The military leader of debt-crippled Nigeria has proclaimed that his country had unilaterally set a ceiling on the amount of its international debt it is willing to pay this year.
At first blush, Maj. Gen. Ibrahim Babangida's New Year's Eve announcement sounded like a bold challenge to the international creditors who are owed about $17 billion by the government of Africa's most populous nation.
It appeared that the former tank commander who seized power in a coup Aug. 27 and who told the International Monetary Fund on Dec. 13 that he did not want their $2.5 billion bailout was now telling the world banking system to leave him alone.
The fine print of the general's New Year's Eve budget message, however, tells a far more conciliatory, fiscally responsible story, according to western diplomats in Lagos, the Nigerian capital.
Babangida did vow that Nigeria would not pay more than 30 percent of its foreign exchange earnings this year for servicing the country's external debt, although even that pledge was softened the next day by Finance Minister Kalu Kalu, who told reporters that the 30 percent figure was a target, not a strict limit.
The setting of a limit on debt payments recalled the controversial announcement by Peruvian President Alan Garcia in July that his country would not pay more than 10 percent of its export earnings to service the foreign debt.
But Babangida went on in his televised budget message to announce several painful reforms that, taken as a whole, amount to what one western diplomat in Lagos called the most far-reaching overhaul of the country's oil-dependent economy since the early 1980s.
The oil glut and falling oil prices have cut Nigeria's export earnings in half since 1980. The government, dependent on oil for 96 percent of its export earnings, found it could no longer hold together an economy that had been severely undermined during the oil-rich 1970s with corruption, mismanagement and expensive government building plans.
The IMF, during two years of negotiations with Nigeria that Babangida ended last month, had demanded that the government adjust to the oil glut by slashing the generous subsidies it gives consumers for fuel, that it devalue its currency and that it get rid of an import licensing system that critics say is riddled with corruption and inefficiency.
"What you are seeing in the New Year's Eve speech is a virtual acceptance of the entire IMF program, without the name of the IMF attached to it," said one diplomat interviewed by phone in Lagos.
Babangida eliminated all subsidies on gasoline and diesel fuel. The move, expected to double the price of a gallon of gasoline from about 80 cents to about $1.60, will save $900 million this year, according to the government. It said the savings would be used to rebuild about 37,000 miles of rural roads.
The general did not explicitly devalue the naira, which trades on the black market at between 14 and 15 percent of its official value. But he did impose a flat 30 percent tax on all imports, which amounts to a de facto devaluation. On Thursday, Finance Minister Kalu told reporters in Lagos of plans to allow auction sale at market rates of foreign exchange by commercial banks.
On the third IMF demand, however, Babangida did not do away with the import licensing system. The system allows certain individuals and companies to buy foreign goods at the artificially low official exchange rate and then resell them at their true market value, frequently at huge profits.
Babangida's announced import reforms open the licensing procedure up to increased public scrutiny and allow some individuals to pay for imports with foreign currency.
What Babangida's reform package does not offer, and the IMF package did, is billions of dollars in credits and loans to smooth Nigeria's transition to fiscal responsibility.
"What financial people have said here this week is that the Nigerian government is going through all the agony of structural adjustment, but they are getting none of the reward. They are really doing it in the hardest possible way," said a diplomat in Lagos.
The IMF loan would have amounted to about $2.5 billion over three years. But if Nigeria had signed an IMF agreement, it would have released another $1.5 billion from the World Bank and up to $1 billion from commercial banks. The agreement also would have allowed Nigeria to reschedule medium- and long-term debts, and free up oil income for paying debt service.
Shortly after he seized power, Babangida put the question of whether to accept the IMF package to a national debate. The debate made it clear that Nigerians felt signing the IMF agreement would amount to an abrogation of national sovereignty. There also is a strong sentiment, after years of corrupt government in Lagos, that any large outside loans would be stolen by politicians.
Now, without IMF and World Bank money, Nigeria must keep its economy going while persuading skeptical commercial bankers and creditor nations to reschedule their loans. In the past, western creditors have insisted on an IMF agreement as a condition for rescheduling.
According to bankers and diplomats familiar with Nigeria's debt situation, the total debt bill for 1986 is likely to eat up about 60 percent of the country's export earnings. That is twice as much as Babangida said he would be willing to pay, so some rescheduling appears to be necessary.