Nigeria's new finance chief grapples with depressed oil market
Nigeria's new finance minister, Chu S. P. Okongwu, must be something of a bear for punishment. He took on the job early in February, soon after the price of oil began its dramatic plunge. If the price of oil remains where it is, the horrendous loss in government revenues promises to multiply the difficulties of managing the economy of Nigeria, Africa's most populous nation of some 100 million people.
``It is very troublesome,'' says Mr. Okongwu, an economist who received degrees from Boston University and the Massachusetts Institute of Technology across the Charles River in Cambridge.
Oil has accounted for roughly 24 percent of Nigeria's national output and some 80 percent of government revenues. Suddenly the value of that output has been halved.
This economic blow won't trouble so much the 75 percent of Nigerians who live in the country. Most of them are involved in relatively simple farming, usually growing their own food.
But for city dwellers, who are much more dependent on salaries or other money incomes, the loss of petroleum revenues promises hard times, indeed, a slump that could be far worse than the Great Depression in the United States.
``I wish I was finance minister in 1975,'' Mr. Okongwu said wistfully in a recent interview here. At that time, some 14 months after the Organization of Petroleum Exporting Countries had quadrupled the price of oil, petrodollars were pouring into Nigerian coffers.
Mr. Okongwu, who regards himself as a technocrat and not a politician, figures he would have wasted far less oil money than his predecessors. He notes how Saudi Arabia and Venezuela set aside billions of dollars in financial reserves. If Nigeria had done something similar, he says, ``we would be sitting pretty. But there's no use in crying over spilled milk.''
On New Year's eve, Okongwu's predecessor presented a budget regarded as extremely tough. It reflected the weakening of oil prices at that time. Since then oil prices have slid further.
``You can't fulfill the financial proportions in the budget,'' Okongwu says.
He works for Maj. Gen. Ibrahim Babangida, who took power last August in a bloodless coup. General Babangida and fellow officers overthrew Maj. Gen. Muhammadu Buhari, who ran a regime which was intolerant of criticism, abused human rights, and muzzled the press.
The new regime has freed the press to join in public debate. This has its democratic merits, of course. But it has also made it more difficult politically for the government to deal with its extreme economic problems, including servicing an external debt of around $20 billion. That sum is the equivalent of 16 percent of Nigeria's output of goods and services. It is a huge financial burden.
With oil prices down, the government will be forced to reschedule its foreign debt, that is, stretch out repayments of interest and principal. To negotiate a deal with Nigeria's major creditors, mainly foreign governments or their agencies, Nigeria needs an agreement with the International Monetary Fund (IMF) on some sort of austerity plan aimed at bringing Nigeria's international payments into better balance. In the eyes of IMF officials, tough as the New Year's budget was, it was not sufficient to manage the task.
The government knows that. But some needed measures, such as a further devaluation of the nation's currency, the naira, have become very sensitive. This issue has become a matter of national pride. The public regards the IMF as a villain, a major source of the nation's economic troubles, and, perhaps most important, an invader of national policy prerogatives.
More than any other military government in Nigeria's 25 years of independence, General Babangida's regime is subject to public pressure, observers say.
President Babangida announced the suspension of negotiations with the IMF in a public broadcast last December. He indicated that Nigeria would use only 30 percent of its export earnings to service its debts.
That 30 percent would have been barely adequate then. With oil revenues down further, it is insufficient.
Now the government is back in touch with the IMF and its sister institution, the World Bank. Finance Minister Okongwu hopes that despite the lack of an agreement with the IMF, the ``Paris Club,'' a Paris-based organization which conducts rescheduling negotiations for governmental creditors, will agree to negotiations.
``I am told that the Paris Club doesn't look favorably on the creation of a precedent [negotiations without an IMF agreement],'' says Mr. Okongwu.
``But I am hopeful that the Paris Club will get to understand that we are serious, that this is an urgent, exceptional situation.''
As proof of Nigeria's seriousness in tackling economic problems, he notes how the government is diverting far more resources to the nation's rural areas -- a shift long urged by the IMF and the World Bank. He talks of the drive to maintain capital assets -- buildings, plants, highways, etc. Critics have long commented on the widespread deterioration of Nigerian productive facilities.
In fact, he hints that at some point the Nigerian naira will be further devalued, a measure the IMF regards as essential to discourage imports and encourage exports, as well as knocking out much of the corruption that comes when an overvalued currency makes import licenses the ticket to wealth.
``A determination of the President will be made,'' he says. ``The naira will be allowed to find its true value. But the modalities, the extent, the timing -- they have to be determined.''
``We intend to pay our debts,'' he continues. ``However, we can't do so if we are strangled economically. If the point at issue is our sovereignty, then the Paris Club is out. The essential thing for us is to be responsible. One out of every four Africans is a Nigerian. I don't believe the Paris Club will deliberately allow such an economy as ours to go down. They should help us to revive.''
Will the Paris Club listen to this plea? The secretive group met Thursday on the question of Nigerian debts, but its conclusions, if any, have not been made known.