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THURSDAY, MAY 25, 2000
U.S. House of Representatives,
Subcommittee on Domestic and International Monetary Policy,
Committee on Banking and Financial Services,
Washington, DC.

    The subcommittee met, pursuant to call, at 10:50 a.m., in room 2128, Rayburn House Office Building, Hon. Spencer Bachus, [chairman of the subcommittee], presiding.

    Present: Chairman Bachus; Representatives Green, Waters, Frank, Watt, Lee, Sherman, Inslee and Schakowsky.

    Chairman BACHUS. I would like to call the Subcommittee on Domestic and International Monetary Policy to order. The hearing today will deal with three issues: One, multilateral reform efforts and whether they will help Nigeria; second, the return of stolen national assets to Nigeria; and three, other options for economic growth in Nigeria.

    We will be hearing from three panels. The first panel will be two officials from the U.S. Treasury Department. The first one will be William Schuerch. Mr. Schuerch was named Deputy Assistant Secretary of the Treasury for International Development, Debt and Environmental Policy on March 15th, 1998, after acting in the position since 1996. He is responsible for the formulation of international debt policy and a wide range of economic, financial and environmental policy issues pertaining to the United States.
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    Also appearing will be Mr. Steve Radelet. Mr. Radelet is Deputy Assistant Secretary of the U.S. Treasury for Africa, the Middle East and South Asia. He has broad responsibilities for overseeing U.S. financial relations with the countries in these regions, including debt repayments and programs with the international financial institutions.

    Our second panel—we have added this panel—is a member of the Nigerian House of Representatives, or is that Parliament or House of Representatives; what is the name of it?

    Mr. HAMZA. House of Representatives.

    Chairman BACHUS. House of Representatives or the National Assembly of Nigeria. Danlami Hamza. I had the opportunity to visit with him and the delegation from Nigeria yesterday afternoon. He is currently serving as a member of the Banking and Currency Committee, so he is our counterpart in Nigeria of this committee. He is here visiting as a part of the delegation observing the working of the U.S. financial agencies and how they interact. We welcome you and look forward to your testimony.

    The third panel will be made up of Jack Blum. Jack is an internationally known attorney, partner, in a Washington law firm. He is an expert on controlling government corruption, international financial crime, money laundering, international tax havens. And the testimony that you submitted is indeed fascinating, and I think to the point, and look forward to your oral testimony.

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    We also have a Nigerian professor. It is Mobolaji Aluko. Is that right? OK. And he is a Nigerian professor, Chair of the Chemical Engineering Department at Howard University. He is currently President of the Washington-based Nigerian Democratic Movement, and the USA coordinator for the International Umbrella United Democratic Front Nigeria. He has written several opinion pieces on the Nigerian situation and has appeared in various public forums advocating for democratic and constitutional reform in Nigeria.

    Joining him on the third panel will be Ezekwesili, and that is—I am sorry, his first name is Obiageli. OK. So I apologize, this is a Miss. She serves as one of the founding directors of Transparency International, an organization dedicated at the international level in preventing corruption. She serves on the board of several national and international organizations committed to development, democracy and accountability issues both in Nigeria and globally.

    At this time, we will entertain opening statements, and does anybody wish to offer an opening statement?

    I will give an opening statement as Chairman, and then if Ms. Waters wishes to give an opening statement when she gets here, she will be allowed to do that.

    Nigeria stands at the crossroads of reform. It is a country richly blessed with abundant natural resources and over 120 million people in a country over twice the size of California. But ever since its founding in 1960, political instability, ethnic conflicts and widespread corruption have held back economic development in Nigeria. After suffering from years under weak and corrupt governments, General Obasanjo campaigned as a reformer and was democratically elected in May of last year. In his inaugural address, the new President said he is prepared to restore confidence in government, deal with the growing economic crisis and tackle corruption. I want to affirm my support for President Obasanjo and state my agreement with the three goals he has outlined for the new Nigerian government.
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    At the request of the distinguished Ranking Member Representative Maxine Waters, this hearing has been called to review what steps are necessary to achieve sustainable economic development in Nigeria and how we can assist that process. Since Nigeria is still very dependent on international support, this hearing will focus on the effectiveness of multilateral aid and debt restructuring. I look forward to the testimony of the Treasury Department about what efforts are being made by the IMF and the World Bank to help promote economic development in Nigeria.

     Currently, the IMF is negotiating an agreement with Nigeria to reschedule Nigeria's external debt service burden, as opposed to actual debt relief. In return for debt rescheduling, the IMF is seeking a number of economic reforms from the Nigerian government, including more budget discipline and the buildup of foreign exchange reserves.

    One interesting aspect of debt rescheduling is the effect of such an agreement on private creditors. It appears the IMF has agreed to President Obasanjo's request to limit his country's debt service payments to $1.5 billion a year. Currently their yearly debt service burden is $3.3 billion, with $2.3 billion to bilateral creditors, $700 million going to multilaterals and $340 million to private creditors. There is a significant fear on the part of commercial creditors that if the voluntary offer to reschedule the private debt is not accepted, that the IMF and Nigeria will agree to a compulsory commercial debt rescheduling. Given the importance of attracting private capital in the future, it seems that the IMF and Nigeria should be very careful before taking such a step.

    After hearing from the Treasury Department witnesses, the second panel will discuss other options for economic growth and what steps need to be taken for Nigeria in order to assist Nigeria to recover the nearly $5 billion in national assets stolen by the regime of Sani Abacha.
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    In mid-December of last year, Swiss officials announced that they have frozen an estimated $551 million in Swiss bank accounts tied to the former military leader and his associates. Swiss officials said that about 120 accounts in Zurich and Geneva have been frozen. Recently President Obasanjo announced that as of May 2000 his government had recovered $200 million in public funds looted by former Nigerian dictator Sani Abacha. Unfortunately, this is a miniscule portion of the total amount of money stolen, and much more needs to be done by the international community and by other countries to help Nigeria recover its stolen wealth.

    I look forward to hearing from our third panel on how to recover the missing funds and also what can be done to prevent corruption in the future.

    Only recently has the international community began to realize the full impact of corruption on the economic growth of entire countries. It is becoming more apparent day by day that more must be done to protect developing countries from the scourge of corruption. In order to discourage corruption, there must be some way to seize ill-gotten gains of corrupt government officials. That is the only way to create a credible deterrent against the temptation to abuse public office. And I will note here that the President has actually called for stronger measures.

    The hearing today should be a catalyst for designing a plan for the international community to help Nigeria fight corruption and at the same time achieve sustainable economic growth.

    At this time, if no one else has an opening statement, we will hear from our first panel, and we welcome the Treasury Department and your testimony.
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    Mr. SCHUERCH. Thank you, Mr. Chairman, distinguished Members. We welcome the opportunity to testify on United States efforts to help Nigeria consolidate democracy, restore a functioning economy and promote sustainable economic growth.

    The events in Nigeria over the last eighteen months are the source of considerable hope for the future.

    Chairman BACHUS. Mr. Schuerch, would you pull that microphone a little closer?

    Mr. SCHUERCH. The inauguration of President Obasanjo last year was a clear success in the country's political transition and may represent a turning point in the country's history. There are other signs that democratic institutions are taking hold, including increased freedom of the press and a reconstituted parliament, some of whom you have introduced here today. The expectations of the Nigerian people for visible and rapid improvement in their economic prospects now present an enormous challenge for the new government.

    While ultimate responsibility for meeting these expectations lies with the Nigerians themselves, the Administration enthusiastically recognizes the opportunity and importance of supporting Nigeria's return to democracy and assisting efforts to put the country on the path to sustainable and broadly shared economic growth. Thus Secretary of State Albright named Nigeria as one of the four key transitional democracies in the world.
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    Nigeria's leadership role in supporting regional stability through substantial peacekeeping efforts over the last decade demonstrates its importance to the region and furthering U.S. goals for stability in Western Africa. Recently the Nigerian military, the key player in ECOMOG, has been central to efforts to support peace in Liberia and Sierra Leone.

    My colleague Steve Radelet will begin with some comments regarding the broad challenges facing Nigeria and will discuss the foundations necessary for sustained economic growth. I will discuss the role of international financial institutions in supporting Nigeria's efforts to accelerate growth and fundamentally reduce poverty. I will also touch on the important role that USAID activities will play in our efforts to support Nigeria, and will address the role of the Paris Club in helping Nigeria with its significant debt problems.


    Mr. RADELET. Mr. Chairman, distinguished Members, Nigeria's importance in Africa is clear. Home to one in five Africans, and the second largest economy in Sub-Saharan Africa, Nigeria's success or failure will have ramifications far beyond its borders. Nigeria is also an important economic partner of the United States as our second largest trading partner in Africa. In 1998, Nigeria was the fifth largest crude oil exporter to the United States, and it provided roughly 8 percent of total U.S. crude oil imports.

    Nigeria benefits from a large population of energetic, educated and entrepreneurial people as well as from an abundance of natural resources. Most apparent is Nigeria's oil wealth, which generated roughly $12 billion in export revenues in 1999. The agricultural sector, only a shadow of its former self in the past, has been a significant producer and exporter of rubber, palm oil, cotton, cocoa and a variety of food crops, and it could be again.
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    The economic challenges facing Nigeria are as impressive as the potential. Growth averaged only 1.2 percent between 1982 and 1995, which was less than half the population growth rate of 2.9 percent. Nigeria's social indicators paint a portrait of a persistently impoverished country. And the AIDS prevalence rates have reached an estimated 5.4 percent of the adult population, which is a threshold considered by many experts as marking the takeoff point for a widespread epidemic.

    One factor behind the low growth rates is the lack of economic diversification, with oil providing about 90 percent of foreign exchange earnings and 80 percent of budgetary revenues. This overdependence on oil has contributed to the decline of the agricultural sector, and it has limited development of labor-intensive sectors that could provide greater opportunities for job creation.

    Mr. Chairman, let me touch on six key components that I see as necessary to provide the foundation for sustained economic growth and poverty reduction in Nigeria.

    First is macro-economic stability. The government has made important strides in restoring economic fundamentals; however, an oil-based economy such as Nigeria's remains vulnerable to price shocks as well as internal pressures for looser fiscal monetary policies. The experience of resource-rich countries around the world demonstrates the risks of spending extraordinary revenues from high oil prices, and it provides clear evidence of the need to prudently manage the high revenues to facilitate long-term development.

    Second is the government's role in the economy. Privatization of state-owned enterprises such as power and telephones is a critical requirement for stronger growth and improved governance. Public enterprises have been an unproductive drain on public resources, a source of endemic corruption. Critical services are inadequately provided and at unacceptably high costs. The large public sector presence has also served to exclude private investment in sectors it dominates.
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    We believe that government should place a high priority on an open, transparent and far-reaching privatization program. Slow progress so far raises some concern that the state will continue to inhibit economic growth through excessive intervention.

