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EXTERNAL DEBT AND NIGERIA’S SOVEREIGNTY   

 

Umar Dantani1 

 

1Department of Political Science, Faculty of Social Sciences, Usmanu 
Danfodiyo University, Sokoto, PMB 2346, Sokoto, Nigeria 

 
 

 
 

 ABSTRACT 
 
Article History 
Received: 9 January 2019 
Revised: 26 February 2019 
Accepted: 2 April 2019 
Published: 20 May 2019 
 

Keywords 
External debt 
Sovereignty 
Adjustment programmes and 
IMF and World Bank. 

 
JEL Classification:  
H63. 

 
This paper examines external debt and Nigeria’s sovereignty. The methodology of this 
research is based on content and qualitative analyses. The paper argues that external 
debt influences the sovereignty of Nigeria in different ways. These include the 
imposition of adjustment programmes ie privatization, devaluation, deregulation and 
trade liberalization. These programmes have subjected Nigeria to political control by 
the international financial institutions and affected Nigeria’s sovereignty vis-à-vis the 
place of the country in the comity of nations. The paper also argues that the imposition 
of adjustment programmes on the country provides opportunity to the IMF and the 
World Bank to monitor the implementation of the programmes that infringe on the 
sovereign right of the country. Furthermore, the paper believes that the imposition of 
high debt burden on the country infringes on the sovereign power of Nigeria to 
perform its human rights obligations towards its citizens. Moreover, this research 
argues that the introduction of debt rescheduling i.e. debt-equity swaps by the creditor 
countries give them the opportunity to determine how resources from the debt-equity 
swaps should be invested in the country. Therefore, the paper concludes that for 
Nigeria to utilize its sovereign power within the comity of nations it ought to have 
deimplemented adjustment programmes that are agents of imperialist control.  
 

Contribution/Originality: This study contributes to the existing literature on external debt and sovereignty. 

This study is one of few studies which have investigated the implementation of SAPs in Nigeria. The paper 

contributes to the first logical analysis of debt overhang and debt burden. The paper’s primary contribution is 

finding that external debt subjects Nigeria to political control. This study documents for proper management of 

external debt. 

 

1. INTRODUCTION 

Nigeria’s external debt started in 1958 when $2.8 million was incurred to finance railway construction 

(Anthony, 2005). The external debt of $1 obtained from the International Capital Market (ICM) in 1978 increased 

Nigeria’s external debt to $2.2 billion. The loan was the genesis of Nigeria’s debt crisis because it came with 4 

percent interest charges (Anthony, 2005). Subsequently, in the 1970s and 1980s, Nigeria obtained external loans 

from the World Bank to finance the economic sector and other superstructures in the social formation. Specifically, 

the loans were obtained to finance trade, support balance of payments and achieve socio-economic development. 

External debt is also an instrument of imperialist exploitation and political control because high debt burden is 

imposed on the weaker debtor nations. For instance, Nigeria’s external debt repayments in 2002 amounted to $1.8 

billion. The repayment of debt infringes on the sovereign power of Nigeria to finance economic sector and other 

Financial Risk and Management Reviews 
2019 Vol. 5, No. 1, pp. 25-39 
ISSN(e): 2411-6408 
ISSN(p): 2412-3404 
DOI: 10.18488/journal.89.2019.51.25.39 
© 2019 Conscientia Beam. All Rights Reserved. 

 
 
 

 
 

 

 
 
 
 

https://www.doi.org/10.18488/journal.89.2019.51.25.39


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superstructures as well as carry out human rights obligations in the social formation. By 1980s, Nigeria’s debt crisis 

became manifest. The crisis could be attributed to poor lending and inefficient loan utilization, mismanagement of 

external loans, unequal trade and exchange rate policies, accumulation of arrears and penalties, increase in interest 

rate, poor debt management; and increase in the exchange rate. Others include dependent industrialization, the 

decline in the prices of oil between 1981 and 1982, lack of effective feasibility studies on a project to be financed 

with external debt, the conspiracy of IFSs/West in assisting the corrupt leaders to misappropriate external loans 

and the adoption of Structural Adjustment Programmes (SAP).   

For instance, in the early 1970s the International Financial Institutions charged a 4 percent interest rate but in 

1989 it reached 12 percent. The increase in interest rate has increased Nigeria’s debt overhang to $28 billion in 

1991. The devaluation of the Nigerian currency, the Naira has also contributed to Nigeria’s debt crisis because 

between 2002 and 2003 the country’s external debt increased by $4 billion due to depreciation in the exchange rate 

of the Naira to Dollar. In fact, debt crisis and debt burden affect the productive forces, distributive capacity and 

exchange relations of Nigeria because massive resources are allocated in the payment of debts than in investment, 

provision and maintenance of economic sector and other superstructures. Arguably, it hinders investment and 

affects growth and development in the Nigerian social formation. Consequently, this affects social relations of 

production between Nigeria and international financial institutions in particular and it trading partners in general. 

