FINANCE MINISTERS NORMALLY lead unspectacular official lives.
The best stay in their jobs for many years, slowly and steadily
shoring up government finances and putting their countries on a
path to sustainable growth and prosperity. The worst,
meanwhile, have no regard for the long term, spend lavishly,
and have little control over government policy or the broader
|Okonjo-Iweala: Paris Club
will leave a lasting legacy
Ngozi Okonjo-Iweala falls into neither category. Rather,
she's that rarest of breeds: a spectacularly good finance
minister who has achieved an enormous amount very quickly. She
has led the economic team of president Olusegun Obasanjo only
since June 2003, but in that short time she has transformed
Nigeria's finances, successfully avoided the pitfalls of
windfall oil profits, installed an efficient and hard-working
group of highly educated technocrats to work for the Nigerian
government, and – above all – come to a
historic accord with the Paris Club of bilateral creditors to
buy back all of Nigeria's $31 billion in Paris Club debts at an
effective price of just 40 cents on the dollar.
What's more, Okonjo-Iweala has done all this in the face of
entrenched opposition in Nigeria, in a country plagued by
endemic corruption, and while living more than 8,000km away
from her family in Washington.
For Okonjo-Iweala is in many ways the product of an American
life, built, though, on a childhood full of lessons about
tenacity and survival. After teenage years at the heart of the
Nigerian civil war she arrived at Harvard in 1972 to take a
first degree in economics. She went on to a PhD from the
Massachusetts Institute of Technology, then straight into a
21-year career at the World Bank. By 2002 she had risen to
become vice-president and corporate secretary for the World
Bank Group as a whole, liaising between the board of governors
and all of the Bank's disparate units.
Along the way she also served as economic adviser to
president Obasanjo in 2000. When he was re-elected in 2003, he
decided he needed her as finance minister. He was smart enough
not to ask her directly: he got her boss, James Wolfensohn, to
pop the question.
Okonjo-Iweala struck a hard bargain. She would have to be
head of the entire economic team: there would be no undermining
of her position from elsewhere in the government. And she stuck
to her guns: after the president removed the budget and
planning departments from her control, she resigned until he
changed his mind.
Okonjo-Iweala also negotiated a $240,000 salary –
800 times Nigeria's per capita gross national income –
which is paid for by the UN. Such a salary allows her to stay
clear of suspicions of using her post for her own gains,
rumours of corruption having tainted some of her predecessors.
Her salary has, however, been an easy target for her many
opponents in Nigeria.
For Okonjo-Iweala has attacked her portfolio fearlessly,
making enemies especially as a result of her anti-corruption
drive. The former inspector general of police, Tafa Balogun,
was arrested and charged on 70 counts of corruption, while two
cabinet ministers have been fired. Okonjo-Iweala helped to
create the Economic and Financial Crimes Commission, which is
charged with fighting corruption systematically, from low-level
so-called 419 scammers (the emails offering millions of dollars
for helping move money out of Nigeria) all the way up to the
highest levels of government.
Okonjo-Iweala's most publicized achievement, however, is
Nigeria's agreement with the Paris Club. The seeds of the
agreement were laid shortly after Obasanjo was first elected.
He did the rounds of world leaders, trying to get them to agree
to debt relief for his country, for all of his first term. What
he was looking for was Naples terms on Nigeria's debt
– a 67% debt reduction, justified by a very low GDP
per capita ($300) and very large debt burden.
"When it first started, we were looking for a conventional
Naples deal and had been getting no traction," recalls
Okonjo-Iweala. "The president had been trying for years. So
when he hired me as finance minister, I said we would need an
economic team to really get right the things that were not
going right in the economy."
The political arguments for debt relief were not going to
change – that Nigeria was Africa's most populous
country, that the millennium development goals would never be
reached without debt relief, that Nigeria was an important
source of geopolitical stability in Africa, and so on. But the
country had suffered so much economic mismanagement over the
years that its biggest creditors – the UK, France, and
Germany – weren't convinced that debt relief, in the
absence of economic reforms, would do any good.
