalization seeks to weaken it. Nigeria enters the global market at a competitive disadvantage. It has a largely mono-product economy, weak currency, shrinking indigenous industrial base, mounting debt profile, corruption – infested political and economic climate, etc.

This unacceptable posture imposes on her systematic dispossession and exploitation of initiatives and resources. It squeezes her into a position of a highly indebted country begging for debt cancellation, which only comes with conditions that further aggravate its economic fragility and open it up for further debt accumulation. In its present condition, Nigeria seems to have no choice than to accept the dumping of several finished products in its market, thereby leading to the massive collapse of local industries and the surreptitious elevation of its economy to the position of a service economy.

BACKGROUND

Globalization, viewed as a force of inequality and marginalization, constitutes a dividing factor between the developed and developing countries. It seeks to concretize the view that despite the excitement generated by globalization as an invitation to a world that is increasingly interconnected and borderless, Nigeria (like other African countries) comes out as the worst victim. Whereas the country has been making enormous contributions to the global economy, it remains at the receiving end of the side effects rather than the gains of globalization – mounting debt profile, capital flight, the collapse of local industries, galloping inflation, weak currency, over-dependence on imported goods and services, mono-product economy, etc.

CONCEPTUAL AND THEORETICAL FRAMEWORK

The word globalization, though relatively new, is part of a historical continuum, which started some six centuries ago. Every discovery and advancement in the technological and scientific world has impacted on its evolution. The examples of the railway, marine transport technology, air technology, telegraph, e-mail and now internet facilities ensure faster and more efficient movement of goods and services. This development in western technologies opened up Africa and exposed it to the destructive impact of colonialism (Hagher, 2002). The colonialists came to Africa and put in place a system of government and trade that displaced the organized procedures and principles of the African people. Colonialism was accompanied by exploitation of human and material resources in an inexplicable magnitude.

Africa entered into the global village at a competitive disadvantage. Its products were traded without a bargain. The buyers fixed the prices for the supposed sellers. The period between 1870 and 1915 became known as the “Age of Empire”. This was a period when competition for the sphere of influence and colonial space was driven by the exploitative desires of the West, which was in dire need of raw materials and cheap labour. This underscored the great importance attached to colonialism and the deceptive acronym widely known as the civilianizing mission. The exploiters, already confronted with intellectual guilt, sought to rationalize their rape of African resources – human and material. They pretend that Africa needs a new form of government; the one that encourages liberal virtues enlivens debate, accommodates criticisms and promotes succession through the power of ballot rather than by ancestral means or by might.

After the Second World War, a renewal of globalization masked as internationalism came with the birth of the United Nations Organization (UNO). The UNO was designed to promote universal membership. While the major aim was to seek a just resolution to the

Second World War and seek to maintain World peace through collective effort, the colonies of Africa, including Nigeria, were never part of the deal but were simply integrated, in turn, at political independence. The UNO presented the world with the global village concept. It was designed to build a better world through basic fundamental issues such as tolerance, justice, the oneness and dignity of humanity.

GLOBALIZATION AND THE NIGERIAN ECONOMY

Nigeria, Africa’s most populous country, has an estimated population of 140 million people. The country emerged from the civil war of 1967 – 1970 with a devastated economy. A meaningful recovery process started with the advent of petroleum in the mid-1970s. The economy was basically agrarian. The relative share of agriculture, including livestock, forestry and fishing in the GDP, which was 65.6% in 1960/61 declined sharply to about 32% per annum in the 1990s. This is in spite of the fact that the sector still constitutes the source of employment and livelihood for about three-quarters of the population. Up till the early 1980s, Nigeria had a reasonable amount of foreign reserve with an insignificant record of foreign debt. Its currency, the Naira, was competing strongly with other foreign currencies. By mid-1980s, the economy started declining as foreign reserves became almost exhausted. Also, foreign debt started accumulating at an alarming rate while the Naira lost its value relative to other currencies.

The World Bank World Development Report indicated that the Country’s GDP in 1980 was US $91.13 billion, which puts it in the 20th position in terms of GDP size. From 1986 – 1987, the country was hit by the triple disaster of political instability, economic stagnation and the pursuance of an inappropriate and ill-fated Structural Adjustment Programme (SAP). This devalued the currency, assets and productive resources available for use and left the country’s economic managers with the problems of:

  • Correcting distortion affecting any of the four major prices – exchange rate, interest rate, domestic price level and wage rate.