    The third key component is improved environment for private enterprise. The government should also strengthen Nigeria's regulatory and judicial framework while liberalizing its trade and investment framework to provide a more hospitable environment for the private sector. President Obasanjo highlighted this need in meetings with President Clinton last October, and our bilateral assistance program aims, in part, to address this problem. For investment in labor-intensive sectors to occur, there will need to be adequate infrastructure and a consistent rule of law. In addition, corruption, business fraud and poor protection of intellectual property rights further damage the international image of Nigeria and remain serious disincentives to investors.

    In the banking sector, lending rates remain high, and access to capital is limited. The authorities need to work to increase the efficiency, transparency and oversight of the banking industry to address these issues, to promote private sector-led growth.

    Fourth is improved social sector spending. With prudent fiscal management, additional resources also become available to target the social sectors in order to alleviate poverty. The government should focus on targeting investments in priority areas while building capable institutions to ensure the effective use of these funds for Nigeria's development needs.

    Number five is open trade regime. During the past decade Nigeria has taken several important steps to liberalize its trade regime; however, some agricultural import bans have been replaced with restrictive tariffs, and removing the barriers to trade will increase the effectiveness and profitability of investment, create new jobs, and integrate Nigerian firms with the global economy.
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    Sixth is transparency and governance. Democratic processes benefit people by broadening representation and institutionalizing accountability, but they also imply more complex decisionmaking. Because Nigeria returned to democratic government only last year, it is effectively starting from scratch and learning how to build consensus between the legislative and executive branches. It is clear that more transparent processes and reliance on rule of law and steady progress in targeting corruption and strengthening institutional capacity will be key to addressing the many challenges currently confronting Nigeria.

    The Obasanjo government has already made notable progress in the year since it was elected last year. The government's early efforts to restore macro-economic discipline are demonstrated by the increase in economic growth from 1.9 percent in 1999 to an estimated 3.9 percent this year. There has been a rapid deceleration of inflation. It is recovering international reserves after a precipitous fall under the Abacha regime and the unification of the exchange rate.

    As a former Chairman of the Advisory Board of Transparency International, President Obasanjo has also placed a very high priority on fighting corruption and promoting good governance. The government has already taken many steps to open the democratic process, including efforts to provide more details on spending and revenue in its annual budgets and to make substantial reductions in off-budget spending.

    Improvements in these areas have helped lay the foundation for increased engagement, both with the United States as part of our bilateral assistance program and with the international community, including the multilateral financial institutions.
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    I will now turn back to my colleague Bill Schuerch, who will address the various means by which we are currently engaging Nigeria to help support its long-term growth and development strategy.

    Mr. SCHUERCH. Concerning bilateral assistance, the United States Government has identified $107 million in assistance for fiscal year 2000. This figure represents a substantial increase over the fiscal year 1999 levels of roughly $38 million. The large increase represents the Administration's commitment to assist Nigeria in its return to democracy and a market economy.

    The fiscal year 2000 funds include $93 million from USAID targeted at health and education, privatization efforts, anti-corruption reforms, fiscal discipline, poverty reduction and the promotion of the private sector, especially in agribusiness and other labor-intensive activities. Of this total, $26 million is targeted for HIV/AIDS and other health-related programs, and $10 million for education programs. The additional amounts include anti-narcotics programs.

    Further, the State Department and the Department of Defense are working to help Nigeria rebuild and professionalize a military that has been devastated through neglect and corruption.

    I should also note the Administration's proposed Vaccine Initiative would assist Nigeria in improving its childhood immunization coverage, which is now one of the lowest in the world at about 45 percent. Over time, it should also assist in combating epidemics through the development of new vaccines for HIV/AIDS, malaria and tuberculosis.
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    Concerning IMF assistance, in the late 1980's and early 1990's, Nigeria had three one-year programs. Since early 1992, Nigeria has not had a financing relationship with the Fund. The IMF has been working actively to support reform since the change in government in 1998. Last year, Nigeria agreed to a series of reforms under an informal ''staff-monitored'' program that was to help set the foundation for broader reform efforts. While there were implementation problems under this program, the progress that Nigerians have made has provided a basis for negotiations of a formal program.

    As you noted in your opening statement, the Government of Nigeria and the IMF are now in the advanced stages of negotiating a one-year program, which targets many of the fundamental challenges Mr. Radelet has already addressed, including better infrastructure, privatization, improved governance and fiscal control. The Nigerian Government has already made substantial progress toward reaching agreement on this program by adopting key reforms. Discussions are now focused on budget. We look forward to the conclusion of these negotiations.

    Concerning MDB assistance, the World Bank has not made a new loan to Nigeria since 1993, when lending was cut off because of poor implementation, continued deterioration in governance and President Abacha's embargo on all foreign borrowing. The Bank continued to supervise ongoing projects through the 1990's. The Bank, like the Fund, began to reengage following the change in government in 1998.

    This month, the World Bank Board endorsed an interim strategy that proposes that approximately $900 million of concessional resources also be made available over the next three years. The $600 million project component of the Bank's lending program will be focussed in areas crucial to immediate poverty alleviation, such as primary education, community rural development, and AIDS and health-related systems.
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    The initial strategy is weighted with diagnostic work to assess institutional and economic management capacities at both macro and sector levels. Technical assistance and advisory services will be provided. At the heart of the Bank's near-term strategy is an Economic Management Capacity Building Project that aims to strengthen key economic institutions of the government, particularly those dealing with formulation and implementation, monitoring and accounting of the budget; a $55 million primary education project; a $60 million community rural development project; a $60 million micro-watershed and environment project.

    When the IMF program is adopted, the World Bank and the African Development Bank will be prepared to propose a balance of payments loan in the range of $300 to $450 million to support the government's Poverty Reduction Fund.

    The African Development Bank is in the midst of preparing its country assistance strategy for Nigeria. While plans are still preliminary, its effort will also be closely linked to those of the World Bank, supporting projects under the Poverty Reduction Fund and providing the balance of payments loan. In all, the African Development Bank program will total approximately $200 million.

    I should emphasize the importance we attach to ensuring that assistance is provided in the context of strong performance. The Nigerian government understands this, and work is well underway to support a more active program of international financial institution assistance going forward.

    Concerning debt issues, one of President Obasanjo's priorities clearly is to reduce Nigeria's significant external indebtedness. Nigeria has over $30 billion in loans due. Much of this debt, over $20 billion, is in arrears because Nigeria stopped paying its official bilateral creditors in the early 1990's. This action and the fact that private creditors were being paid during the same time has not made the President's task easier.
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    The Administration recognizes Nigeria's difficulties as well as this subcommittee's interest in Nigerian debt relief. We continue to work to address these issues both within the U.S. Government and with other creditor countries. Based on HPIC criteria of poverty and indebtedness, using the best available estimates of Nigeria's debt profile, we should acknowledge Nigeria would not qualify for HPIC relief, because it is not sufficiently indebted.

    While only holding about 4 percent of Nigeria's debt in the Paris Club, the United States has taken the lead in encouraging a generous interim rescheduling of Nigeria's debt. If a rescheduling agreement is reached, this will lower Nigeria's total debt service from roughly $3.5 billion in fiscal year 2000. While we have encountered strong resistance by other creditors who want a significant down payment on Nigerian arrears prior to any rescheduling, we have made enough progress to reduce creditor demands to payment levels more consistent with Nigeria's development needs and payment capacity.

    We expect Nigeria's 2000 external debt service payments to be roughly $1.5 billion. This amount was included in the original budget proposed by President Obasanjo. If agreed, this would present significant cash flow savings that Nigeria could use to support programs to help reduce poverty and promote economic growth.

    In sum, the challenges facing the Nigerian people are immense. The future course of economic and political development depends primarily on Nigerian leadership and Nigerian decisionmaking. We believe we have a unique opportunity at this time to support the transition underway in Nigeria. A strong and stable Nigeria is in the interest of the Nigerian people, the rest of Africa, and the United States.
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    Thank you. We would welcome questions.

    Chairman BACHUS. Thank you.

    One of the witnesses on the next panel wrote that, and I quote: ''Corruption has been the key factor in the failure of countries to make use of their own natural and human resources to improve the standard of living and the quality of life.''

    What steps have the international institutions taken to combat corruption since it is, as he characterized it, the most important obstacle to development?

    Mr. SCHUERCH. If I could, I would start with the—not the question of the international institutions, which is an entirely appropriate one, but the question of what is the leadership in Nigeria doing on corruption, and I think it is an important place to start. The President of Nigeria has very much focused on this issue and recognized its importance for the future of his country. He has declared a fight against corruption as one of the first actions in coming into office. He is quite engaged in improving the governance as one of his top priorities of his administration, and he has taken measures to move in this direction.

    The first bill that he put into the National Legislature was an anticorruption bill. While it has not emerged from the Legislature yet, it has passed one House. It has been actively debated, and they are continuing to pursue its passage.

    He set up a commission to review past awards of public sector contracts. He has conducted and had his government conduct reorientation workshops for senior civil servants. He has required his ministers to take integrity pledges. Several contracts for oil exploration that were previously awarded by prior governments have been questioned and have been canceled. He has made clear with his leadership that this is an area that he wants to be active in, and he has started that process, and there is no doubt about his intentions to continue.
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    He has also focused on the details of these issues and has focused on the procurement processes of the government and trying to improve them. In that context he has asked the World Bank to review the procurement systems of the government, the public sector ways of handling contracts and review, starting with a review and audit of the oil sector particularly.

    So the institutions are working with the President, with the leadership on the corruption issues in Nigeria. I would say it is still at an early stage. The institutional programs are in their infancy, and in some cases more in their planning stages, but they are engaged on the subject matter. Thank you.

    Chairman BACHUS. You dealt with what he is doing. He will need cooperation from the World Bank, from the international institutions, from the multilateral bank. What do you see as their role?

    Mr. SCHUERCH. The World Bank itself has focused quite considerably on corruption issues. The President of the Bank as well as the President of the Fund have highlighted them extensively since the fall of 1997, and they have created quite a level of expertise to address the matters on a country-by-country basis. They have done it largely on the basis of a request-driven process. They are prepared to provide technical expertise and advice on a range of issues related to management of budgets, tax policies, judicial system and legal system strengthening, regulatory frameworks and a host of other specific areas, as well as utilizing the privatization process to limit the opportunities for corruption within government activities. There have been an active core center of corruption problems, so moving in privatization of telecommunications or power companies and things of this sort are also part of this agenda.
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    Chairman BACHUS. When we talk about Nigeria, people bring up now that there has been a rise in oil prices, and that that should benefit Nigeria, but I am hearing that Nigeria may not be able to take full advantage of the increased oil prices or any increased revenues that that brings, because the World Bank retains rights to oil revenue over a certain price level. Is there any truth in that, or is that just a rumor?

    Mr. RADELET. No, there is no truth to that at all. They will be able to benefit substantially from the rise in oil prices in two different ways. One is just in terms of their external position, it should provide a means to be able to finance more imports, and at the same time, build up their foreign exchange reserves to a more secure position. Second, it will help in terms of budget revenues and, therefore, their ability to spend more money. And, in fact, under the IMF program, government spending this year will be much larger than it was last year, to large extent because of oil revenues and also because of privatization receipts and other things.

    So they will be able to use the full extent of the increase in the oil prices.

    Chairman BACHUS. So the World Bank doesn't retain rights to oil revenues over a certain price level?

