Obasanjo's Views on Debt and Governance: A Critical Response

The sad truth today is that there is a lot of ignorance in an age filled with information. Many people are educated, yet there is still a lot of illiteracy. We all need to speak up and repeat the facts, hoping they will start to make sense to those who seem lost. Today’s world brings new challenges. Economies are not what they used to be. We can't solve today’s problems with the same thinking that created them. These are my thoughts as I respond to the strong political comments made by former President Obasanjo. I call it political, even though it touches on an economic issue, Nigeria’s debt. The way he presented his views is so misleading that we must reject what he said and treat it as nonsense.

First, let’s look at today’s national economies. There is a race for development, and no country wants to lag behind, not even North Korea, the most isolated country. Every government aims to improve the lives of its citizens, build infrastructure, or at least leave a legacy. In this fast-paced development, nobody is waiting for anyone. What's more likely is that those who can will take advantage of those who are not careful about global politics. A few months ago, I wrote that the world has not invested enough in Africa, and that Africa, especially Nigeria, is not over-borrowed. I still believe that.

In today's economy, proper treasury management is crucial. This means using our resources and cash flows wisely to grow, provide better for our people, and acquire the infrastructure we need for the future. My article pointed out that smart nations, mostly in the West, have gathered real leverage and have become places we all rely on for education, health, tourism, technology, and more. I urged African nations to wake up!

It is surprising that Obasanjo would say what he did. I can only think this is because of his political support for Peter Obi, whom he likely wants to control, and his long-standing opposition to President Bola Tinubu, who has proven to be a strong leader with his own ideas.

Now, let’s look at the history of national debts. Why do countries borrow? Is borrowing necessary? What happens if they do or do not borrow? When faced with these questions, it is important to look back at our history to understand how we got here. Reacting to immediate events is a mindset for the unwise. Recently, I spoke to a group of secondary school students and noticed that we might be raising them to be angry because they lack a connection to Nigerian history.

For our children to care about Nigeria, they need to know its history. Who founded Nigeria? What is colonialism and slavery? Why were the northern and southern territories merged? Who fought for our independence? What caused the breakdown of political order? What triggered the first coup? Who were the key figures in Nigeria's First, Second, Third, and Fourth Republics? What legacies did they leave? How have we managed our diversity? These questions matter if we are to build our nation. We should not shy away from them.

When it comes to debt, understanding history is also important. Here are some facts from a simple online search:

• Ancient and Medieval Times: Rulers in places like Mesopotamia and Rome borrowed money for wars and public projects. They sometimes enacted forgiveness laws when debts became too much. In medieval Europe, tally sticks tracked royal debts.
• The 17th Century: The Dutch Republic changed state borrowing by issuing long-term public bonds to fund its independence war.
• The British national debt traces back to King William III, who got traders to invest in government debt, leading to the Bank of England.
• The Bank of England (1694): Britain made national debt a permanent, tradable financial tool instead of a sign of bankruptcy.
• Wartime Debt: Conflicts in the 18th and 19th centuries, like the Napoleonic Wars, drove debt levels high. British debt-to-GDP went over 200 percent after these wars.
• World Wars: Global wars pushed debt to historic highs. By the end of World War II in 1945, US and British debt-to-GDP ratios peaked around 240 percent.

From history, it is clear that nations borrow for specific projects. Initially, these projects were wars. The first national borrowing was for war efforts, whether in the Netherlands, England, or America. In China, emperors viewed borrowing for war as beneath their dignity, so they relied on fines and taxes instead. Another key reason for national debts is to secure the support of wealthy citizens in society.

When you lend money to a king for war, you ensure your survival. It can be argued that post-colonial nations like Nigeria didn’t have the chance to secure loyalty from wealthy citizens like others, as we quickly turned to borrowing from international lenders. But borrowing has become vital today. National economies must be managed like bank treasurers manage funds. The key principle is to avoid sitting on cash or failing to leverage it for growth, especially with population growth.

This does not mean borrowing carelessly. Nigeria’s debt-to-GDP ratio is just 35 percent, one of the lowest globally. A savvy financier might wonder if we have no need for money, no infrastructure to build, no people to care for, no children to educate, and no elderly to support. So, claiming that debts are worse than leprosy or bad for the economy is a dangerous misconception.

As we build infrastructure like the US did with its highways, adding $10 billion to our debt should not bring Obasanjo to claim that ‘debt is worse than leprosy’. This seems political; Obasanjo supports Peter Obi, whom he believes he can control, and who has yet to present any real plans for Nigeria.

We learned about the Debt Trap in economics before 2006. It was about how some African, Asian, and South American countries mismanaged debt, sometimes pressured by smarter lenders from the London and Paris Clubs. Nigeria was seen as capable of paying its debts and was made to pay $12 billion to write off $18 billion. Some Nigerians, including former Governor Tunde Fashola, felt we shouldn’t have agreed to such a costly deal. Notably, 33 African countries benefited from the G8’s Multilateral Debt Relief Initiative in 2006, which canceled debts for many poor nations.

After the oil shocks of the 1970s and the falling commodity prices of the 1980s, many low-income countries fell into unpayable debt to Western governments, the IMF, and the World Bank. To qualify for the HIPC Initiative, these nations had to show their debts were unsustainable. In Sub-Saharan Africa, this included countries like Benin, Burkina Faso, and Ghana. In Latin America, Bolivia, Haiti, and others qualified, and in Asia, Afghanistan received a full debt write-off.

By the end of Obasanjo’s presidency, Nigeria was back in debt. Domestic debt reached ₦2.05 trillion, while foreign debts were at $3.35 billion. At ₦124 to $1, Nigeria’s total debt hit $19.8 billion when President Yar’Adua took over. By May 29, 2011, Nigeria's debt rose to $45 billion, and by May 29, 2015, it reached $63.8 billion under President Buhari. Today, the Tinubu administration faces $113.42 billion in total debt, and the current figure is $123 billion. This shows that the claim that President Tinubu is overborrowing is false. His government borrows only when necessary. But with ambitious plans, funding is needed.

Like the US with its highways, adding $10 billion to debt should not prompt Obasanjo to say that ‘debt is worse than leprosy’. This seems political; Obasanjo supports Peter Obi, who he thinks he can control and who hasn’t proposed any real reforms for Nigeria.

Obasanjo’s statement is also hypocritical, given that he made a controversial deal with the World Bank, agreeing to pay back $12 billion. Obasanjo has contradicted himself, once friendly with Bretton Woods Institutions, now criticizing them. He said, ‘These brilliant boys package things well academically. They tell us what to do, and we accept it blindly, which harms us.’ He also noted that the World Bank and IMF were not created for us and that they were formed before our independence.

On the contrary, I believe that debt can build generations. Debt has indeed built many generations. Countries that matter today borrowed and used their resources wisely to reach their current status. The West has played small with Africa, and we are not here to be taken lightly. Recent partnerships with China have shown more promise for Africa and Nigeria, with visible results like roads and railways.

Finally, there is a video online where Obasanjo talks about a certain Mrs. Kruger from the World Bank/IMF, who wanted a grand welcome during his presidency. He shared how he would send her report to his Economic Adviser, Soludo, who rejected all their recommendations, and to Okonjo-Iweala, who supported them. He would blend both views for a middle ground, warning Soludo never to show opposition to these institutions. Obasanjo knows what he is doing, and he is playing politics. It is unfortunate, considering Nigeria's current state. I expected him to set aside his political differences and support Nigeria's progress, especially with new reforms that no president has successfully implemented before. Why is he trying to block Nigeria's progress with political games?