  • Avoiding regression in employment and external balance.

  • Creating a market-based incentive and opportunity system as a way of improving the economy.

The level of industrialization and technology development is so low that it whittles the competitiveness of the economy in a globalized world. The foreign actors would have to give more and have little or nothing to receive since globalization is the channel of redistributing technology. This is to say that with the challenges of industrialization and technology development, the Nigerian economy is poised to encounter a herculean task effecting globalization transactions to Nigeria’s advantage.

The lack of zeal of the domestic corporate executives to undertake investment in the industrial sector exposes finance capital to the hazard of foreign invasion. This implies that foreign investors could take this advantage to expropriate the wealth of the nation. This hampers the strength of the Nigerian economy because capital is mobile and globalization is about interconnectedness and interdependence. The finance capital available in the economy is being moved at will to the economy of other states.

Evidently, globalization has brought about the domination of the Nigerian economy since its basic export is woven around raw materials. The raw materials provide the basis for production and further production; whereas export in Nigeria promotes economic diversification abroad, it restricts diversification in the domestic setting. The Nigerian economy is thus not competitive in the global trade circle.

DEBT SERVICING PROFILE AND ILLUSION OF GLOBALIZATION

Globalization is, at best, an illusion in view of the high indebtedness of the countries of the South. The debt-servicing scheme has virtually created a perpetual debtor in the less developed countries. Debt servicing has not the only dehydrated national economy; it stultifies growth and erodes the much-taunted gains of globalization. Using Nigeria as an example, it is no news that the servicing of the nation’s external debt had severely encroached on resources available for investment, growth as well as socio-economic development and poverty alleviation (Falegan, 1992).

Although since 1986, the nation had taken a decision to limit debt service to not more than 30 percent of oil receipts; this, however, has not brought much relief. For instance, the external debt overhang had an adversely affected inflow of foreign capital investment. From the debt service regime, it is apparent that any attempt to underestimate the crucial linkage between debt, growth, development and poverty reduction will create a distorted view of globalization and its side effects. Typically, as noted by Arikawe (2003), such a conflict of interest causes excess volatility in interest rates, as the Central Bank of Nigeria, CBN swings back and forth between holding down interest rates in order to borrow money as inexpensively as possible and raising interest rates in order to control inflation and defend the exchange rate of the naira.

THE $18 BILLION DEBT CANCELLATION DEAL

From a paltry debt stock of $1 billion in 1971, Nigeria had towards the end of 2005 incurred close to $40 billion debt with over $30 billion of the amount owed the Paris Club alone. Although Nigeria’s debt was more than the total of those of the 18 other poor countries (14 of them African countries) classified as Heavily Indebted Poor Countries (HIPCs), it had been a herculean task convincing the creditors that debt cancellation was the most desirable option. Prior to Nigeria’s $18 billion debt cancellation deal, these 18 other poor countries i.e. Benin Republic, Bolivia, Burkina-Faso, Ethiopia, Ghana, Guyana, Honduras, Madagascar, Mali, Mauritania, Mozambique, Nicaragua, Niger, Rwanda, Senegal, Tanzania, Uganda and Zambia had secured a 100 percent debt cancellation totaling $40 billion (Semenitari, 2005).

The Nigerian President, Olusegun Obasanjo, had waged a six-year war on debt cancellation. He had to hire an ex-World Bank official, Nigerian-born Ngozi Okonjo- Iweala as Finance Minister to prosecute the war. In their bid, they joined several other anti-poverty campaigners to argue that the debt relief is imperative. By so doing, the Group of 8 (G8) countries will be stopping 30,000 children from dying each day of hunger, lack of clean water and diseases (Christian Science Monitor as cited by Tell, 2005). The argument is that the poor countries of the world pay over $100 million dollars every day as interest alone on loan which kept pilling.

Before the debt cancellation deal, Nigeria was to pay a whopping $2.3 billion every year on debt servicing. This amounted to $32 billion between 1985 and 2001 alone (Ahmed, 1998). At the Gleneagles meeting, Britain’s campaign that something must be done about the debt burden worked. World leaders saw reason but tied debt forgiveness to good governance. President Bush, for instance, canvassed a partnership with Africa that is different from a relationship of “check-writer”. As Semenitari (2005) noted, Bush said,

We have got obligations and so do people we are trying to help”.