    Mr. RADELET. No, not explicitly. The World Bank is one of the creditors that would be paid part of the $1.5 billion that you mentioned, but there is no specific rights that they have with respect to oil revenues back.
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    Mr. SCHUERCH. If I could add to that answer, I think perhaps where this impression has come from has been there have been discussions in the debt discussions in the Paris Club that relate to what happens if oil prices substantially increase, and there has been no conclusions per se, but certainly any number of creditors feel that they should share in sort of unanticipated, particularly high oil revenues. So that is the probably the background of the nature of where the question comes from, but there is no conclusions, and it is certainly not the case with the World Bank.

    Chairman BACHUS. Thank you.

    Ms. Waters.

    Ms. WATERS. Thank you very much. I will submit my opening statement for the record, because it is rather lengthy.

    I would like to thank you very much for holding this hearing. It is very important, and I know that you have been interested in what is happening in Nigeria, and you have been engaged in some discussions with me and others around debt relief and debt forgiveness. And I know that you are concerned about our ability to give support to the Government of Nigeria as they move forward with the democracy that they have created, even under some very difficult times and very difficult situations.

    So, I would like you to know that I have been monitoring what has been happening in Nigeria, and I, along with many others, am very impressed with the amount of progress that they have been able to make, despite, again, a very difficult social structure. Despite the fact that they have moved to embrace democracy, they need a lot of support, and they are lacking in a lot of resources.
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    There have been a lot of visits to Nigeria: Secretary Bill Richardson; our Secretary of State Madeline Albright; the leader of this House, the Minority Leader, Mr. Gephardt took over a delegation. I have been there. Everyone is impressed with the work of the President. President Obasanjo is doing a magnificent job. However, the question of whether or not they are going to be able to sustain their efforts is a real question, and I am hopeful that in this hearing that we are having today we will learn more about the package that is being put together over in Treasury, learn more about what is happening at the Paris Club and our efforts to get debt forgiveness, and learn more about what we are doing to track some of the dollars that were taken out of the country and placed in our own American institutions by the past president—well, past dictator—Mr. Abacha.

    So this hearing is extremely important. It may be the first in several, I don't know, that we may have to have in order to really understand and move forward in the best ways possible.

    So I am very thankful that we have here today Mr. Schuerch, who we have been talking with from time to time, and whenever it is my time to raise questions, I will do that. Thank you very much.

    Chairman BACHUS. All right. You can either go ahead and ask them now.

    Ms. WATERS. Yes. I am very interested in understanding where we are with the debt relief package that was being negotiated, and I would like to know if it is available; what is in the packet, and whether or not it includes debt forgiveness; and if not, why not; and are we on the same track with Treasury when we talk about debt forgiveness and not simply restructuring?
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    Mr. SCHUERCH. Congresswoman Waters, in the opening statement we started to address this issue. It is clearly much, much more detailed. Clearly, the Administration is very focused on this issue. We are very focused on the action taken in the markup on the HPIC bill last year in full committee here that was a very strong indication of the support for debt relief and inclusion of Nigeria in that instance in the HPIC program. We have been substantially engaged in this issue within the Government and with other governments and other creditors. I think the context we are dealing with is one in which the United States' exposure for their debt is a very small percentage of the overall percentage. We are in a component in about the 3 percent range of total debt exposure for Nigeria. This limits our capacity to influence other much, much larger creditors.

    If you look at the broad exposure, you find that the United Kingdom has 25 percent of this debt. Japan has 19 percent of this debt. France has 17 percent of this debt; Germany, 15 percent. Even Italy has more than two-and-a-half times the amount of debt to Nigeria that the United States does. So we have been more actively addressing this issue than virtually perhaps any other specific issue in terms of Nigerian policy. I would say in every Paris Club meeting since September of last year, Nigeria and Nigerian debt relief has been an active subject, if not the major subject. It has been the major subject of several different types of proposals and discussions, particularly in the early months of this year.

    Similarly, Nigerian debt relief/reduction has also been pursued among the G–7 group and the G–7 financial ministry deputies groups on multiple occasions. So there is a constant effort to work out an international response to provide opportunity for Nigeria to gain additional resources for poverty reduction and social spending. It is balanced clearly by the desires of many creditors to receive repayment.
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    It has been a difficult set of discussions. I think the approach that we have agreed on, given that circumstance within the U.S. Government, clearly is one which aims at rescheduling. We have pushed for a generous rescheduling. We have pushed for a rescheduling which would be extraordinary and would meet the cash flow desires or expectations of the President of the country in terms of the $1.5 billion debt service figure for the fiscal year 2000.

    Even that agreement has not been achieved yet, although I think it is quite close. It will not be achieved, of course, in terms of implementation until such time as we have an IMF agreement.

    Ms. WATERS. All right. So that you don't have to keep going along that line of response, and that is where we disagree on the rescheduling versus debt forgiveness, I want to just ask this last question, if I may. A May 2000 African News article describes a multibillion-dollar debt buyback scheme that greatly diminished Nigeria's treasury. The article refers to the—I think it is Fashanu Report, named after John Fashanu, the man who uncovered the fraud. The article also states it was gathered that the IMF and the World Bank gave tacit approval to the operations of the Fosters, who swindled Nigeria through a network of secret bank accounts and fictitious companies.

    You mentioned this report in your written testimony, so you obviously know about the debt buyback scheme and how it affected Nigeria. And if so, wouldn't you have some concerns about any debt rescheduling even though it may provide some immediate relief? It still is money that must be paid back, and still they will be incurring the interest rates that will cause them even more problems in the future, because they have paid back so many millions of dollars in interest rates over the past years. How do you reconcile this, and how will they ever be able to get out of debt, and what can we do to have some justice here based on the schemes that have taken place that have robbed this country?
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    Mr. SCHUERCH. I have turned to look around, because we are unaware of the specific allegations that you have recited from the article.

    Mr. FRANK. Excuse me. Can you talk a little bit louder? I think you can trust these people if they overhear you.

    Mr. SCHUERCH. I said we are unaware of the specific article on those specific set of allegations. Clearly there has been a wide range of allegations about corruption in the past in Nigeria, and we will, you know, look at the specific article and give you what response we can for the record.

    In terms of the broader issue, obviously what happens with the resources that we would desire to have applied to poverty reduction programs is of critical importance regardless of whether those resources come from a debt rescheduling process that is based on cash flow, or regardless whether they might come in the future from the reduction program, or from simply new lending from any one of the international financial institutions, or a reorientation of the utilization of the government's own funds.

    Ms. WATERS. Well, I am going to move on, so that the other Members can raise their questions. It remains that you and I disagree, and you and I have a lot to disagree about. Number one, the length of time that it has taken. This president will not be able to sustain democracy in his presidency if he does not get some immediate help and relief. It has taken too long. It has taken too long in many other countries, including Sierra Leone and Congo, and we sit and watch the crisis mount while we are reviewing, and we are looking at it and we are trying to do this. And so, if there is any message I can leave with you today is, it is taking far too long.
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    Number two, we are on the wrong track. We need some forgiveness. We don't need to mount more debt and the interest rates that go along with it.

    And so I am going to turn this over to my Chairman so that others can have an opportunity to engage you, but I do want you to take that message back in case I don't have another opportunity to share it with you here today.

    Thank you very much, Mr. Chairman.

    Mr. SCHUERCH. I think if I might respond briefly, we understand your message and your desire to help Nigeria actively. That desire is shared by the Administration. I would say the rescheduling that is being pursued is one which would deliver on a cash basis during the next year an amount that is pretty roughly equivalent to the amount they would achieve if there were a debt reduction program in place. So obviously, it is not a reduction program. There are additional years to consider and long-term implications, but on the short term, if we are able to achieve the enriched Paris Club debt reduction program, it will be roughly equivalent to having achieved for this year the debt reduction program.

    I would also say that clearly we feel that a debt reduction program in Nigeria similar as in HPIC countries must be embedded in a policy structure, reform policy framework, that provides an opportunity for the country to grow over a longer period of time. Debt reduction alone achieves a short-term benefit, but doesn't guarantee growth, and that is quite evident in any number of African countries, in particular ones with rich oil resources. Thank you.

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    Mr. RADELET. If I can follow up on that, this year we have been working quite closely with other international creditors. We have been working quite closely with President Obasanjo and the Nigerian government toward a solution for the debt problem that they face. What President Obasanjo asked for this year was a reduction in debt payments due to the international community to $1.5 billion and a rescheduling of his debts for this year.

    Ms. WATERS. I am sorry, how much money did you say?

    Mr. RADELET. $1.5 billion is what he proposed last year that he said that the Nigerian government would be able to pay this year. And he asked for a rescheduling this year of the remainder of the debts. It has been very clear in several letters to the U.S. Government.

    Ms. WATERS. Excuse me, I don't want to interrupt, but I have to do this. I met with the President, and I met with the leaders of the General Assembly. It is very clear to me that everyone prefers debt forgiveness. They are not initiating conversations about rescheduling. If they are forced to take it, I am sure they will agree, but I don't want anybody to get the impression that the President's preference is rescheduling. It is not. It is absolutely not, and I believe I have a letter to that effect in my office.

    Mr. RADELET. What he has asked for, and when I have met with him, and when others have met with him, and in his letters to the U.S. Government, he has asked for a reduction in the future. He has asked for a reduction this year of the payments to $1.5 billion and Paris Club rescheduling this year. He has asked for a debt reduction in the future, and we have worked very hard to meet his request. And it was very difficult to get other creditors to agree, and we are not quite there yet to his request to limit payments to $1.5 billion this year. The amount due was over $3 billion. And there was an extraordinary amount of resistance from other creditors, and we took the lead in this to the other creditors, and we are not quite in full agreement at the level of $1.5 billion. It is quite close, and we are hopeful and optimistic that we can get there, but that will meet exactly what the President asked for a year ago, even when oil prices were lower for this year.
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    Chairman BACHUS. Before we get on to questioning, one thing I would request of the Treasury panel. We are going to have testimony from Professor Aluko concerning—I will just read—let me just read a part of his testimony: ''Not all of the loot was acquired by Nigerians alone. Some of the schemes ostensibly used to reduce the debt, particularly the debt buyback schemes, were, in fact, avenues for loot acquisition, both by Western individuals and banks in the West.''

    He is going to go on and testify about that. It will be helpful to us if you stayed and listened to that testimony and then basically in letter form respond then to us, because I think we are all very interested if as a country we are demanding debt buyback, but we are not doing everything we can to investigate these charges and to actively help the Nigerian government, a new democracy, in recovering that money. I mean, we owe them that obligation.

    Mr. RADELET. These charges that debt buyback came to light just a few weeks ago, I am aware of the article. This, as far as I understand it, had to do with debts owed by Nigeria to commercial banks rather than to U.S. Government, other governments or to multilateral institutions. These were selling on the international market at a very reduced price of about 10 cents on the dollar. They were purchased by a third party, and then the Nigerian government bought them back at an accelerated rate.

    So, I am aware of just what is in the newspaper article. This had to do with commercial debt rather than government debt in the early 1990's.