Therefore, external debt has far reaching impacts on the sovereignty and political economy of any debtor state. 

Nigeria, has suffered a lot from the impact of its external debts. In fact, the last two decades have been characterized 

by a severe economic and social crisis in the country. The prevalence of the crises was as a result of the adoption of 

the capitalist mode of production in response to debt predicament.  

External debt is a major challenge to sovereignty. Sovereignty is an important characteristic of a state. The 

characteristics of a sovereign nation include absoluteness, comprehensiveness and universality, permanence, 

inalienability, exclusiveness and indivisibility. These are essentials for a sovereign nation to make choices, decisions 

and take courses of actions that are independent without external influence, manipulations or control. However, 

external debt, an imperialist agenda is tied to acceptance of certain conditionalities and their implementations. 

These include adjustment programmes, democracy and good governance as well as adherence to the rule of law. 

The imposition of devaluation, privatization, deregulation and trade liberalization by the IMF and the World Bank 

on Nigeria interferes with domestic policies of the country that undermines its political sovereignty.  

External debt is also an instrument of imperialist exploitation and political control because high debt burden is 

imposed on the weaker debtor nations. For instance, Nigeria’s external debt repayments in 2002 amounted to $1.8 

billion. This infringes on the sovereign power of Nigeria to carry out its human rights obligations towards its 

citizens. Therefore, external debt has far-reaching impacts on the sovereignty and political economy of any debtor 

state. Nigeria has suffered a lot from the impact of its external debts. In fact, the last two decades have been 

characterized by a severe economic and social crisis in the country. These arise as a result of adjustment policies in 

response to debt predicament. This paper examines how external debt influences the sovereignty of Nigeria. 

 

2. LITERATURE REVIEW 

Over the years the sovereignty of state has been a determining factor in interstate relations and the foundation 

of world order. The concept has its origin from customary international law and the United Nations Charter. 

Sovereignty is an essential element of maintenance of international peace and security and protection of weak states 

against the strong ones (Boueteflika, 1999). Sovereignty is a complex concept that generates a lot of controversies. 

For Boueteflika (1999) who argues that: 

Few subjects in international law and international relations are as sensitive as 

the notion of sovereignty. Steinberger refers to it in the Encyclopedia of Public 

International Law as “the most glittering and controversial notion in the history, 



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doctrine and practice of international law”. On the other hand, Henkin seeks to 

banish it from out vocabulary and Lauterpaeth calls it a “word which has an 

emotive quality, lacking meaningful content”, while Verzij notes that any 

discussion on this subject risks degenerating onto a Tower of Babel. More, 

affirmatively, Brownline sees sovereignty as “the basic constitutional doctrine of 

the law of nations and Alan James sees it as “the one and the only organizing 

principle in respect of the dry surface of the globe, all that surface now… being 

divided among single entities of a sovereign, or constitutionally independent 

kind”. As noted by Falk, “there is little neutral ground when it comes to 

sovereignty.       

Krasner (2001) differentiates between four meanings of sovereignty. These comprise of interdependence, 

domestic, Westphalian or Vattelian and international legal sovereignties. Independence sovereignty refers to “the 

ability of states to control movement across their borders”. Domestic sovereignty means the “authority structures 

within states and the ability of these structures to effectively regulate behaviour (Krasner, 2001). Krasner argued 

that authority structures could include monarchies, republics, democracies, unified and federal systems. He believed 

that the loss of interdependence sovereignty tantamounts to some loss of domestic sovereignty. Krasner justified his 

argument when he said that “if a state cannot regulate movements across its borders such as the flow of illegal 

drugs, it is not likely to be able to control activities within its borders such as the use of drugs (Krasner, 2001). 

Westphalian or Vattelian sovereignty connotes the exclusion of external sources of authority that involves 

dejure and defacto. In other words, it means that the state possesses the power to make authoritative decision 

making within its specific boundaries. In this perspective of sovereignty, it signifies non-intervention in the internal 

affairs of other states. Finally, international legal sovereignty refers to mutual recognition which in the 

international practice, is accorded to “juridically independent territorial entities…capable of entering into voluntary 

contractual agreements” (Krasner, 2001). The above-mentioned definitions of sovereignty have identified five key 

dimensions of sovereignty that need to be analysed.  