So Okonjo-Iweala's strategy changed. When she first met the
G8 finance ministers in 2003, she didn't ask for any debt
relief at all. Rather, she spelled out her economic policies,
and told the assembled creditors that if and when she could
show that those policies were working, then she'd ask for debt
relief. "We would ask for relief because we had done the right
things," she says.
The main plank of Okonjo-Iweala's policy is the National
Economic Empowerment and Development Strategy, or Needs. She
calls it "a very well defined structural reform programme" that
is designed to provide macroeconomic stability through a
combination of non-oil GDP growth, disinflation, management of
foreign reserves, fiscal discipline and budget transparency at
both the federal and state levels.
She says that simply publishing the amount of money that
each state of the federation gets every month "has been a
revolution". Now, she says, "people ask what is happening to
their money at the local government level" and demand
But "the single biggest achievement", according to
Okonjo-Iweala, was her success in delinking the budget from oil
prices. "We know that oil prices are mean-reverting," she says.
"We have to plan carefully for the day when oil prices come
Last year the budget was based on oil at $25 per barrel and
this year it is based on oil at $30 per barrel: revenues beyond
that are not automatically spent as they come in. As a result,
Nigeria's foreign reserves have started rising, and the
groundwork was laid for the Paris Club agreement.
There was still the problem of the IMF, however. The Paris
Club doesn't agree to debt relief unless an IMF agreement is in
place, and Okonjo-Iweala didn't want one. "If you want to stop
reform dead in its tracks, the best thing you can do is to
invite in the IMF," she says. "If Nigerians thought that this
was being imposed from outside, it would never succeed."
But Okonjo-Iweala was convinced that her programme was
tougher than anything the IMF could come up with. So she
persuaded the president to invite the IMF to look over the
country's books on a quarterly basis – something
called a "policy support instrument". It's essentially a way in
which Nigeria can certify to the rest of the world, and
specifically to the Paris Club, that it is doing the right
thing, without having a formal IMF programme in place.
Once Needs was in place and working, Okonjo-Iweala started
thinking about how to get a Paris Club agreement. "We were told
you need a champion," she says, so she started lobbying the
obvious one: the UK government. Not only was the UK Nigeria's
largest creditor, it was also about to chair the G8, where it
wanted to emphasize debt relief.
Bilateral discussions took about six months, but in the end
the UK was utterly convinced. Between them, senior UK Treasury
official Jon Cunliffe and chancellor of the exchequer Gordon
Brown, international development minister Hilary Benn, and
prime minister Tony Blair proved a formidable team to go to bat
alongside Nigeria to persuade the rest of the Paris Club to
come to an agreement.
Meanwhile, Okonjo-Iweala was also working her World Bank
connections, to have Nigeria reclassified as an IDA-only
country from a blend country, officially receiving both IDA
(International Development Assistance) money and IBRD
(International Bank for Reconstruction and Development)
commercial loans. In fact, the last time that Nigeria received
any IBRD money was in 1993. With the help of a research paper
written by Todd Moss, Scott Standley and Nancy Birdsall of the
Center for Global Development, Nigeria was so reclassified,
which made it much easier for the Paris Club to grant debt
The next time the G8 finance ministers met, Nigeria was
prepared. Okonjo-Iweala took on the job of persuading her old
World Bank boss, Caio Koch-Weser, now at the German finance
ministry, while president Obasanjo also worked the ministers in
concert with Gordon Brown.
The official announcement emerged at the end of June:
Nigeria would pay roughly $12 billion to settle, once and for
all, its $31 billion in Paris Club debt. Nigeria will be the
first country to buy back Paris Club debt below par, and the
enormous reduction in its debts will be a lasting legacy of
Okonjo-Iweala's term as finance minister.
Postcards from the