According to the Centre for Global Development (CGD), Nigeria’s actual borrowing in the 1970s was $2.1 billion. The monumental debt build-up was substantially due to highly controversial interest rates regime and penalties for not meeting attendant obligations. After intense negotiation, Nigeria was classified into the 60% debt forgiveness zone. The creditor nations felt Nigeria was not in the 100% zone of countries rated as extremely poor. Nigeria’s rich potentialities in natural resources and the oil deposit accounted for this feeling. Mrs.

Okonjo-Iweala collaborated with her former World Bank colleagues now working with the Centre for Global Development (especially Nancy Bedsol and Todd Morse) to ensure that Nigeria was able to borrow from both the concessional arm of the World Bank Group – the International Development Association (IDA) and the commercial arm – the IBRD. With the reclassification as an IDA – only – country, the proposal for 67% reduction was tabled. Nigeria’s perception as having worked hard in the last few years to enthrone sustainable economic development was then used to secure the debt relief.

The debt relief was simply put: pay $12 billion to buy back $18 billion and exit Paris Club. The details as provided by the Nigerian Finance Minister included the idea that paying back $18 billion for the next 23 years would no longer be required (see Semenitari, 2005b). Also, the $1 billion allocated to debt servicing annually can now be ploughed back to develop the critical sectors of the economy. It is noteworthy that paying the $30 billion over a period of 23 years would have amounted to paying a total sum of $50 billion in the final analysis. However, whichever options are taken, Nigeria would still have to pay about $5 billion owed another group of creditors – the London club.

THE POLITICS OF DEBT REDUCTION AND/OR FORGIVENESS

The $18 billion debt cancellation for Nigeria is good but the creditors would have done better. According to the Punch of 18th July 2005, “–to extract $12 billion immediately from a country with an annual budget of $14 billion is callous. Why would they be demanding so much from a country where children are dying, millions are not in school and hunger and disease pervade?” This testament of dubious debt relief or cancellation package espoused by Professor Jeffrey D. Sachs, Professor of Economics and Director of the Earth Institute at Colombia University captures the perfidious attempt of the Paris Club and other Bretton Wood institutions to weaken the Nigerian economy – an economy assessed to be of great potentialities but faced with debilitating economic policies surreptitiously packaged as contributions to getting a reprieve.

The history of Nigeria’s mounting debts can hardly be separated from its decades of misrule and the continued recklessness of its rulers. Nigeria’s debt stock in 1971 was $1 billion. By 1991, it had risen to $33.4 billion, and rather than decrease, it has been on the increase, particularly with the insurmountable regime of debt servicing and the insatiable desire of political leaders to obtain frivolous loans for the execution of dubious projects.

The Paris Club debt cancellation deal of 2005 was to the effect that poverty-stricken Nigeria would cough out $12 billion to buy its exit from a $30 billion debt trap. It can be deduced, and rightly too, that the creditor nations have come to realize that the debt profile of close to $40 billion had become not only unmanageable but un-payable despite Nigeria’s rich economic potentials. It was therefore logical to write-off a significant part contingent upon instant payment of the balance – a whopping $12 billion. It was also evident that with the meagre annual budgetary allocation of $1 billion to debt servicing, Nigeria would probably remain in the high debt profile zone forever and the interest rate regime would compound the crisis to an unmanageable proportion.

It would be recalled that shortly before the $18 billion cancellation deal, members of the Nigerian National Assembly had voted to advise the executive arm of government to discontinue payment or servicing of the debt. Although, this would have carried a severe penalty, the Paris Club sensing the danger ahead, and knowing fully well that the entire debt portfolio is nothing but the interests that have accrued over the years took the most sensible path for recovering the money. The fact is that after the $18 billion debt cancellation, Nigeria may soon return back to the group of highly indebted countries for some reasons:

  1. The political leaders are unable to resist the temptation not to borrow because of pecuniary interests. Many of the money borrowed never fully go into executing the projects for which they were meant.
  2. There is also no serious legal instrument to regulate external debt accumulation. Where one exists, as is currently being canvassed, it has always been very easy to circumvent it and borrow.
  3. The seeming magnanimity of the Paris Club and her western allies constitute a halfway measure. For instance, how can we understand partial debt cancellation that is not matched with unfettered access to the American economy and its products to western markets? Instead, what we have is restricted and guided access coupled with inconsequential aid regime.
  4. Many have argued and partly right too, that Africa’s woes can be dumped at the doorstep of misrule and corrupt leadership. But the corrupt leadership loot is kept in western banks. It is equally true that what has come to Africa in terms of aids is less than required. This explains the Tony Blair’s crusade at the last G8 summit where he canvassed for heavy debt pardon and other concessions. What Africa deserves is a “big bang” injection of aids and better trade conditions. African needs a platform or avenue to sell its grains, fruits and vegetables to the rest of the world. As Time Magazine observes, forgiving debt without opening up markets would be like sponsoring a sports team and then asking the players to take the field, with their hands tied behind their backs (Punch, 2005).

