By Ben Wilkinson
Though not without its fair share of controversy, Olusegun Obasanjo’s presidency was key to embedding democratic rule, tackling corruption and laying the foundations for long-term development in Africa’s most populous nation.
Summiteering, mediating, issuing pronouncements and launching one initiative after the other. Never before had Aso Rock – Nigeria’s presidential residence – been the international forum it became during Olusegun Obasanjo’s eight-year stay.
By the time the former general stepped down in May 2007, he had become the model of the new African ruling establishment: neither old-style authoritarian nor younger generation technocrat.
One of Nigeria’s better-respected military rulers in the 1970s – the only one to retire peacefully – Obasanjo nevertheless embodied a break with the past, on Nigeria’s tortured path towards democracy rebuilt. Upon his first retirement, the future president became a figurehead for Transparency International (TI), the civil society group, back when good governance first exploded as a fashionable global issue in the 1990s. Armed with this experience, Obasanjo represented a radically new era when he returned to public life following the tyranny of former dictator Sani Abacha.
He emerged victorious from the 1999 elections, with a mandate for decisive action to get the economy back on course while cleaning up the image of Africa’s most populous nation. One early decision proved crucial. He recruited World Bank executive Ngozi Okonjo-Iweala to reorganize Nigeria’s chaotic debt management records. The president was so impressed by the results that he appointed her to run a re-empowered economic team in 2003, as finance minister.
Structural reform
Obasanjo threw his political clout behind radical and often uncomfortable reforms, as the new team focused on a small core of “structural reform” priorities. Rather than wrangling over official IMF programmes – dealing with the Fund was a Nigerian taboo – the administration opted for the home-grown National Economic Empowerment and Development Strategy (Needs), which in effect replicated an IMF standby agreement but could be sold more readily to a domestic audience.
Tackling corruption was a central preoccupation for the Nigerian leader. He set up the formidable Economic and Financial Crimes Commission, and lifted the country off the bottom of TI’s Corruption Perceptions Index. Around 130 top officials were “retired” or dismissed because of inefficiency or corruption, and hundreds of fraudsters were arrested for financial crimes.
“On the anti-corruption and transparency front, everyone knows that we have a huge problem.
But our development partners acknowledge that we have been more willing and resolved to deal with corruption,” his ex-minister Okonjo-Iweala told Emerging Markets.
Meanwhile, a mountain of official debt topping $30 billion was compounding penal interest charges and feeding the mistrust of creditor governments. “Paris Club members told Obasanjo there was no chance of Nigeria being offered the debt relief under [the Heavily Indebted Poor Countries] HIPC terms unless things got a lot clearer – which meant paying back some of those debts,” a senior official in Abuja recalls.
Dealing with debt
When the mid-2000s oil price surge began to refill government coffers, Obasanjo overcame considerable political opposition to back Okonjo-Iweala – who dealt with the debt conundrum at a stroke by using windfall revenues to offer the Paris Club a deal. In 2006, Abuja paid back $12.4 billion, and the rest was written off. The deal was not without its critics. Central bank governor Charles Soludo told Emerging Markets at the time: “What they are doing now is taking away from Nigeria $12 billion all at once. For a country with more than 50% of its population in poverty, this raises quite some questions, and you can understand why some Nigerians are crying foul.”
Nevertheless, combined with a buy-back of London Club obligations completed in 2006, the deal did give Nigeria a clean sheet to replace its reputation as a bad debtor. This paved the way for the private sector to access the international market as well. For that to happen, a further reform was required. Soludo himself moved with Obasanjo’s backing to undertake a massive forced consolidation of Nigeria’s banking sector from almost 90 to just 25 players.
When Okonjo-Iweala resigned abruptly in 2006 – following an internal power struggle – there were fears that reform momentum would suffer, but Soludo explained that the impetus had come from Obasanjo himself. “All the reforms contained in the president’s programme are his own. Everything that has been accomplished has been a collective effort,” he told Emerging Markets.
The final stages of Obasanjo’s presidency were paradoxical. The government’s financial reform efforts culminated in a sovereign credit rating and, just weeks before Obasanjo left office, two banks made a dramatic breakthrough by borrowing in the global capital markets.
But he failed to resolve violent tensions in the oil-producing Niger Delta, and his efforts to change the constitution to run for a third term were blocked – to general relief but great pique from the man himself. While such moves almost undermined the religiously-divided country’s delicate constitutional balance, Obasanjo could still take the credit for introducing democracy and sending the military back to barracks. Combined with economic stabilization, this political transition established the country as a “frontier emerging market”, the first sub-Saharan state aside from South Africa to put itself on the map for global investors.
While lionized abroad, Obasanjo cut a more controversial figure at home. Suspicions loomed over his alleged penchant for promoting the interests of favoured business partners as well as his selective use of his much-vaunted anti-corruption drive as a tool to slam political opponents – notwithstanding the legion of corrupt officials legitimately targeted. Many Nigerians are enjoying the refreshingly low-key style of his successor, Umaru Yar’Adua.