The Paris Club refund leaves Nigerians lamenting another FG engineered monumental scam



WED, AUGUST 23 2017-theG&BJournal-When theG&BJournal began making calls and emailing those who should know about the Paris Club debt refunds to the 36 state governments of the Federal Republic of Nigeria, there were no convincing answers to the questions we put forward and most didn’t even bother to respond.

Trying to understand the key questions raised around the source of funding the exercise and why the states should be benefitting from a fund that is clearly not an external inflow and not budgeted for, unfolded like a top-notch Corruption ingrained movie script. So, who wrote the cheque among the Paris Club members, all of whom have long closed their books or ledgers in relation to the Nigerian debt forgiveness deal?

Another question that arose was why is the Federal Government not benefitting from the Paris Club debt refund if it was an external inflow or why is the Federal Government providing information only about the receipts of States without informing on how much it received and how it is utilising the receipt.

A former presidential aide confided to theG&BJournal- “ the so-called Paris Club Debt refund is not an inflow of fund from any external body but simply the internal accounting settlement among the beneficiaries of the Federation Account following the utilisation of US$12 billion from the Federation Account to secure the Paris Club Debt forgiveness .

He said, ordinarily, the US$12 billion should have been distributed among the beneficiaries of the Federation Account and each one would then contribute to pay its own share of the external debt. Given that what each beneficiary would have received and what they owed differed from one beneficiary to another, some would end up in credit meaning that they are owed by those whose debts exceeded what would have accrued to them from the distribution.

“This was the internal account settlement that needed to be done. The FG for instance would have received 48.5% of the US$12 billion net of 13% derivation payment (US$5.06 billion) while it owed 75% of the debt settled amounting to US$9 billion. In this regard, the FG became liable to refund the States, the differential of about US$4 billion. That is probably why the question of refunding Paris Club debt to the FG did not arise”,   he said.

Could this be another monster corruption playing out, authored by the federal government looking for a way to bail-out failing state governments? And could it be the major reason the Federal government exceeded its borrowing limits in the first half of 2017? The most intriguing aspect of the Hollywood styled ‘’Corruption movie” script is that the Federal government who disbursed a total of N243.8 billion (US$799 million at official exchange rate of N305:US$1)to the 36 states of the federation and Abuja could not speak on how much it got.

Besides, conditions were attached to disbursements to States for salaries and pension payments only otherwise, no payment- an unprecedented irony given that the States were supposed to be receiving a refund of the money supposedly over-paid when they were repaying their loans to the Paris Club and should have the discretion to spend their fund in the way and manner they deemed fit and in accordance with the provisions of the 1999 Constitution.

Wait for this. Each of the 36 states hired a consultant to assist in determining and retrieving their ‘’monies”. These consultants, long since gone, received or were paid at least 30% of the refunds. It is unclear how the Consultants were procured given that we have Procurement Laws guiding such engagements and how their compensation was derived. Could it be the accounting expertise that they brought into the reconciliation process? If it is so, then clearly, the number of professionals deployed and total man-hours spent must be humongous to justify the size of the compensation which in the aggregate, exceeds the total combined annual earnings of the big five audit firms in the country.

BONIFACE CHIZEA, an Economist and Principal Consultant at BIC Consulting, provided an insight to some of the questions raised. According to him “The Paris Club refund cannot be budgeted for because it’s not something within your view. You don’t budget for a refund. It was the overpay of loan taken by the governors between 1995-2002 and even those benefiting from it presently were not there when the money was borrowed”

“The Paris Club Refund is not also in naira but in foreign currency, because the loan was repaid in their currency. Now, the refund is the excess paid by Nigeria’s Governors and the Paris Club in return, paid into Nigeria’s external reserve which the CBN controls and changed it to naira and disbursed to the state governors by the approval of the federal government.

Because we don’t spend hard currency, the money would have been paid directly to the states’ accounts. The process for the refund started with the engagement of consultant to reconcile the account with the Central Bank of Nigeria and Federal Government”, he said.

“During the negotiation of debt cancellation in 2006, states were not carried along so when the governors’ forum met, it was agreed that a consultant be engaged to reconcile the account and both the consultant and Federal Government have come to conclusion.”

This explanation was however debunked by a former Presidential Aide who participated in the reconciliation of the external debt balances of States in 2002. According to him, the loans were actually mostly taken by the various tiers of government with Federal Government sovereign guarantees from 1979. Years of default in servicing attracted huge penalties which were then consolidated to arrive at the US$30 billion owed by the Nigerian Federation to the Paris Club of Creditors as at the time of the debt exit negotiation in 2005.

The Paris Club of Creditors is “an informal group of creditor nations whose objective is to find workable solutions to payment problems faced by debtor nations. The Paris Club has 19 permanent members, including most of the western European and Scandinavian nations, the United States of America, the United Kingdom and Japan. The Paris Club stresses the informal nature of its existence and deems itself a “non-institution.” As an informal group, it has no official statutes and no formal inception date, although its first meeting with a debtor nation was in 1956, with Argentina.”

It is therefore obvious that there is no institution called Paris Club of Creditors that could have issued a cheque to Nigeria as claimed by Dr. Chizea. If the refund is actually the FG’s refund to States as part of the internal accounting settlement of the Paris Club debt negotiation, the FG ought to have budgeted for such an expenditure and the National assembly which carried out the legislative appropriation ought to know about it but inquiries at the National assembly drew a blank. So, is the Paris Club refund therefore an extra-budgetary expenditure of the FG? This seems more plausible because, the FG is yet to explain how it overdrew its whole year’s planned deficit as at half year as reported by the Central Bank of Nigeria. This is technically, a direct printing of Naira for the States with dire economic consequences for both the Naira exchange rate and inflation in the economy.

It is really amazing that for such a consequential economic matter, the FG is unwilling or unable to provide answers to nagging questions to Nigerians leaving one to conclude that the Paris Club debt refund is still an unfolding monumental scam and scandal.

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