CASE AGAINST UNDUE OPENNESS

Even some advanced countries with the full potentials to reap from the globalization dividend are kicking against undue openness. Take for instance France; whereas French companies embrace globalization, its people denounce it. According to The Economist of 2nd July 2005: A sour mood of protectionism has taken hold since French voters said no to the European Union Constitution, on May 29 (2005). Politicians of all stripes, including Dominique de Villepin, the new prime minister, have been eagerly denouncing globalization.

The bone of contention is the impact of the lifting of tariffs on Chinese textiles at the beginning of 2005 and the flood of textile imports from China and the ensuing panic from European competitors. Beyond the textile, the case is a surge in trade of sorts. Chinese export to the EU has grown by an annual average of 23% over the last five years. Only 15 years ago, China was not even one of EU’s top ten trading partners. Now it is the second largest exporter to the EU and the third – largest importer from the EU. The EU trade deficit with China in 2004 stood at USD $98 billion.

It is noteworthy that France is both the World’s fifth – biggest economy and fifth biggest exporter – shipping out USD $560 billion of merchandise in 2004 alone. Whereas its politicians profess a fear of global capitalism, it is on record that French businessmen exploit same. For instance, French private sector boasts of world-class producers of cars (Renault, PSA, Peugeot, Citroen), Cosmetics (L’Oreal), Insurance (AXA) and Oil (Total). While Renault attained 43% rise in profit after tax for 2004, Total’s figure soared by 50%.

The question arises, if France profits so much from a globalized economy, why are its politicians feeling uncomfortable. The simple reason was the fear of unemployment. French politicians are working hard to resolve this before allowing full-blown openness.

The evidence of the negative impact of globalization on Nigeria are legion. Suffice to recall some of them below for emphasis;

  1. The controversial Structural Adjustment Programme (SAP), an economic policy designed to liberalize the Nigerian economy in the spirit of globalization has produced serious negative effects – including inflation, devaluation of currency etc. This has continued to create new threats to human development – the argument about its faulty implementation notwithstanding.

  2. Globalization provides an avenue for corrupt officials to loot the treasury of their countries. Many of Nigerian leaders, the most notorious being General Sani Abacha, have had to forfeit hard-earned foreign exchange to western banks and collaborators. Many of the loans secured for projects were repatriated abroad through money laundering. The African Union estimates that as much as $148 billion dollars yearly, or 25 percent of Africa’s official Gross National Product (GNP), is lost to corrupt activities.

  3. The collapse of local industries, especially in the textile and automobile industries. From statistics, it shows that about 150,000 job losses from 1989 – 1999. Textile materials – Ankara brocade and Lace – are now massively being smuggled through the porous border with Benin Republic and up North with Niger Republic. The domination of the car importation segment by the Vaswani brothers finally led to the collapse of the close to 20 automobile plants strewn across the country. Today, only Peugeot Automobile of Nigeria (PAN) is surviving with production cut from dozens of cars per day to about a dozen in a month. Such other auto firms like Steyr, Leyland, Mercedes-Benz-ANAMCO, Volkswagen, Nigeria Truck Manufacturing Company etc. have become history. Even tyre manufacturers like Michelin and Dunlop are facing stiff competition from imported tyres from Asia and South America.

  4. Cultural erosion. Today in Nigeria, Chinese cuisines are more popular than the local menu. The economy of Nigeria today could be said to be substantially in the hands of Lebanese, Indians, Koreans, Chinese, French people, Americans and Britons. In fact, the government recently closed down what is known as “Chinese village” – a place where contraband products are openly sold.

METHODOLOGY AND DATA ANALYSIS

In order to effectively study and analyze the effect of globalization and challenges of national development in Nigeria questionnaires were drafted to sample the views of individuals if poverty has been reduced with the debt relief. About seventy (70) questionnaires have been designed and used, randomly administrated to people living in Gwagwalada, the direct information retrieved will be presented in a table while the simple percentage method of data analysis was used to analyze the data.