    Chairman BACHUS. At the same time he says, ''were avenues for loot acquisition both by Western individuals and banks in the West.'' I am just saying that we need to get to the bottom of this.
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    Mr. RADELET. Absolutely.

    Chairman BACHUS. I think you all would agree.

    Mr. SCHUERCH. We will have somebody cover the rest of the hearing for you, sir.

    Chairman BACHUS. Mr. Frank.

    Mr. FRANK. I come over here, and the first thing—well, I come in this morning, and the first thing I heard we are not going to be in tomorrow, which eases my schedule. So that made me cheerful, and then I heard we are getting out early, at 3 o'clock, and I was cheerful, and I come over here, and you guys have ruined my mood.

    What we are getting is a lot of bureaucratic haggling. You are talking here to a group of people who have been your best friends with regard to the multinational institutions. We are some of the people who carried the ball for the IMF funding in 1998. We worked very hard on HPIC. You are going to need us, because there are going to be efforts to tie HPIC coming from the Senate to the Meltzer Commission's recommendations, which I think is dead wrong. We made it very clear last year that aid to Nigeria was very important to many of us. Nigeria obviously is enormously important, both morally and politically. It is very important in Africa. We just turned to them with regard to this terrible situation in Sierra Leone.

    We agree, we assume you agree, that we have a new president who is doing, I think, even better than anybody could have expected. A man comes into a very difficult situation and is doing a great job, and what we are getting from you is a lot of bureaucratic mumbo jumbo.
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    In the first place, let me ask you this: Are you equating rescheduling with debt relief as a benefit to the country?

    Mr. Schuerch.

    Mr. SCHUERCH. I think only in the timeframe of a single year.

    Mr. FRANK. I am not asking about any timeframe. Are you equating, as a matter of policy, debt relief with rescheduling as a benefit to the country?

    Mr. SCHUERCH. I don't think anybody would do that.

    Mr. FRANK. OK. If you were the president of a country, would your time horizon be one year in thinking about your finances?

    Mr. SCHUERCH. I don't think there is any question any president of a country, his time horizon would be his term.

    Mr. FRANK. OK. Don't tell us that he is really indifferent as to whether or not he gets debt relief or rescheduling.

    Mr. SCHUERCH. I don't.

    Mr. FRANK. But that is basically what you have been answering Ms. Waters. I am very unhappy, and this is not the kind of effort we expect from you. And basically Ms. Waters asked, and you say—I will be honest with you, I don't believe that the president is indifferent as to whether or not he gets rescheduling or debt relief. I think Ms. Waters is very clear. If you tell him he is not going to get debt relief, he will take rescheduling, there is no question about it.
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    Mr. SCHUERCH. Let me correct the misimpression then. I don't think there is any doubt at all that the president would also like debt reduction and 100 percent debt reduction first. That is his first priority in terms of what he would rather have.

    Mr. FRANK. Well, then, let me ask. Then I would invite you to go back and read what you said in the transcript—we have a very reliable reporter over there—because you said he is getting what he wants for this year, and I don't think he is. Do you think he is getting what he wants for this year?

    Mr. SCHUERCH. On a cash-flow basis the amount——

    Mr. FRANK. I didn't ask on a cash-flow basis. Is he getting what he wants this year?

    Mr. RADELET. He is's getting what he requested this year.

    Mr. FRANK. Do you believe that his request was unconstrained by any prior conversations? That is, if the president hadn't had these prior conversations, and he said to you, ''Here is what I would like,'' what do you think he would have asked for?

    Mr. SCHUERCH. Obviously his request is based on what he believes he can achieve.

    Mr. FRANK. And was he told by people in the Administration that he was unlikely to get debt relief this year?
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    Mr. SCHUERCH. I think he was told by every creditor——

    Mr. FRANK. I don't ask you to speak for every creditor. I am asking you to speak for the Clinton Administration. Did the Clinton administration convey to him that he was unlikely to get debt relief this year?

    Mr. SCHUERCH. Yes, certainly.

    Mr. FRANK. You did. OK.

    Mr. SCHUERCH. That is a factual statement.

    Mr. FRANK. Yes. You did tell him that. OK.

    Did his request for rescheduling come after you told him that?

    Mr. SCHUERCH. I believe his request in his budget, which has a $1.5 billion debt service, existed before that statement was made.

    Mr. FRANK. Before you told him he wasn't going to get it, but when he asked for the $1.5, did he specify that he wanted rescheduling rather than debt relief?

    Mr. SCHUERCH. No.

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    Mr. FRANK. Well, I think, there are two angles here. One is are you trying hard enough to get debt relief, and I don't think you are, but that might be debatable. But the suggestion that you are satisfying his needs is not debatable, you are not. He is doing rescheduling. He has got to do planning. You are just adding to his debt. I assume the rescheduling means he pays less now and more later; is that correct?

    Mr. SCHUERCH. Certainly.

    Mr. FRANK. OK. That is a wholly inadequate response. Here is a man who comes into a very difficult situation, economically and politically. He appears to be trying to establish a democratic regime. At the same time he is responding to our request to send his troops into very difficult situations. He has got ethnic difficulties, and your response is totally inadequate.

    Let me just tell you that I am beyond trying to be persuasive. I assume this year there were going to be things you are looking for, and maybe it will be next year. I think, as I look down the row, every one of us are going to be here next year. Maybe you won't be. I hope you will be, or people similarly inclined, but the Treasury Department is going to be looking to the people here to carry a lot of the burden with regard to better policies with the multilateral financial institutions and with debt relief, and if you don't do a lot better job with responding to the needs of this regime which is trying hard to establish a democracy, you are going to find it in a very hard time.

    So please convey to the Secretary my disappointment. Frankly, I think this is less than we were told we would get when Ms. Waters very graciously—and I would tell you, I talked to her about whether or not we were going to be offering amendments. Ms. Waters withheld pressing insistence on Nigeria being included in the interest of the broader debt relief package, and we did that in the expectation that there would be much more recognition of that moral and economic and political case for genuine debt relief than we are getting. So I do want you to convey my severe disappointment to the Secretary at this response, and even more than that, because I don't expect my disappointment to ruin anybody's day, but disappointment can be mutual. We are not only disappointed, but if we stay disappointed, we will be disappointing.
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    Mr. SCHUERCH. Thank you. We, I think, understand the help and assistance Members of the subcommittee have given repeatedly over the years for the international institutions and on debt policy and debt issues. It is not an easy subject, as we know, just judging from the relatively little success on getting the HPIC program funded so far. So we certainly appreciate all the assistance that has been there in the past from the subcommittee and hopefully will continue.

    We certainly, if you will, got the message on Nigeria last year. I can only assure you, even though you are sort of dissatisfied and frustrated with the results we have been able to achieve, that there was a very strong interest in debt relief and in reduction, and certainly there has been enormous effort in achieving relief. There has been a judgment, after talking with other creditors, creditors with vastly more at stake, that it was not possible at this time to achieve reduction, and that is where we stand.

    We believe we will achieve for the one-year period a cash flow benefit that is roughly the same as would have been achieved had we got that reduction, and there will be a continuing debt issue for quite a number of years.

    Mr. FRANK. That is what is bothersome. One, I am skeptical—I believe if the United States had made this as high a priority as it should, we probably would have had more success, but what is not debatable is when you frankly weasel words around and kind of leave the impression that they are equivalent. Cash flow relief is not qualitatively the same as debt relief, and you are trying to leave an impression that you have done more than you have done. And you tell me that you are appreciative of our help, and I guess I can only be grateful that you are appreciative, because if we get this little a response when you are appreciative, I hate to see what is going to happen when you are angry.
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    Mr. SCHUERCH. I can only say we understand the qualitative difference between reduction and——

    Mr. FRANK. No, I don't think you do—I take that back. Of course you do, but that is what makes me unhappy that you try to diminish it in your testimony. I invite you to go back and do a little analysis of your testimony. The effect of what I heard was for you to be kind of trying to minimize the difference. They are very, very different, and a one-year timeframe, no financial analyst uses a one-year timeframe. You are overselling what you were able to give, and as I said, that makes me nervous, because when people oversell what they have done, that leaves me to wonder about the depth of commitment to what really needs to be done, and they are just going to have to do better.

    Mr. SCHUERCH. Thank you. We understand the position. I would say, while we haven't achieved what you desire, what we think we will get an agreement on has some very dissatisfied creditors with the amount of reduction or relief—I am sorry, relief that would occur under that agreement. It has taken since September——

    Mr. FRANK. Well, I guess you better decide who you want to dissatisfy more, them or us.

    Mr. SCHUERCH. I think the problem is they have a role. We only have 3 percent of the exposure. We can't make the decision for the international community. We have to——

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    Mr. FRANK. How much of that is owed to the banks, to the World Bank or the IMF or the ADB? How much of the debt is owed to the multilateral institutions?

    Mr. SCHUERCH. Multilateral debt is $4 billion of the $33 billion.

    Mr. FRANK. So that is more than 10 percent, and we have 3 percent, and the multilaterals have a little more. So it is about 11 or 12. So that is about 15 percent. Well, that is a good start, and what are we doing with the multilateral institutions?

    Mr. SCHUERCH. At the moment we have spent our efforts on the largest portion of the debt, the $25 billion that is in the Paris Club.

    Mr. FRANK. Can't you walk and chew gum at the same time? Are you not able also to pursue this in the multilateral institutions?

    Mr. SCHUERCH. As yet there has not been an active discussion with the multilaterals.

    Mr. FRANK. Why not?

    Mr. SCHUERCH. Because in the multilateral discussion it is focussed on the HPIC program.

    Mr. FRANK. Can't you do more than that? You need more staff or something? You are too busy? I don't understand why you can't initiate discussions in the multilateral institutions about this.
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    Mr. SCHUERCH. I think what is critical is that we reach agreement with others that are major creditors that you can do something. Minus a group agreement, you cannot move anything through international institutions or the Paris Club.

    Mr. FRANK. It is a different story when you are talking about bilateral debt and multilateral debt. Their financial stake is less than the multilateral debt, and the fact that you haven't even begun these discussions apparently with regard to the 11 or 12 percent that is multilateral is a problem.

    Mr. SCHUERCH. I understand.

    Chairman BACHUS. Before I yield to Mr. Watt, there is $33 billion owed, is that about right? And $25 billion of that is to the Paris Club?

    Mr. SCHUERCH. That is correct.

    Chairman BACHUS. And of that $25 billion owed to the Paris Club, that is bilateral debt?

    Mr. SCHUERCH. Bilateral official debt.

    Chairman BACHUS. Three percent of that is owed to the United States?

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    Mr. SCHUERCH. Three percent of the $33 billion is owed to the United States.

    Chairman BACHUS. How about of the $25——

    Mr. SCHUERCH. I think the number is slightly higher, 4 percent.

    Chairman BACHUS. Four percent of the $25 billion is owed to the United States?

    Mr. RADELET. Slightly less than $1 billion dollars.

    Chairman BACHUS. We have talked, when we were discussing debt relief, about the importance—if the United States forgives their portion of that, we leverage that with the other countries, in other words, it influences their decision. I will just use the word ''pressure.'' It puts some pressure on them to then grant debt forgiveness.

