The actual amount stolen from Nigeria’s treasury between 1993 and 1998 by former military dictator, Sani Abacha, may never be known. Nonetheless, Amnesty International, for example, has suggested that over $5bn of Abacha’s loot had been identified, even when speculations still persist that the audacious ‘shop-lift’ by the late Head-of-State and his associates is probably close to $10bn. There is no concise record of the recovered loot, unfortunately. However, Nigeria’s treasury may have been boosted with the return of well over $3bn since former President Olusegun Obasanjo initiated the international pursuit of Abacha’s loot in September 1999.
Notably, Liechtenstein returned $227m in 2014, while Jersey reportedly released €149m by November 2003, with another tranche of €315m scheduled for December 2014; The Luxembourg authorities also announced that $630m was identified as part of the loot and frozen in eight bank accounts. Furthermore, the United States’ authorities had in August 2014 also announced the seizure and return of $480m to Nigeria. With Finance Minister, Kemi Adeosun’s confirmation, in April 11 2018, Switzerland will have fulfilled its pledge to return another $322m, in addition to the first tranche of $700m already confirmed as fully repatriated by December 2012.
The Swiss authorities were obviously unhappy with the ‘hazy manner’ the $700m loot, earlier repatriated, was spent. Consequently, the major pre-condition for drawing down the second tranche of $322m was that “it will be used to finance projects that will strengthen social security for the poorest sections of the Nigerian population”.
Already, there are grumblings that the choice of beneficiaries of the loot will ultimately be arbitrary, sectional or inequitable. Besides, the wasteful manner in which such funds were applied, in the past, to uncoordinated, freewheeling and populist interventions, will certainly not inspire much hope that the repatriation of another sum of $322m will have a meaningful or enduring social impact.
Furthermore, the process of repatriating the latest $322m Swiss loot may have, in fact, actually commenced in 2014 with the implicit pre-condition, according to a BBC December 5 2017 report, that “the money will be paid in installments, specifically to finance National social safety net projects, which have been agreed with the Nigerian Government and executed with regular audits under World Bank supervision.”
According to the Head of the Swiss delegation, Ambassador Roberto Balzarretti, in the BBC report on the Agreement with Nigeria said, “If the first installment is not properly accounted for, subsequent payments will be halted. This is to prevent the funds from being stolen again!” This means that, although the Nigerian Government appears to celebrate the reported return of the $322m, the modus operandi for disbursement was projected as payment in installments. Although in May 2014 the Swiss authorities actually indicated that a total of N380m would be returned by July 2018, just over $322m was confirmed as actual net inflow. The difference of about $60m may have been incurred as “repatriation and management fees” to both Nigerian and foreign lawyers and the agents, who supervised the process.
However, if the Abacha loot was, conversely and diligently applied to create critical education, health and transport infrastructure since 2003, social welfare would probably have improved. Regrettably, also, the looted funds had been impounded in foreign custody for possibly more than 20 years without even a kobo interest payment. Consequently, we may speculate that the Swiss and other International financial outfits, which harboured funds stolen from Nigeria, may have also circuitously become Nigeria’s creditors from our government’s forays into the International debt market to finance fiscal deficits.
The question, nonetheless, is whether or not the application of the repatriated loot has any enduring or meaningful social impact on the challenge of reducing the number of 87 million Nigerians who, according to a recent report from the Washington based, Brookings Institution, live in abject poverty.
Instructively, if the payments from the $322m Swiss loot have already been made between 2014 and 2018, then, once again, the social impact of such cash injections has clearly not been noticeable.
In essence, the agreement between the Swiss authorities and the Nigerian Government appears to have been rather predicated on the notion that occasional cash hand-outs to the poor would reduce poverty and provide social safety nets for almost 200 million Nigerians. Arguably, the surest social safety net against deepening poverty anywhere still remains an opportunity for gainful employment with a realistic income. Invariably, with deepening poverty
and a huge army of unemployed citizens, the repatriated Abacha loot may have failed so far to improve social security.
The failure of public expectation from such ‘charitable’ cash injections is because, as long as the underlying monetary indices in the economy remain counterproductive and out of gear, quantum increases to government expenditure will not automatically propel economic growth or reduce poverty. For example, the obtuse model of annually increasing government spending when inflation is already well above best practice and rates below three per cent will not reduce poverty. It is equally implicit that, since it is not rational for anyone to lend money below the prevailing rate of inflation, the cost of borrowing to local industrialists and businesses will predictably remain higher than the inflation rate and therefore, increase the cost of production and make local output uncompetitive against cheaper imports.
Furthermore, higher inflation rates, driven by excess naira supply, will inevitably reduce consumer demand and compel industrial and business contraction, with serious consequences for employment and national income. Regrettably, therefore, the re-injection of Abacha’s loot and other similar fiscal and extra budgetary cash interventions to purportedly alleviate poverty may have ‘also inadvertently’ expanded money supply to fuel double-digit inflationary rates. Instructively, best practice implies that you do not quench the fire of inflation by pumping more money into a market, which the monetary authorities themselves readily characterise as persistently challenged by a burden of excess naira supply.
Inexplicably, all administrations since 1999 have consistently projected annual fiscal deficits, which were usually funded by additional debt accumulation even when the accommodation of fortuitous cash interjections, such as the $322m Abacha loot, would have eliminated or possibly reduced the need to borrow at such oppressive rates for government debt.
Curiously, however, over the years the approval of the National Assembly was never sought, as constitutionally mandated, before such returned loot and indeed, other accruals from the ‘illegal contraption’ of the “Excess Crude Account” were shared without regard to reducing the fiscal deficit by the Federal Executive and state governors.
Nonetheless, it is deducible that the oppressive burden of surplus naira, spiraling inflation, dysfunctional economy and deepening mass poverty are clearly instigated by the Central Bank of Nigeria’s unusual direct substitution of naira allocations for all forex revenue, including repatriated loot, before sharing to the three tiers of government. Regrettably, the CBN’s sleight of hand goes unnoticed when it directly substitutes the naira, at its own unilaterally determined rate, for all foreign exchange denominated government income, including proceeds from crude oil sales.
Here is the crux of the matter; invariably, if the CBN’s creation of fresh naira values for distributable foreign exchange inevitably increases the naira liquidity surplus that drives inflation, it follows, therefore, that the higher the foreign receipts, the higher will be the challenge of naira surplus liquidity and a serious abiding inflationary threat.
Now the farcical part of this macabre drama is that the same CBN would, in response to the liquidity surfeit it created and the threat of an inflation spiral, step up and pay lenders, primarily money deposit banks, double-digit interest rates to borrow from them and sterilise the excess funds in order to reduce the systemic liquidity surplus and the inflationary threat, not minding that this will raise the cost of borrowing and domestic production and also, crowd out the expansion of the real sector.