The first definition gives emphasis on the recognition of state sovereignty. Ashley (1984) and Miller (1984) 

argued that sovereignty is not an attribute of the state but is attributed to the state by other states or ruler. In this 

circumstance, Jackson (1990) was motivated to state that state depends on other states for its authority. In the 

modern state system, members recognize the equal authority to employ coercion within their defined territories. 

For a state to be recognized as sovereign it must be able to decide and initiate alternative courses of actions to 

overcome internal and external problems. In effect, capabilities are actually central to the recognition of the 

sovereignty of the state (Jackson and Roseberg, 1982) and Jackson (1990). Given more support to the works of 

Jackson and Roseberg (1982) and Jackson (1990); Thomson (1995) argued that: 

States are recognized as sovereign when they present a fact of sovereignty: that 

is, states recognize another’s sovereignty when the latter has achieved the 

capability to defend its authority against domestic and international challenges. 

European history largely supports this argument but the Post-World War II 

period of decolonization does not. By no stretch of the imagination is it possible 

to explain the existence of the vast majority of today’s sovereign states in terms 

of their empirical power capabilities. Most cannot defend against either external 

or internal challenges (…) power capabilities are equally as or more important 

than outside recognition. It may (…) that sovereignty is limited to those who 

possess the material resources to defend it while the less powerful are nominally 

sovereign but in fact, are subject to heteronomy.          



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The second meaning of sovereignty gives it the premise on the state dimension of sovereignty. The theory of 

international relations assumes that sovereignty resides with the state. The assumption has it genesis from the 

European conquests and annexations that led to the emergence of the modern state that resulted from their resisted 

efforts in which state-builders attempt to monopolize their authorities (Tilly, 1975). On this basis, Gidden (1985) 

was motivated to argue that sovereignty resides with the state when such state monopolizes coercion both 

internally and externally. Similarly, Thomson (1995) concluded that the residency of the state sovereignty is a 

product of both internal and external competition, of conflict and cooperation. 

The third is the authority dimension of sovereignty. In defining authority Thomson (1995) sees it as “political 

being what is subject to state coercion”. Thomson argued that in analyzing sovereignty the main concern should be 

based on political authority rather on control. 

 In fact, authority and control are separable however they are paramount in providing a clear understanding 

and measurability of sovereignty. Authority exists when it is being recognized but control is determined by the 

capabilities of the state to monitor and enforce compliance with rules and regulations made by the constituted 

authority. This line of demarcation made Jackson and Roseberg (1982) to lament that the new African states 

although not scientifically sovereign possess sovereignty because of the interstate recognition of their sovereignty. 

For instance, capabilities perhaps might be supplied by other states or international organizations as in the case of 

Somalia or the earlier case of Congo where international intervention is aimed at building the state’s power 

capabilities especially the security and police forces.  

The fourth is the coercion dimension of sovereignty. Coercion is defined as “a monopoly on the major 

organized forces of violence”. A prerequisite for recognizing the sovereignty of a state is its ability to regulate and 

control its territory (Ashley, 1984). Coercion is central to understanding the sovereign nature of a state because the 

exercise of absolute authority depends largely on it Blau (1963). The manifestations of the monopolization of 

coercion were facilitated by the European conquest and annexation of the third world nations and gradually 

achieved by the late nineteenth century. They employed the use of maxim guns and coerced the conquered 

territories. Therefore, European invaders were able to have absolute control over coercion through foreign military 

interventions and resulted in the eroding of the sovereignty of the independent states of Africa. 

The last is the territorial dimension of sovereignty. In international politics, sovereignty provides a linkage 

between territory and political authority. Indeed, Skocpol (1979) argued that territorial sovereignty is vested in “a 

set of administrative policing and military organizations headed and more or less well co-ordinated by an executive 

authority”. Thomson (1995) demarcated sovereignty from authority not on the basis of function but on geography. 

The dimension of sovereignty separates sovereignty from heteronomy. The basis of territorial sovereignty could be 

Euro-centric in nature and extent to non-European territories in order that international politics is based on 

sovereignty. Territorial sovereignty has been legally extended to political authorities or state that lack European 

state sovereignty (Bull and Watson, 1982; Miller, 1984; Strang, 1991a;1991b). This movement is known as a 

globalization of sovereignty (Thomson, 1995). Despite the formal extension of sovereignty to third world nations 

their sovereignties have been seriously eroded by the developed countries in order to protect their economic and 

political interests. In line with this, Wendt and Barnett (1993) and Onuf and Klink (1989) argued that sovereignty 

resides with the developed countries.  