    Mr. SCHUERCH. That strategy has been discussed at different times, and on occasion it has had merit. It is one that not doing the reduction, but permitting the reduction in the case of post debt reduction was possible. Where we stand at the moment is a case where we have extremely reluctant other creditors. We have a very small leverage in terms of our own financial circumstance.

    Chairman BACHUS. But we have total leverage over that $1 billion that is owed to us. We could forgive that tomorrow?
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    Mr. SCHUERCH. As a Government, inclusive of both the Legislative and Executive Branches, yes, we have exclusive control over our debt. Current law would require an appropriation to cover the budgetary cost on the credit bill budget. We do not have authority under current law to forgive the amounts that are there.

    Mr. FRANK. Would you yield?

    How much would the budgetary authority be? I know it is obviously—the $1 billion is what is owed, but the OMB scales that down significantly. What would the budgetary cost be of forgiveness?

    Mr. SCHUERCH. That is correct. If you were to do a unilateral debt reduction at 67 percent, the estimated budget cost is $100 million. If you were to do it at 100 percent, the estimated budget cost would be $155 million.

    Chairman BACHUS. So, for $155 million, the United States could make a statement to the world that it is forgiving the entire amount of its——

    Mr. FRANK. Could I ask a question on that, on the arithmetic? If 67 percent is $100 million, how does—$55 is a little high, it seems to me, for the one-third then to be $55—it ought to be $50.

    Mr. SCHUERCH. Actually, it is quite similar. It is one-third increase on both sides. It is quite proportionate.
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    Mr. FRANK. Well, one-third is half of two-thirds, 50 is half of 100. You have got an extra $5 million in there. It should be $150 million, not $155 million.

    Mr. SCHUERCH. That is true. That is true. We will be happy to go with OMB and go through the formulas that are used. It is not a simple discussion for here.

    Chairman BACHUS. But you say that has been discussed?

    Mr. SCHUERCH. Yeah.

    The other difficulty with that strategy is if you, in fact, do debt reduction, in order to lead others to debt reduction or hope they will follow, if they don't, the effect is not a benefit to the country involved. The effect is that the amount of reduction that would happen in Paris Club is slightly less than the other creditors' benefit rather than the other country you would like to benefit.

    So that is the complexity of moving in that direction, but I would say the issue of future policy, beyond rescheduling, is a continuing discussion within the Government. It has not been resolved.

    Chairman BACHUS. I suppose the Congress could at least pass a resolution saying that we are willing to forgive our share of the bilateral debt if other countries are willing to forgive those. That would obviously be making a statement.

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    Mr. SCHUERCH. I don't want to comment on what you might want to put in this legislation at this point. I would say we have pending requests that are substantial in the HPIC program. Last year, as you know, we asked for bilateral and multilateral contributions for the HPIC Trust Fund. The multilateral at $210 million we were not successful in getting appropriated. We did get considerable success in other components of the bill. We have rerequested in a supplemental immediately this spring as a first matter. The supplemental we have not been able to get successfully through the Congress yet, and we are pursuing beyond that amount an additional $225 million for the underlying HPIC program in the fiscal year 2000 budget.

    Chairman BACHUS. And none of that is for——

    Mr. SCHUERCH. There is $435 million that has yet to get through the Congress on the HPIC program that we are pushing for the October timeframe.

    Chairman BACHUS. None of that is for Nigeria?

    Mr. SCHUERCH. None of that includes Nigeria. That includes the perhaps potentially 33 other HPIC programs.

    Chairman BACHUS. Mr. Watt. We have come back from recess. There is not a vote on the floor.

    Mr. WATT. Thank you, Mr. Chairman.

    Let me just pick up and make sure I understand the totality of the impact of what you are saying is you are not forgiving any debt, you are restructuring payments. The debt would basically remain the same, and the payments would actually be interest payments, I take it, would be what basically the reduction would be?
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    Mr. SCHUERCH. Yes, you are basically correct. It increases the debt as much as you put off the payment term, and you have to pay interest on the amount put off until you deal with the issue at a later point in time.

    Mr. WATT. So you are actually increasing the debt under that formula.

    Mr. SCHUERCH. You increase the amount of nominal payment that is due on net present value basis. You do not increase the debt.

    Mr. WATT. OK. Now starting on page 5 and going all the way over through page 6 of your testimony, what part of this bilateral assistance, IMF assistance and MDB assistance, to Nigeria would be in the form of increasing debt to Nigeria?

    Mr. SCHUERCH. Well, any program that lends resources to Nigeria increases debt. The lending from the IMF is concessional lending.

    Mr. RADELET. The IMF program this year, at the moment what is under consideration with Nigeria is that there would be a program in place on which they would not borrow any funds. They want a program in place, they want the economic policies, they want a dialogue with the IMF.

    Mr. WATT. So let me just go through step by step. You guys are talking bureaucratic language. I just understand the numbers. Of the bilateral assistance that is described on page 5, how much of that is debt, and how much of it is not debt?
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    Mr. SCHUERCH. Bilateral assistance from USAID is grant resource.

    Mr. WATT. OK. So it is zero?

    Mr. SCHUERCH. Yes.

    Mr. RADELET. We will go simple.

    Mr. WATT. The amount of that part is zero, right? Of the IMF assistance described on page 5 and continuing to the top of page 6, what part is debt?

    Mr. SCHUERCH. The IMF assessment is not cash assistance, it is getting a program in agreement on——

    Mr. WATT. Would you just answer my question? What part is debt? If that means nothing, then nothing.

    Mr. RADELET. It is not finalized yet.

    Mr. WATT. But what you are talking about, is that zero?

    Mr. RADELET. It would be zero. They would have the ability to borrow money if they so desire, but they are talking about borrowing—so if they did draw on the IMF money, it would be loans, but what they are talking about now is to have the program, but not borrow any money off it. That is why the IMF one is a little bit different.
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    Mr. WATT. So, what you are saying is whatever they borrowed, whatever they got under IMF assistance, would be debt.

    Mr. RADELET. If they decide to draw it, it would be debt, that is correct.

    Mr. WATT. And if they decide not to draw it, then it would be nothing, because it would be of no assistance to them.

    Mr. RADELET. It is not financial assistance. What the IMF would do is put the economic policies in place that would provide the foundation, and it would open the door for other kinds of assistance since other bilateral creditors and countries and other institutions look for an IMF agreement as the first step, as sort of a seal of approval that the economic policies are in place that can restart other forms of assistance. So the Fund program would have those benefits even if they didn't draw money on it.

    Mr. WATT. OK. And going forward to page 6, the MDB assistance, what part of that is projected to be debt?

    Mr. SCHUERCH. That $900 million is either resources projected over three years that would be all be highly concessional debt reduction—it is all debt, but it is a debt that has a very high effective grant element, over 70 percent or so. It is a loan of the following type of nature: You have a ten-year grace period, you have a forty-year repayment, you have a small administrative fee per year and no interest. It is highly concessional.
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    Mr. RADELET. So it is debt that they pay less than 1 percent interest rate, and they pay it back over fifty years, so it is highly concessional.

    Mr. WATT. But it adds to the country's debt?

    Mr. RADELET. It does.

    Mr. SCHUERCH. It adds to the stock of debt, but it adds much less to the net present value of debt; but the net present value also goes up, yes.

    Mr. WATT. What is that, $900 million?

    Mr. RADELET. Yes.

    Mr. WATT. Let me just ask a clarifying question on page 2 of your testimony. You indicated that the AIDS prevalence rates have reached an estimated 5.4 percent of the adult population. Is that AIDS active prevalence rate or HIV?

    Mr. RADELET. That is a good question, and I am not positive. We can look it up, but I believe it is HIV and AIDS together. And it is 5.4 percent of the population between age 15 and age 49. That I am sure of. I believe it is both HIV and AIDS, but we can look into that.

    Mr. WATT. We need to know that, because given the discussions, the distinctions that are beginning to take place, based on discussions with President Mbeki of South Africa.
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    Mr. RADELET. I believe this is the HIV prevalence rate, so I believe it combines HIV and AIDS, the estimated number of people with HIV and AIDS.

    Mr. WATT. And what part would be HIV and what part would be AIDS?

    Mr. RADELET. The estimated number of full-blown AIDS is about one-fifth of that. It is 2.5—the total number of people with HIV/AIDS is 2.6 million people estimated number with full-blown AIDS is 590,000 and the estimated number of AIDS-related deaths so far, 500,000.

    Mr. WATT. And now if you go over to page five again, in the second full paragraph of bilateral assistance, the last sentence, you say of this total, ''$26 million is targeted to HIV/AIDS and other related programs.'' Do you target specifically enough to deal with the AIDS issue versus HIV or is that—who makes those decisions?

    Mr. RADELET. This is USAID funding, and so they are working in cooperation with the government. My understanding is that it is a combination of programs, one of which works at HIV/AIDS prevention, so it is not a treatment program. It is a prevention program which, presumably, is public awareness. There is a child survival immunization program, maternal-child health, so a lot of this is prevention before either HIV or AIDS as opposed to treatment per se.

    Mr. FRANK. If the gentleman would yield. I wish there was something you could do to immunize, but immunization wouldn't have any relevance in this setting, because we have no form of immunization for HIV. If it is immunization, it has got to be something else.
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    Mr. RADELET. That is correct. It is a broad health project. It covers child survival immunization. This specific program I am looking for is not specifically HIV/AIDS. It is a broader health project. You are correct on that.

    Mr. WATT. Thank you, Madam Chairwoman.

    Ms. WATERS. [Presiding.] Thank you very much.

    Ms. Lee.

    Ms. LEE. Thank you Madam Chairwoman. Let me say with regard to the whole HIV/AIDS numbers that you have here, I have visited Nigeria, I believe it was in December, with our Ranking Member on the International Affairs Committee, Representative Gejdenson, and it was around World AIDS Day. And that was the time, I believe for the first time, the government had actually come up with records and numbers with regard to this entire pandemic in Nigeria. These numbers are just the tip of the iceberg I want to say in my response to you. And so I think in the future when we have your testimony and read these numbers, it would be good if you indicate that, because Nigeria is a huge country—what, 120 million people? And we are looking at a disease rate and pandemic that is much more than 5.6 percent of the population right now, that whether it is HIV or full-blown AIDS and the Obasanjo government, thank God, has stepped up to the plate to deal with this; but they have had to fast track the kind of data collection.

    Mr. RADELET. That is correct. These are estimates that were provided to us by USAID. And what is clear in the international experience is that once prevalence rates reach 5 percent, they really begin to escalate quite quickly. So the 5.4 percent may be an underestimate. That is USAID's best estimate at the moment, but the key point is you are absolutely right, that it is ramping up. And I think everyone is quite concerned of the potential for it to ramp up even faster in the very near future.
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    Ms. LEE. So our response should be based on the proportionality of that and just reflect in terms of the United States response and what we are doing. Let me just ask you, Madam Chairwoman, with regard to the whole debt forgiveness question that we have been discussing. It appears that there is more debt, whatever kind of debt you call it, concessional loans or whatever. It is mounting at that point. And what I am wondering is, in your discussions with the President and with the Nigerian government, when you indicate to them that there is no way the United States can do debt relief, but must do debt restructuring and then place them in a position to formally respond based on your giving them that information. Does that lock them in at some future debt if we do get the negotiations and debt forgiveness completed and are able to do the right thing? Because, you say you have a letter saying that they want to do X, Y, and Z; but that letter is in response to your saying you only do X, Y, and Z.