TABLE 1.0

Description

Total

Percentage

Yes

18

25.7%

No

52

74.3%

Total

70

100%

Source: Field survey, 2012

From the table above, it could be deduced that the respondent disagreed to the fact that poverty has not been reduced over the years despite the debt cancellation with about 74.3% representing 52 respondents while 25.7% agreed that poverty has actually been reduced through the debt relief. Since those that went for “No” are more, therefore we can conclude that poverty has not been reduced even after the debt relief.

CONCLUSION AND RECOMMENDATION

Many have argued that what Nigeria needs is trade, not aid. This paper has established that Nigeria needs both. In addition to the two, Nigerian political leaders need to develop homegrown policies to enhance the country’s competitive advantage in the international market in this era of globalization. As noted by the editors of The Economist of July 2, 2005, ending poverty can hardly solely depend on the “generosity of strangers”. China’s first cautious turn to the market in 1978; India’s nod to entrepreneurship in 1982; Vietnam’s “doi moi” reforms of 1986; all homegrown policies allowed these countries to advance along the development ladder and tackle poverty by making more money than by receiving handouts. In essence, Nigeria needs a hand up and not a handout. Aids alone, it is said, makes the government be dependent on the paymasters in the countries of the West rather than on the taxpayers at home.

For Nigeria, conscious efforts must be made to secure total exit from all forms of commercial debts that exposes the country to another regime of debt overkill. Nigeria must also explore and develop more export products outside crude oil. The current effort at developing Cassava as a veritable export commodity is highly commendable. Nigeria must take full advantage of the US African Growth Opportunity Act (AGOA) by developing other products for export.

Furthermore, the proposal to establish the West African common market and currency must go beyond seeming lip service. The establishment of the Ministry of Solid Minerals, as well as the planned revolution in the agricultural sector, must be assessed on a schedule of the attainable plan of action rather than rhetoric. The anti-corruption war must be fought holistically and irreversibly. The slow movement in the ladder of corrupt nations by Transparency International must be seen to accelerate and this can only come with doggedness and commitment to reducing greed and graft in the public and private sectors. Political leaders must convince the populace that they exist to serve the people rather than prey on them.

Lastly, the establishment of the World Forum on globalization may add up to the avenues to redress the imbalances created by this inevitable phenomenon. It is suggested that for the challenges ahead, more people (intelligentsia, scholars and technocrats) from the countries of the south are needed. A step in this direction came with a recent appointment of a Nigerian – Reverend Father Matthew Hassan Kukah-into the forum. The Forum will have to look deeply into the multi-dimensionality of globalization and global governance in a way to ensure that certain unprotected economic sites including those of Nigeria and other countries of Africa are not retrenched. The Forum, as advertised, will have to seek to raise the quality of dialogue and further the commitment of the states of the world forum to transform conversations that matter into actions that make the difference. The Forum needs to meet more frequently as it has met only twice, the second being in Mexico from December 4 – 7, 2002. This will enable it to tackle very urgent issues such as true trade, social equity, the war on terrorism, education, sustainable civilization, etc.

REFERENCES

  • Ahmed A (1998) “Short and Medium Term Approaches and Measures to Solving Africa’s Debt Problems.” Paper delivered at the Financial Times Conference, London
  • Akin-Aina, T. (2004) “Globalization and Social Policy in Africa” (Darka: CODESRIA) P1.
  • Arikawe, A. (2003) The Guardian January 1
  • Falegan, S. B. (1992). “Nigeria’s External Burden”. Fountain Publishers, Ibadan.
  • Hagher, I. (2002). “Leading Africa Out of Chaos: A God-centered Approach to Leadership”. Spectrum Books, Ibadan. P28.
  • Nnoli, O. (2003). “Globalization and African Political Science” in African Journal of Political Science Vol. 8, No. 2. P11. December.. Punch, July 18, 2005. P 16.
  • Semenitari, I (2005). “The Road to debt Relief” in Tell No 29, July 18, P38.
  • Semenitari I (2005b). ‘It was all God’s Doing” in Tell No. 29, July 18, P47.
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About Enyiuche 88 Articles
A simple, honest youth who believes in change. Was born on the right day, in the right place and at the right time. Built and equipped with tools to serve mankind irrespective of culture, belief, race, language, and ethnicity.

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