Furthermore, Thomson (1995) maintained that: 

At one level, territory is simply a geographical space whose limits are defined by 

physical borders-lines on a map. With sovereignty, however, states mutually 

recognize one another’s exclusive authority over what is contained in that space. 

The essence of the state-building process has been the state’s drive to penetrate, 

exploit and mobilize those resources for interstate competition and war. One of 

those resources of course, is the people who live within the state’s borders, and 



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part of the state-building process- still incomplete in most of the world- entails 

creating a “society” or nation out of these people; that is forging their loyalty to 

and identification with the state. So, the territorial dimension of sovereignty 

entails not just the defense of geographic boundaries but tight linkages between 

the state and people.                        

The concept of sovereignty has been criticized by many scholars. Krasner (1999) perceived it as an “organized 

hypocrisy” while Fowler and Bunck (1995) view sovereignty as “of more value for the purposes of oratory and 

persuasion than of science and law”. Weber and Biersteker (1996) reconstructed sovereignty to mean “social 

construct” which has no identifiable features and its nature is determined by the customs and practices of nation-

states and international system and liable to change over time. This argument was supported by Krasner (1999) 

who maintained that: 

Sovereignty has many different aspects and none of these aspects is stable. The 

content of the notion of “sovereignty” is continuously changing, especially in 

recent years (…). From the above we may conclude that under international law 

the sovereignty of states must be reduced. International cooperation requires 

that all states be bound by some minimum requirements of international law 

without being entitled to claim that their sovereignty allows them to reject basic 

international regulations. Thirdly, we may conclude that the world community 

takes over sovereignty of territories where national governments completely fail 

and that therefore national government sovereignty has disappeared in those 

territories. The world community by now has sufficient means to stop in with 

the help of existing states and has therefore the obligation to rule those 

territories where the government fails.          

In fact, there are limits to sovereignty of the state. These could either come from the customary international 

law or treaty obligations. For instance, Chapter VII of the UN Charter. Also Articles 1(2) and 2(7) 

The criticisms presented by some scholars have been the instrumenting force that resulted to the 

reconstruction of the concept of sovereignty. It has been intensified and reinforced by the emergence of 

globalization. The spread and development of globalization had generated an intellectual tempo for debunking the 

state-centric approach to international relations. The state-centric theories assume that states are by nature 

sovereign. In other words, states are territorial political units, having political independence, free from external 

control and possess de facto autonomy (Krasner, 2001). While the rationalist theories of international relations ie 

realism and liberal institutionalism view state sovereignty as the genetic material of the international system. But 

constructivists believe that the sovereignty of the state is an expression of the mutual understanding between and 

among many states (Ruggie, 1998). 

The state-centric approach to international relations was criticized in the late 1970s and early 1980s by 

liberalism and maintained that the sovereignty of the state had been eroded by the economic interdependence, 

growth and development of global technology and institutionalization of democratic politics (Keohane and Nye, 

1972; Rosecrance, 1986). The scholars believe that states could no longer be able to control their borders due to 

forces of globalization. Specifically, the development of modern technology has empowered non-state and sub-state 

actors to control the movements of goods, people and information across states’ territorial boundaries. Capital 

accumulated could also move across national boundaries and the currency has the opportunity to escape state fiscal 

and monetary policies. Furthermore, the development of computer and telecommunication technologies has 

shattered down the efforts of states to defend their cultural values (Rosecrance, 1986). The above challenges to state 

sovereignty became manifest since the end of the cold war that led to the emergence of new globalization. 



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The new globalization poses a serious challenge to the sovereignty of the state because it erodes the power of 

the state to have control over the activities within its defined territories. In addition, the activities of the United 

Nations, the International Monetary Fund (IMF), the World Bank, the World Trade Organization, the wave and 

spread of democratization and technology, the dubious activities of multinational enterprises and the atrocities 

committed with the cyberspace could not only erode the power of the state but also the structure of the state 

authority. Thus, globalization is attributed to the “disintegration of the state, its “collapse” or the emergence of a 

powerless state. 

 

3. EXTERNAL DEBT AND NIGERIA’S POLITICAL SOVEREIGNTY 

In the 1970s, before Nigeria became highly indebted, its annual budget was internally scrutinized and later 

presented to the public. But beginning from the early 1980s when Nigeria’s debt crisis became manifest coupled 

with the adoption of adjustment programmes, the country’s debt overhang and debt burden became unbearable, the 

political sovereignty of Nigeria began to be severed. During the period, Nigeria’s budgets in 1986, 1987, 1988, 

1989, 1990, etc respectively were approved by the IMF and the World Bank before presenting it to the nation. This 

was done to ensure that Nigeria complies with the implementation of adjustment programmes. This compliance 

with the dictates of the IMF and the World Bank on budget proposal indicates that the Nigerian state has 

seemingly lost a very important political power of policy-making and execution. This is because the budget is a very 

important instrument of national public policy.  