    Mr. SCHUERCH. No, I mean the only thing that locks them in is when they actually make an actual payment, that payment won't be subject to further debt relief after it is made; but any outstanding arrears interest or principal payments are still subject to international discussion so they are still sort of full flexibility to consider solutions to that.

    Ms. LEE. But if we do succeed with debt forgiveness, will then any payments be credited on the credit side of the ledger that they have made under your debt restructuring?

    Mr. SCHUERCH. If we succeed with debt forgiveness there will, it will go from a specific point in time. It is highly unlikely that it will reach back from the time of the agreement to an earlier date. It will deal with everything that is currently stock of debt in arrears if they have not paid, it could deal with that. If they have paid, there is not a crediting process.
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    Ms. LEE. I think, given Nigeria's importance to the U.S., it is important to the continent of Africa and what they are dealing with, somehow we need to see the uniqueness and the importance of this country and figure out some mechanism for a credit. I mean in some way, shape, or form in the future.

    Mr. SCHUERCH. Given the budget process, when a payment is received by the Federal Government it goes into the general fund of the Federal Government. If you want to credit Nigeria within that process, the way to credit it is to appropriate grant assistance equal to the amount of the credit you want through the normal appropriations processes of the Congress.

    Ms. LEE. OK.

    Madam Chairwoman, I think you have taken the whole lead on this debt relief effort. And I think it is important for us to note that, because if, in fact, Nigeria is going to be making payments under some restructuring they have been forced to deal with, and then in future we do get debt relief, whatever payments they have made under this restructuring effort should be somehow taken into account.

    I don't care how much money it is, I think if the AIDS crisis is enormous, they would have enormous needs in their infrastructure development. I mean, somehow I think we need to make sure we are on the right side; and if, in fact, we can get there, which I hope we do, make sure that these payments go somewhere that makes some sense that they have already paid, because we made them do that.
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    Mr. RADELET. If something like this happened in the future, since there is a debt rescheduling which took payments that were originally due new and pushed those off into the future, it is plausible that those payments could be covered in some sort of future agreement. So in some sense they would be.

    Ms. LEE. That would.

    Mr. RADELET. It is one of the benefits.

    Ms. LEE. I think it makes only moral sense and practical sense. One other question I would just like to ask you. In terms of oil production, we all know that we are dealing with an oil crisis in this country and have been trying to figure out a variety of ways to address it. And Nigeria's oil production could be increased. I remember the discussions in the hearings we held at the height of OPEC discussions. Have we done anything in Treasury or within our policy with regard to helping Nigeria increase its oil production at this point?

    Mr. RADELET. Well, I know that people from the Department of Energy have been to Nigeria and have been meeting with Nigeria. Of course, the Treasury doesn't have any particular expertise in any way that we could help with oil production per se. But I am aware that there have been discussions with people in the Department of Energy on these topics, but that is not something the Treasury itself gets involved in. Thank you.

    Ms. WATERS. We are going to have to move on. Gearing to have to be out of the room, and I want to hear the second panel. So thank you very much. I would like to thank you very much for your attendance here today. Obviously we have a lot of unresolved concerns, and I am going to ask to set a meeting with you and maybe Mr. Barney Frank and one or two other people so that we can talk about this and we can talk about timing also.
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    We are entering a crisis period in Nigeria, and I have drafted a letter to the President that speaks to our concerns about both the proposed package and the timing of all of this. We are going to have to push you an awful lot, but thank you very much for being here today. And I do appreciate it, and I would like to call up the second panel. Thank you very much.

    I would like to ask the second panel to come forward. Mr. Blum, Mr. Aluko, and Mr. Ezekwesili. While they are coming forward, let me just say that Mr. Jack Blum is an internationally-known Attorney who is a partner at Lobel, Novins, & Lamont, a Washington DC. law firm. He is an expert on controlling government corruption, international financial crime, money laundering, international tax havens, and drug trafficking. He has assisted and negotiated numerous international business transactions and has assisted clients who have been victims of complex fraud. Prior to this, he served as a consultant to various Government agencies on narcotics and money laundering issues. He has also served as the Special Counsel on the Committee on Foreign Relations in the U.S. Senate where he directed committee investigations on the impact of American foreign policy on narcotics law enforcement. I know him; I have worked with him. I hold him in highest regard, and I am so glad that he is here today.

    Mr. BLUM. Thank you very much.

    Ms. WATERS. Let me just say who the other panelists are, and we will come back to you.

    Mr. Mobolaji Aluko is a Nigerian and Professor and Chair at the Chemical Engineering Department at Howard University. He is currently President of the Washington-based Nigerian Democratic Movement and U.S.A. coordinator to the international umbrella United Democratic Front of Nigeria. He has also written several opinion pieces on the Nigerian situation and has appeared in various public forums advocating for democratic and constitutional reform in Nigeria.
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    Mr. ALUKO. Thank you very much.

    Ms. WATERS. Would you please help me with the pronunciation of your last name? I gave it a valiant attempt. Would you please pronounce your name for me?

    Ms. EZEKWESILI. The first name actually can be called ''Oby.''

    Ms. WATERS. That helps out an awful lot. OK.

    Ms. EZEKWESILI. The last name is Ezekwesili. It sounds exactly the way it is spelled.

    Ms. WATERS. All right. Well, thank you for telling us that. She serves on the board of several national and international organizations, committed to development democracy and accountability issues both in Nigeria and globally. She is one of the founding Directors of Transparency International, an organization dedicated at the international level to preventing corruption. She also founded the Nigerian Chapter of Transparency International. She serves on the board of Tufts University's Education for Public Inquiry and International Citizenship and the Center for Democracy and Development based in the United Kingdom. Currently, she is a graduate student in Public Administration at Harvard University's Kennedy School of Government.

    Thank you all very much for your appearance.

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    Mr. Blum.


    Mr. BLUM. Thank you, Madam Chairwoman.

    I have a prepared statement; and with your permission, I would like to have it made part of the record.

    Chairman BACHUS. [Presiding]. With unanimous consent.

    Mr. BLUM. I will simply speak to the points in the statement. I believe that the biggest single problem Nigeria faces is the corruption of the past, which is hanging over it, which has created the debt and created the chaos that is there today. Solving it will take a lot more than conferences on civil society and how to make people more honest.

    You have to bring criminal justice and recovery of money into play. Absolutely, it is essential. That means getting at the proceeds of corruption. It means going after the billions that Abacha took and the billions more that prior governments looted from the country. Many of those people are sitting in London as some of the wealthiest people in England. Those assets cannot be overlooked. We are talking about billions of dollars. Four billion with Abacha, $40 billion at least since independence. I have heard people estimate as much as $90 billion.

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    The first thing we have to do is treat money that is looted from a country as we treat drug money. Money laundering laws should apply to the proceeds of corruption, and we have had a global epidemic of high-level corruption on a massive scale. It is not just Nigeria. It is Indonesia; it is Mexico. We could go on and on with a laundry list of countries aiding. The countries are invariably desperately poor; and they are left with hangover of debt when the thieving head of state departs. And that debt is then something they have to wring out of the poorest people in the country. So I begin by saying this has to be made part of the issue of money laundering, and we have to be able to apply the same treaties around the world that apply to drug money that has been laundered, to money that is the proceeds of corruption.

    When Citibank testified before the Senate Permanent Investigations Subcommittee, I think you got an idea of how this money gets hidden. Major banks have private banking departments, they invite people in; and then they structure a way of hiding the money. That will be trusts, offshore corporations, bank accounts in bank secrecy jurisdictions. All of which puts it beyond the reach of the usual methods of debt collection. And they came in and said ''We didn't do anything wrong, because the crimes which may or may not have been underneath the money that we put in our private banking department were not crimes in the country where they came in to do the banking.'' I believe that is a distinction that should never be made, that if you want to hide money that is the proceeds of crime in country A, it is a crime to hide that money in country B. And I think that the bill that Chairman Leach has introduced that I know that the Chairman of this subcommittee and the Ranking Minority Member sponsored answers that question and says it is the same whether it is a crime here or a crime there. I think that is very important and that bill should be placed into law.

    I think also that there should be civil liability on the part of banks that knowingly handle the funds of corrupt officials. Jeremy Pope of Transparency International has suggested that, that you go after whoever hid the money. You hold them accountable in the form of the idea of that they are trustees for the people whose money has been stolen.
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    Then we have to continue the efforts to control the ''hide the money industry.'' This is the whole problem of the offshore jurisdictions, the no-name corporations, the asset protection trusts. And there the efforts of OECD, the efforts of the U.N. Offshore Forum, the efforts of the G-7 are essential business.

    And we cannot tolerate secrecy. There has to be complete transparency for law enforcement, and I believe transparency for recovery of stolen assets.

    I think we also need an international convention on civil recovery of assets. The problem here is that if you go to court to try to get money back as proceeds of a crime, you have plenty of treaties and ways of getting at the money. If you go to court as a civil litigant, those treaties don't apply. Yet civil law is really the first line of defense, because that is where you can make a complicated case. You don't need jury trials; you don't have the same level of difficulty in bringing the case. And I think we have to facilitate civil litigation where fraud and taking of government assets are involved.

    I think, and this is probably the most important thing I have to say today, is we need significant reform in the multilateral lending agencies. Underneath the debt you were talking to the Treasury Department this morning about, is theft. If you talk to people at the World Bank, they talk to you about ''leakage.'' And leakage is the euphemism for the money that disappeared from the money that was lent.

    So far, the Bank has not taken the responsibility of recovering the money that has been stolen from Bank loans, period. They don't do it. They say that is a responsibility of the country from whom the money's stolen. All they are going to do is collect the debt. And yet they have now begun a process of auditing many of these loans and have, in those audits, discovered that as much as 60 and 70 percent of the money has been stolen. Either the cars that were needed for the project were registered to private individuals, the education component went to pay college tuition in the U.S. or in England, the contractors got padded, they got extra money, there were kickbacks to government officials. Whatever the modality, the money was taken. Now what happens is when you get these international loans—and it is not just the World Bank, it is all of the international lending agencies—you get no problem at all with collection, because the IMF is the collection agency.
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    They come in and say ''Here, we want you to restructure so you can repay these loans,'' and the restructuring is the taking of the money from the poorest people in the country to repay the money that has been stolen by the richest people. And that is an unacceptable proposition, and it should never be. What should be happening, in fact, is a concerted funded effort with expertise by both the IMF and the World Bank to go after the people who took the money and make them repay it.

    I think it is kind of amazing that some of the banks that are waiting in line to collect from Nigeria, I would guess have in their private banking departments the funds of people who have looted the very projects for which the money was lent. There is a kind of irony to all of this and I think one should be looking to recover some of that money and bring it back.

    Then internally, the World Bank and the IMF should have personal financial disclosure for high level employees. It is inexplicable to me how they have gone all these years without the disclosure that a Member of Congress makes, that any high level Federal employee makes. When any institution is in the business of giving out $30 billion a year, temptation does arise. When I have raised this issue with the Bank, it was explained to me that doing anything about it would be rather bad for employee morale. If it is, so be it.

    I think that it is very, very important that the Bank sets the standard for the rest of the world, not with seminars at the village level on how to be honest, but with its own direct performance. I think also there has to be transparency in the Bank's internal auditing process. Right now they are doing audits which are disclosing major frauds with loans, yet nobody has made public the contents of those audits. And those audits have to be made public for the democratic process to work.
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    I believe there should be a pool of people who work with the government of Nigeria, perhaps on the staff of the U.N., perhaps independent groups assembled and funded by the World Bank or the IMF, to go at the problem of recovering the money. And I believe that effort should be funded by the international lenders themselves as part of the process. In other words, not just go to them and say, ''Hey, here is how we are going to collect the money in the future, but let us now all work together to go after the guys who are living in luxury in a place like London or on the Riviera—or wherever they have gone and say, 'Sorry time is up; we are going to get the money back.' '' Thank you.

    Chairman BACHUS. Mr. Aluko.


    Mr. ALUKO. Mr. Chairman, Ranking Minority Congresswoman Maxine Waters, honorable Members of Congress on the Subcommittee on Domestic and International Monetary Policy, ladies and gentlemen, it gives me great pleasure and it is a privilege to testify before you today on ways in which the United States and its other partners in the international community might be able to assist Nigeria in creating sustainable economic growth, after so many wasted years under tyrannical and unprogressive military rule. Due to the shortness of time that I have, I will be rather direct and state that those ways include one, debt relief, including outright cancellation; two, loot recovery from Western banks; and three, constitutional reform.

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    Let me first speak to debt relief. During the period 1986 through year 2000, the exchange rates between the U.S. dollar and the Nigerian naira changed from $1 U.S. equals 2 naira to $1 U.S. equals 100 naira. Furthermore, its internal debt increased from $0.36 billion to $4 billion today. That is internal debt.

    During this same period, Nigeria's external debt increased from $11.5 billion in 1986 to what it is currently today, about $30 billion, although there are some discussions about whether it is $30 or $33 or whatever. And that is about 70 percent of the 1999 estimated gross domestic product and of which, out of that $30 billion, $18 billion is interest payment, interest arrears. During this period, it has, on an official level, tried everything to manage this debt: Debt rescheduling, debt conversion, debt buy-back, curtailed new borrowing. Yet it has seen little or no relief. The strategy is just not working and cannot work.

    For the U.S., these dollar values that I have spoken about are rather not large, but for Nigeria, they are insurmountable and go to accentuate the fact that Nigeria with its monoculture of oil and its 120 million population is a very poor country, even though it is oil rich.

    In fact, the current 2000 national budget of Nigeria, which the executive and the legislature are still haggling over, is barely $6 billion equivalent, while the U.S. budget of this year was $1.8 trillion. This $6 billion for the District of Columbia with a population of 247 thousand people, I think, is to be spent on its school education. But this year's 2000 budget for Nigeria means that 120 million Nigerians will have to starve for about five years if it is to use up all its money to pay off its external debt, even if all interest payments were frozen today.
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    What all of this means, Mr. Chairman, is that for Nigeria to ever be able to reap any democracy dividend which President Obasanjo so much harps upon these days and improve the lives of its citizens, it is imperative, it is mathematically imperative that Nigeria be granted a mixture of three things: immediate stoppage of interest payments; outright cancellation of a substantial portion of that debt; and an institutional redirection of some of the portion of that debt under international supervision to definite projects within the country such as for health, AIDS and malaria; water provision; and education within the country.

    In general, these recommendations tally with Jubilee 2000 recommendations for the cancellation of debts of developing countries, which I commend to this subcommittee with some modifications, of course, depending on each country.

    But, I must talk as my brother's keeper and say that really it is not only Nigeria, but Africa that we must talk about, because more generally Africa's debt burden as a whole owed by its governments is currently $350 billion. Of the HPIC nations, 33 are in Africa. If the United States were to exercise greater political will and a serious commitment to find funds to make debt relief true, that will become a reality. The United States Congress must appropriate, not just authorize, to increase funding levels and from the present paltry $75 million to the needed $435 million for this year. The fact of the matter is that if the United States Government contributes its fair share to the international debt plan, and if you and your colleagues approve $810 million over the next three years, this will encourage other creditors to do their part, and $90 billion in debt can be written off for the 33 poorest countries in the world. I think the world is waiting for action.

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    Let me go to loot recovery. Despite all the debt, Nigeria remains an underdeveloped country with a very weak physical infrastructure and an outrageously low human development index. Although a lot of money was spent on education, particularly in the mid-1970's and some of us on this panel are beneficiaries of that, of money spent, quite a lot of the money was spent on conspicuous consumption, funding of unprofitable government-owned parastatals and public projects that were later abandoned and, of course, unproductive salary increases in the public sector. However, more outrageously, for the overwhelming portion of that debt, it is estimated that over the years, $98 billion U.S. dollars have been stashed away by Nigerians in foreign banks, illegally acquired money by its leaders, family members and cronies.

    During the Gulf Crisis, for example, $12 billion just went missing like that. In five years alone, 1993 to 1998, General Abacha and some of his family members are now confirmed to have salted as much as $5 billion away in Swiss, German, UK, and even American banks among several other countries. I think these figures are mind boggling. One wonders really how these large sums from developing countries moved between banks in Western countries without any eyebrows raised when within the U.S. to move some amount of money raises a flag with the IRS or, I think, with the U.S. Reserve Bank.

    However, not all the loot was acquired by Nigerians alone. Some of the very schemes that were used to reduce our debt were used as avenues for loot acquisition by Western individuals and banks. In this respect, my organization, the Nigerian Democratic Movement, recently passed on to the U.S. State Department and IRS a thick document of dubious looking schemes from 1988 to 1993 involving many U.S. individuals and some otherwise reputable banks. I must say I have gotten a call from the U.S. State Department saying that that file has been moved to—I believe they have a crime enforcement and drug department, and I also got a call from the IRS that they are working on it.
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    These schemes involve as much as $6 billion of Nigerian bought-back debt in promissory notes, government debts and bank debts, and they have already been mentioned here in connection with the Fashanu Report, so I will not talk much more about that.

    If only we can recover a substantial part of this loot, it can be used to pay back quite a lot of our excruciating external debt. Obviously, a multilateral approach is clearly needed, because in this digital age, money is readily transferred across capitals with the click of a mouse. If we can plug the complicity of Western individuals and banks in the raping of developing countries, then maybe Africa, the continent of Africa, will not be described as ''hopeless'' as The Economist magazine recently said.

    Finally, let me go to the issue of constitutional reform, because all of this happens within a milieu of law, and that law, the wellspring of that law, is the constitution of our country. Unfortunately, during the years of military rule in Nigeria, the government was run by decree, by fiat. The various military governments suspended the various portions of the constitution and even the unsuspended portions were not obeyed. For years we had the oxymoron, ''Federal Military Government of Nigeria.'' And each time, our constitution had stamped on it, ''Made in the Barracks.'' But since May 29, 1999, Nigeria once again runs a civilian regime and which is similar to the United States Government.

    However, that is where the similarity ends; and our constitution needs to be revised so as to have a true federalism. A consultation by the executive of the legislature, for example, is considered a necessary nuisance. The federal might is suffocative of state rights, which in turn are suffocative of local government rights. There is just too much power and too much money in the center to the detriment of the states where the money is derived. And the physical infrastructure makes it impossible to rule such a big country from the center. And the constitutional requirements to make a change in this constitution are onerous; and within the ethnic, religious, and socioeconomic milieu of our country, it is almost unlikely that any changes can be made anytime soon.
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    That is why some of us in the prodemocracy movement have been demanding a national conference of nationalities and civil societies of some sort to settle the national question in Nigeria, as well as to come up with a comprehensive root-and-branches reform of the constitution. But these are currently rather hastily and haughtily dismissed, because the legislature and the executive feel threatened by such a device. But we fear that by the time it is recognized that a sovereign national conference is absolutely necessary in my country, that time may be too late. And I think that the United States and the international community have an obligation to nudge all parties in Nigeria toward dialoguing so as to have constitutional reform.

    In conclusion, Mr. Chairman, Nigeria has its work cut out for it. Nigeria will be largely developed by Nigerians. It will only develop to the country of promise if its leadership has the will and its citizenry develop the fortitude to constantly demand so. However the international community has a moral obligation of ensuring that it gets debt relief, recovers foreign loot, and is nudged toward fundamental constitutional reform. Thanks for listening.

    Chairman BACHUS. Ms. Oby Ezekwesili.


    Ms. EZEKWESILI. Thank you, Mr. Chairman. It is indeed a great privilege and honor to be able to sit before you, as well as a woman I have really admired from far away, the Ranking Congresswoman, Maxine Waters.

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    I am very delighted to be able to make this presentation to you. I have started by basically structuring my thinking as far as what the U.S. national interest should be and what it is as far as Nigeria is concerned. I know that basically, economic interest is one of the critical core interests of the U.S., and I say that because the issue of new markets represent a very critical part of the globalization drive of the U.S. for the rest of the world. And having taken that into recognition, I would say that a country like Nigeria represents one of the new frontiers for the globalization that we know we can no longer do anything about; it, i.e. globalization, definitely is like the law of acceleration. It would definitely happen no matter where we are. So if Nigeria is to constitute a new market, then it must become a really democratic and viable economy. Thus, it is within the interest of the U.S. that this should be fostered and nurtured.

    Now Nigeria is a country of 120 million people. It is a gateway to another 100 million people in the West African region. That counts for a lot, and I also think that the importance of Nigeria as the fifth major supplier of oil to the U.S. counts for something as far as U.S. economic interest is concerned.

    The issue of promoting U.S. democratic values and economic norms constitute part of the U.S. national interest. And the democratic values that have been promoted around the world would actually get a lot of credence if the democratic situation in my country is consolidated. If there is no reversal of this new nascent and fledging democracy that we have presently, the U.S. has a lot going for its export of democratic values in being able to say that it championed democracy and it has worked in a country like Nigeria. So, Nigeria can become a model of how democracy can be nurtured in post-military environments in Africa.

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    Having laid this framework, I think that one of the things that is important is for the U.S. to look at Nigeria from a perspective that is not hop, step, and jump. There has not been an integrated approach toward Nigeria or Africa. As a matter of fact, within the U.S. policy-elite community, because some sort of inability to get an integrated perspective on the continent and its components, an unstructured Africa policy always sort of underlies the efforts of the U.S. Government. I, therefore, propose that we need for the U.S. to develop and implement an integrated economic development policy toward Nigeria, a policy that ties together trade and investment, development assistance, debt cancellation, transparency and accountability in a coherent manner that is aimed at expanding mutually beneficial economic ties.