Similarly, during the civilian administration of Obasanjo NEEDS was created. It was aimed at wealth creation, 

reducing poverty, employment generation and attainment of Millennium Development Goals (MDGs) (Needs 

Document, 2004). This homegrown economic policy was also submitted to IMF for approval to qualify for a fresh 

loan facility and secure debt relief. The effect is that Nigeria has bargained its political right at the expense of 

qualifying for creditworthiness (Anthony, 2005). Bamiduro further argues that NEEDS was an externally driven 

economic policy designed for Nigeria as an instrument of debt trap because it gives the country the opportunity to 

further obtain fresh loan facilities in the mist of debt overhang and debt burden (Bamiduro, 1999). Therefore, 

external debt overhang provides opportunity for the Bretton Wood institutions to control or influence the 

leadership in Nigeria through the dictates of economic and social policies that are coined within the vicious circle of 

debt trap (Bamiduro, 1999). This reinforces the integration of country into the global capitalist exploitation. In this 

act of integration, politico-economic sovereignty is also seriously affected.          

Before the adjustment period, Nigeria adopted a mixed economic system where state intervened in the 

management of the economy with private enterprise development (Anyanwu, 1997). However, as the country 

applied for structural adjustment facilities to address its economic crisis, Nigeria was advised by the IMF and the 

World Bank to adopt privatization, devaluation, deregulation, trade liberalization and reduce public expenditure as 

conditionalities for incurring external debt (Hussain and Faruqee, 1993). Thus, the implementation of these 

adjustment programmes has affected Nigeria’s sovereign power to continue with its mixed economy. The effect is 

that Nigeria has aligned itself with the ideological bloc of the capitalist economy and integrated it into the 

exploitative international capitalist system. 

Representatives are also sent by the IMF and the World Bank to assess the progress of adjustment 

programmes in Nigeria (Akubo, 1985). In fact, a permanent representative of IMF advised Nigeria to obtain 

external loans to address its economic problems. His advised motivated the country to apply for structural 

adjustment programmes loan facility (Hussain and Faruqee, 1993). This served as the basis for the adoption of SAP 

in Nigeria. In addition, the representatives of the IMF are sent to Nigeria on a quarterly basis to monitor the 

activities of CBN to ensure strict compliance to the continuous devaluation of the Naira. Similarly, IMF monitoring 

team was sent on a quarterly basis to assess the progress of NEEDS during the civilian administration of Obasanjo. 



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This influences the IMF and the World Bank to intervene in Nigeria’s sovereign power. This is a violation of the 

internal sovereignty of a country.    

Third world nations depend on external debt to address economic crises and finance development projects. 

This gives the World Bank and the IMF the opportunity to enslave them to their whims and caprices. In fact, the 

World Bank and IMF have become international brokers for the rich countries and financial houses. The effect is 

that the financial institutions exploit the opportunity by imposing policy options on weaker debtor nations as a 

guarantee against default in debt repayments. The imposition of adjustment programmes on sub-Saharan Africa is 

an example of the IMF’s interference in policy choices that affect the best interest of the citizens. Perhaps this 

infringes on their sovereignty.   

 In addition, the IMF and the World Bank have been playing a major role in rolling back the frontiers of 

government responsibilities and assigning more responsibility to private sector. This started during the military 

administration of Babangida and continued by his successors. For instance, Obasanjo implemented deregulation 

inspite of public outcry against the policy. Furthermore, the prices of petroleum products were increased by 50 

percent in 2003, inspite of its opposition by the civil society organizations. In a related development, radical 

economists and policymakers from the South accused the IMF and the World Bank for intervening into the 

domestic affairs of the debtor nations. For instance, critics of the World Bank argued that the World Bank:  

Has deliberately and consciously used its financial power to promote the 

interests of private international capital in its expansion to every corner of the 

“underdeveloped” world. 

Similarly, they argued that:          

… The Bank is perhaps the most important instrument of the developed 

capitalist countries for prying state control of its Third world member countries 

out of the hands of nationalists and socialists who would regulate international 

capital’s inroads.    

 In an address delivered by Obasanjo at the G-8 Summit in Cairo, Egypt on 25th February 2001, he was 

skeptical about the survival of democracy in developing countries of Africa, Asia and Latin America under an 

intense debt burden. According to him: 

… Debt erodes the will of government to address the needs of its people. 

Democracy, which we all want, and which we all practice is seriously threatened 

by an environment of strangulating debt, where there are social and economic 

needs to be satisfied.     

El-Rufai (2003) argued that privatization “is the key economic policy of the new world of globalization, 

democracy and market economy”. It is superimposed on the weaker debtor countries.  Privatization erodes national 

sovereignty by transferring ownership of public enterprises to foreign investors (Dinneya, 2006). Therefore, 

Nigeria’s political sovereignty has also been infringed as a result of adjustment programmes being adopted in the 

country (Kukah, 1999; Umoren, 2001). 

 For instance, the second phase privatization of Cement Company of Northern Nigeria (CCNN) in 1999 has 

transferred state power of management of the enterprise into the hands of Norwegians and Chinese. Dinneya (2006) 

argues that the sovereignty of a country is limited when its leaders misappropriated the loan resources and 

deposited it in foreign countries. He argues that “where your wealth is, there will your heart be”. A typical example 

can be seen from the Ajaokuta debt buy-back fraud that involved $6 billion in Nigeria. The misappropriated 

resources were deposited into the Bank for International Settlement, Switzerland. The implication is that the 

military administration of Babangida was committed to promoting the interest of the foreign banks at the expense 

of its domestic ones. This limited the sovereign power of Nigeria to protect and promote its national interest.  



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However, Dinneya (2006) argues that privatization that allows foreign investment in the debtor nations does not 

undermine their sovereignty under a purely democratic system.  

Privatisation, denationalization and reliance on market forces had compounded the weaknesses of African state 

(Ake, 2001). Ake (2001) argued that they are instruments of the debt trap. The negative consequences of 

privatisation had engendered hostility to the state that undermined its legitimacy. In fact, it has generated popular 

unrest against the state (Ake, 2001). For instance, between 1990-2000 about 1 million workers were involved in 

public sector industrial unrest (Dinneya, 2006).  

Modern liberals argue that the state is established to provide welfare services to the citizens (Rawls, 1970) cited 

in Heywood, 2004). Thus, the demand for loan facilities warranted the IMF to impose expenditure cut on Nigeria. 

This makes the state to cut expenditure for the provision of social services to its citizens despite constitutional 

provision for welfarism in Nigeria. This has been responsible for the deterioration of infrastructural facilities in the 

country. For instance, the dictates that have been made by the World Bank, IMF and other imperialist international 

financial institutions and aid agencies to influence the government of Obasanjo to impose unpopular anti-people and 

pro-rich petroleum product prices affects human rights and sovereignty of Nigeria. He also pursued the policy of 

removal of subsidies on social services such as health and education. This affected the sovereign power of the 

country to carry out its human rights obligations. Consequently, the ordinary citizens are turning to non-

governmental organizations to provide them social infrastructure (Ake, 2001). By implication, the sovereign power 

of the country to allocate sufficient resources for the provision of social services has been undermined.  

WTO is an instrument of promoting international capitalist exploitation of the weaker nations (Aiyedun, 

2004). The sovereign rights and bargaining power of Nigeria on its trade with international communities have been 

jeopardized by the unfavourable rules and regulations of WTO (Ogbu, 2004). In fact, the power of the Nigerian 

government to regulate its economy has been undermined by the rules of the World Trade Organization (WTO). 

This makes (Dinneya, 2006) to argue that undue dependence on foreign investment diminishes the political 

sovereignty of Nigeria to interact with the comity of nations. For instance, during the regime of General Abacha 

the international capitalist system under the auspices of the International Economic Order dictated at the Geneva 

“Urugay Round” deliberations of the Group of Seven nations that Nigeria should adopt trade liberalization as a 

policy instrument for addressing the economic crisis in the country.  As a result, Nigeria became a member of 

World Trade Organisation (WTO) in 1994 and adopted the trade liberalization policy of the international 

organization. This has undermined the political sovereignty of Nigeria because it has abandoned its restrictive trade 

policy in place of trade liberalisation. However, Elzinger maintained that despite the trade liberalization as 

advocated by the WTO the European countries adopted protectionism in the North-South dialogue under the 

conception of the “Rule of Three”. These are concurrence, whereby companies have agreed not to underbid each 

other; coordination in which firms create mechanisms to carry out their play; and compliance through which 

conspirators enforce their plan.                      