    Having said that, the principle pivot of my discussion before you today would be on the issue of debt cancellation transparency and accountability. I think that Jack Blum, who incidentally serves on the same board with me, and my dear comrade in the fight for democracy, Mobolaji Aluko, they have both made the point very well. I wouldn't belabor the point; but I would like to stress that in Transparency International, we have been able to move the issues that pertain to corruption a higher level; farther from where we were coming from when we initially started the concept of dealing with issues relating to corruption. We had many people who thought we were crazy. It wasn't the kind of ''C'' word you uttered in respectable circles we were told; but we were very, very resilient. And today, thank God, we have the OECD convention and law against bribery in international transaction. Now this is modelled after the U.S. Foreign Bribery Act of the 1970's, and that is a plus for the U.S. in terms of promotion of its values.

    Now having said all of this, what I think is critical is that the Transparency International effort at fostering anticorruption strategies has already gone up to a particular level. The next level that would give teeth to all of this work is a level that enables us to return the loots of corruption that have been taken away from African economies. If that is not done, there is no deterrence of any kind. We cannot begin a new life in any of these countries if something is not done to bring closure to the events of the past. And that is where I think that if anyone wants to empower African people in order to hold up the democratic norms in their countries, they would have to empower them by showing that no leader can get away with the loots of the continent. And I think the U.S. is the country that is best able to provide political leadership for this ability to empower the people. Right now, the people need to be empowered. The people of Africa need to be moved beyond the state of being victims, victims of the dalliance between international financial institutions and kleptomaniac leaders that ruled the continent at a particular stage in its history.
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    I think that African countries have many victims in the form of its majority poor people. And if the Banking and Financial Services Committee of the House of Representatives, that I applauded so much for the work it did as regards the Jewish Holocaust victims' assets wills, I think there is an equivalent, there can be a parallel drawn to those two situations. Nothing can compare with the Holocaust victims situation, but I mean, when you look at a situation where in Nigeria, my dear country, we have had it so badly that poverty level is 60 percent; and the level of poverty that you see is something that you cannot handle. Our people are victims. We have many victims. If they are victims, then the same treatment that was given to the Jewish Holocaust victims ought to be given as far as corruption proceeds is concerned. I am really passionately making a case for the recovery of corruption proceeds from Nigeria, Africa, through a similar kind of global concerted effort.

    I don't think that it works when we say a window of opportunity has been opened by Switzerland and the different countries in Africa should make their different cases. We know that they do not have the level of sophistication to be able to effectively go through the maze of legalities and technicalities that all of these issues of money laundering and of corruption, as you know, entails. So the U.S. has an obligation to provide political leadership and galvanize global concerted effort the same way it did when the U.S. took up the political leadership for global recovery of corruption proceeds of the assets of Jewish victims. U.S. got it. And it happened.

    I am asking you to please take that leadership. And I would just simply highlight the fact that the comprehensive anticorruption strategies that have been implemented in various African countries and, of course, my country, Nigeria, where the first bill that Obasanjo put in the national assembly was the anticorruption bill, would need the support of the U.S. The U.S. has effectively built up institutions for oversight, and I think that that is one thing that we would like to have you promote and take across to the rest of Africa.
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    Having said that, I will just simply trust that you are going to read the content of my paper, because I wanted to bring the passion to this issue of recovery of our moneys more to you. And say to you that Nigeria is today at the turning point in the history of countries where the political will, that is, national and international, combined with results-oriented action and mutually beneficial collaboration often leads to the emergence of a new nation. I think that my country can emerge to become a true and just nation for our people and become a true and good neighbor for the rest of the world. Our people are ready for a new deal. And, because I know what the U.S. stands for, I am bold to say that our people today are ready to work for the new deal.

    We are not ready for handouts. We are ready to work as partners to foster a new Nigeria that emerges stronger and virile, and I think that the person who has been elected, President Obasanjo, understands exactly where the people are right now. And that is why he is saying ''I need a democracy dividend to consolidate this democracy.'' And I think you should become allies in fostering this.

    Thank you very much.

    Chairman BACHUS. Thank you.

    What we are going to do, I think we will ask very brief questions of the panel, then we will have Mr. Hamza come up and testify, because we are going to go into a session where we are gearing to have several votes.

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    But, let me just follow up on the last testimony and ask you, Mr. Blum, is it not possible for the United States political leadership to ignite the same effort that was used to recover Nazi gold and artwork for Nigeria so that the stolen wealth of that country is recovered. And it is estimated to be enough to cover their debt obligations.

    Mr. BLUM. I think we can, and I think we should. I think that the mechanisms are there. It can come in many different forms. We could do it through multilateral organizations, by pressing the World Bank to put together the teams to work on it, to investigate where the money went to provide the basic structure that would give the Nigerian government the ability to go after the money. I think it is a question of stepping up to the plate and doing it.

    I also think that on the question of debt, when you are talking about the money that is owed, one has to look underneath that debt and say was this legitimately incurred. Many of these loans include government guarantees of loans for projects that never happened or projects that were looted one way or another by different people who were engaged in the construction activity. I think we should be asking before we routinely assume the debt has to be repaid what happened to the money underneath that debt and maybe if some of these other governments that are involved guaranteed loans and there is nothing to show for the loan, maybe it shouldn't be repaid, maybe it should be canceled.

    Chairman BACHUS. All right. Thank you.

    Ms. WATERS. Let me just say that I appreciate the testimony that we have been given today. It is quite clear to me that we basically all are on the same track here in terms of understanding the terrific debt that is burdening Nigeria and the need for debt forgiveness. We are also understanding more having seen the testimony here from the Treasury Department that they don't appear to be working as hard as they can with the Paris Club and using our leverage of the United States in order to get the other countries in line with debt forgiveness.
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    This whole issue of how to recover the assets is an issue that we are going to have to frame the same way by which we get this country moving. And I like your suggestions, Mr. Blum, of dealing with World Bank and the IMF. I intend to work with my care to do this; but I am prepared to do everything, including going to the U.N. I am going to send information to the President; I am going to do everything that I can, because this is wrong. It is not fair. It is impossible for this country to move forward with the debt and the way that we are and we are too slow. It has taken much too long. So I thank you for your testimony, and I thank you for your insights into Nigeria and your willingness to come forward as citizens, as individuals here in the United States, born in Nigeria, who love your country and love this country also, but who are willing to say some very tough things about what needs to be done. I really do appreciate it.

    I am committed. I spent a lot of time criticizing Mr. Abacha. I spent a lot of time going after him, and I owe it to the people of Nigeria to support the democracy that has been initiated there. I owe it to the President. I owe it to the leaders there; and, Mr. Chairman, I would like to enter into the record communications both from the Honorable Umar Na'Abba who is the Speaker of the House of Representatives, who I have spent a lot of time talking with and who sent this letter, and also communications from the Right Honorable Dr. Chuba Kadigbo who is President of the Senate, who sent a letter here as a follow-up to our meeting in Nigeria. And it is very clear too, no matter what is said by Treasury or anybody else that nobody is asking for restructuring; but they are asking for forgiveness and it is reiterated and spelled out very clearly. This will go into the record. Thank you, Mr. Chairman.

    Chairman BACHUS. And the subcommittee will also take note that there are 72 million in Nigeria living on less than $1 a day in a country of 120 million. So these efforts are critical to their very existence. At this time we are going to go right into Mr. Hamza's testimony, a member of the House of Representatives of their Banking Committee; and I will tell you that we have about five minutes and apologize for that
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    Mr. HAMZA. Thank you Chairman Spencer Bachus and Ranking Minority Member Waters and honorable Members, distinguished ladies and gentlemen. My colleagues and I, members of the Subcommittee of Banking and Currency of the Nigerian House of Representatives, are very pleased to be present among you this afternoon. I feel particularly honored by the opportunity to present these brief remarks at this subcommittee hearing. I would like, Mr. Chairman, to thank you and Members of your subcommittee for the opportunity.

    Mr. Chairman, we would also like to thank you for convening this hearing which is dedicated to issues which are very relevant to today's Nigeria. This action is another evidence of your continuing support for Nigeria and our new democracy. We in Nigeria are—particularly in the House of Representatives—are quite aware of all the actions overtaken by the U.S. Congress to support and assist Nigeria in this particularly delicate time of our country's history. We are most grateful for this and would like to request for your continued understanding.

    Mr. Chairman, years of oppressive dictatorship and reckless economic policies have left the Nigerian economy badly battered and the Nigerian people greatly impoverished. Our people expect that democracy will reverse this dire situation.

    Nigeria is committed to economic reforms and responsible fiscal policies. The Nigerian government has made it abundantly clear to the IMF and the World Bank that it is willing to accept even supervision to some extent of implementation of fiscal measures designed to put our country back on the right track. However, the task ahead is very challenging. It is rendered more difficult by a huge debt burden now estimated at well over $31.5 billion. Our current debt service obligations require us to commit substantial proportion of our annual GDP and roughly forty percent of our export earnings.
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    You are aware, however, that Nigeria has domestic and regional obligations which our people, and indeed the world, expect us to fulfill. On the domestic front, there is an urgent need to rebuild our social and economic infrastructure and to elevate the poverty of our population. In the regional context, Nigeria has expended vast resources, by our own estimation, some $10 billion, in order to maintain stability in West Africa, particularly Liberia and Sierra Leone. We intend to meet our obligations. In turn, we count on our friends, particularly the United States of America and particularly Congress to understand that our debt overhang renders our task most difficult indeed. We are happy and grateful that the United States is willing to help find a way of reducing Nigeria's debt burden. We urge you not to relent in your efforts.

    Mr. Chairman, in an earlier question to the Treasury Department officials you asked what the international monetary organizations have been doing to help curb corruption in Nigeria. As your people would say, pretty little nothing, nothing. The nonborrowing or nonlending to Nigeria from 1997 was not a deliberate policy on their part. It was as a result of a moratorium placed on foreign borrowings by, of all people, General Abacha himself, otherwise it would have been business as usual.

    The Treasury officials will not tell you everything. They will not recommend debt relief for Nigeria unless we reach agreement with the IMF, and what is agreement with the IMF and the World Bank? They want us to borrow more money. We don't need more loans. We don't. What we are saying is give us a chance. Nigeria is not rich, but we are potentially rich. The debt burden is so high it is almost impossible for us to meet our obligations. The people of Nigeria expect a change from the military style of rulership to the democratic government we have at the moment, but for how long we are going to wait I don't know. We have a difficult situation. Democracy begins with breakfast. If they don't have lunch, by dinnertime they will take from the devil. I urge you to help us.
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    Thank you.

    Chairman BACHUS. Thank you very much. We will have your statement disseminated to the different Members. Our hearing is recessed.

    Ms. WATERS. Mr. Chairman, before we recess, I have three more items I would like to place in the record.

    Chairman BACHUS. Without objection.

    Ms. WATERS. These are items dated March 7, 13 and 17 that I have sent to the President describing what I think is a war in crisis in Nigeria to try and get some attention.

    Chairman BACHUS. Thank you. With that, I will recess.

    [Whereupon, at 1:05 p.m., the hearing was adjourned.]