A recent amendment to fresh external debt and debt relief is aid conditionalities. These include approval and 

implementation of adjustment programmes, good governance and democratization and suspension of any form of 

aid for government accused of human rights violations. In addition, the European Union (EU) insisted that 

intensive dialogue with the governments of African, Caribbean and Pacific (ACP) on the economic priorities should 

be conducted. Indeed, the EU argued that their development experts have a larger say on how to manage the 

economies of the ACP countries. This limited the power of the ACP to take independent decisions.  To ensure that 

ACP countries adhere to the economic reforms as directed by the international financial institutions, the practice of 

providing the needed resources at the commencement of the projects has been replaced by step-by-step 

disbursement and the system was designed to: 

To encourage countries to spread up to the implementation of projects and 

programmes and the size of subsequent allocations and the speed with which 



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they are released will be contingent on ACP countries’ ability to put its first 

instalment to good use.       

The instalment disbursement of loan facility to ACP countries for the development of human resources and 

environmental protection are only based on the approval of specific projects. In addition, they are directed to 

encourage the growth of the private sector and ensure that the local entrepreneurs could get access to the 

resources. These policy options are good to ensure transparency in the implementation of projects funded with 

external debt. However, the IMF and the World Bank have been making policy prescriptions on the weaker debtor 

countries that interfered with their political sovereignty. 

The United States-African Trade Bill of 1998 also contains certain market-oriented economic policies that 

ought to be implemented by individual countries before the disbursement of funds. These are privatization, 

elimination of tariff and non-tariff barriers, reduction of business and commercial taxes and regulation. The effect is 

that the adjustment loan facility is withheld whenever policy implementation and macroeconomic performance are 

not achieved. The conditionalities perhaps may be good for developing countries to manage the resources and avoid 

its misappropriation or transfer to western banks. For instance, many African countries have implemented 

devaluation of their national currencies in their bid to obtain an external loan. Specifically, this started in Nigeria 

during the regime of Babangida and had been continued by his successors. Therefore, the fear for withholding 

external resources for project financing becomes instrumental for the debtor nations to succumb to the whims 

caprices of the creditors that clash with the sovereign power of the debtor countries to carry out state obligations.   

In 1994 Cameroon was suspended by the IMF because it was 60 days overdue for the payments of $46.6 million 

external loan facility. Sierra Leone too was also suspended on 25th April 1988 due to accumulation of debt that 

amounted to $85 million. Nigeria also experience unhealthy cordial relations with IMF and World Bank because of 

its failure to meet the track record of performance as demanded by the institutions. In essence, external loan 

conditionality provides opportunity for the international financial institutions to control weaker debtor nations. 

However, on 28th March 1994, the IMF approved the sum of $163 million for Sierra Leone after lifting the six 

months ban on lending. This resulted from the payments of its external debt. Similarly, the IMF approved SDR 

47.56 ($66.7 million) for Senegal in April 1994 due to its good economic behaviour for twelve months.                

According to Onimode SAP has unstated objectives which it wants to achieve. These are: 

To decolonise Nigeria and other Third world countries; to ensure the payments 

of often “bogus” foreign loans; to keep Nigeria and other countries of the South 

down and deny them opportunity to rise and challenge the hegemony of the 

West; imposition of massive currency devaluation; and to ensure that 

industrialization eludes Nigeria and other countries implementing the SAPs 

conditionalities.        

The effect of these conditionalities is that SAP is an instrument that is employed by the international financial 

institutions to politically control the debtor nations. For instance, When General Abdulsalami Abubakar emerged 

as the Head of State in Nigeria in 1998 the IMF and the World Bank directed the government to implement the 

policy of economic liberalism as a conditionality for an external loan facility. In fact, in 1998 when the government 

of Abdulsalam sought to negotiate with IMF medium-term economic reform programme, the government was 

directed to privatise state-owned enterprises. In addition, for Nigeria to establish a mutual understanding with IMF 

and the World Bank and obtain debt relief from the Paris Club, it has to express greater commitment to 

privatization and liberalization. In essence, due to coercive demands of the international financial institutions and 

creditor nations, Nigeria sold about 40 percent of its equity share in public enterprises to strategic investors which 

control the management of the enterprises. These conditionalities are an instrument of political control, integrated 

the Nigerian economy into the global political economy, compounded its neo-colonial dependency that could affect 

its sovereignty. 



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The intensity of the conditionalities for the external debt has made many Third world nations to submit 

themselves to policy commitments as directed by international financial institutions. For instance, Uganda made 79 

policy commitments between 1991 and 1992. Cumulatively, African countries conducted over 8,000 negotiations 

with creditor nations. The effect is that it infringes on the domestic policy of the debtor nations. This jeopardizes 

the political sovereignty of the debtor nations Nigeria inclusive. 

The impact of globalisation via external debt on the Third world nations was presented by the critics of 

globalization. They argue that: 

The current process of globalisation diminishes the capacity of national 

government to assert their economic policy or sovereignty. Globalisation thus 

makes international policy coordination as well as domestic policy coherence-

increasingly indispensable. The choice for a country is therefore whether to 

actively engage in such coordination through some form of regional integration, 

perhaps pooling its sovereignty to some degree with other countries in the sub-

region in order to collectively strengthen it; to do so passively, which will 

eventually mean aligning its policies with those of others without playing a 

strong role in their definitions, or to be by-passed by the globalisation process, 

as has so far been too much the case.           

The World Bank attributed the failure of SAP in Nigeria to lack of good governance. As a result, it has been 

encouraging the country to ensure effective utilization of resources, efficient management of the institutional 

structures and good governance. As the country return to democratic government in 1999, the US Ex-Im Bank 

provided a sum of $100 million to finance short and medium term insurance in the private sector. In addition, in 

2000 the Bank also provided Nigeria a loan of $1.2 billion for medium and long- term investment (Dinneya, 2006). 

The entrenchment of democracy and ensuring good governance in Nigeria encourages the World Bank and other 

financial institutions to provide new loan facilities to the country. This enables the state to finance its human rights 

obligations.  

Amnesty International in its annual reports and publications exposed to the international community the 

human rights abuses particularly during the regime of Abacha. In fact, between 1996 and 1997, AI published over 

14 reports indicating the military administration of Abacha because of its human rights violation (Amnesty 

International, 2002). Similarly, Transparency International in its first publication on the Corruption Perception 

Index involving 45 countries rated Nigeria as the most corrupt nation in the world. This was more peculiar to the 

regime of Abacha. TI also accused the military regime of Abacha for its human rights violation and poor 

transparency (Transparency International, 2002). Between 2001 and 2004 TI rated Nigeria as the second most 

corrupt country in the world. However, in 2005 Nigeria was placed in the third position in corruption rankings 

(Transparency International, 2005). This shows the increasing involvement of international actors in Nigeria’s 

domestic affairs.  The effect of these human rights violations is that the International Financial Institutions refused 

to negotiate Nigeria’s debt.     

The Commonwealth of Nations through its Committee for the Defence of Human Rights (CDHR) also indicted 

Nigeria due to gross human rights violations. CDHR accused the military administration of Abacha for 

incarceration of Chief Abiola, the acclaimed winner of June 12 presidential election; torture and extermination of 

security personnel; arbitrary arrests and detention of opposition groups without trial; replacement of judiciary with 

military tribunals; and the assassination of Ken Saro-Wiwa and nine Ogoni environmental activits. These human 

rights violation are against Harare Declaration set up in   1991 to promote democracy, human rights and good 

governance in Africa (Dinneya, 2006). As a result, the Commonwealth Ministerial Action Group (CMAG) imposed 

certain sanctions on the country. These range from oil embargo, a ban on air links with Nigeria, freezing of bank 

accounts in foreign countries of the members of the repressive military leadership and suspension of the country 



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from the Commonwealth of Nations. This made Nigeria’s relations with IMF and the World Bank to be uncordial. 

By implication, the International Financial Institutions refused to grant Nigeria fresh loans and negotiate its 

external debt.   

The United States of America also accused Nigeria of official corruption, human rights abuses and reluctance to 

fight drug trafficking. Based on this, the United States Aviation Authorities in 1993 suspended its flights to and 

from Nigeria.  The suspension was made on the ground that the Nigeria-US route was considered to be the biggest 

in narcotic trade (Dinneya, 2006). Sanctions were also imposed on foreign aid and foreign investment in Nigeria. 

Due to the indictment of Nigeria by the US-based International Narcotic Control Strategy (INCS) on its drug 

trafficking the United States of America blocked Nigeria’s request for financial assistance from the IMF and the 

World Bank. In 1995 an American Multinational Export/Import Guarantee Bank, the Ex-Im Bank suspended its 

financial cover of $2 billion meant for the construction of Liquefied Natural Gas (LNG) industry in Finima, Rivers 

State (Dinneya, 2006). This made the Japanese and other creditors who were committed to co-financing the project 

to withdraw their support. The implications of these sanctions and indictments on Nigeria’s political sovereignty 

were that Nigeria was denied financial assistance from the international financiers; the co-financing of the project by 

creditors was discontinued; and Nigeria was denied its rights to participate in the international economic 

interchange despite the propaganda for globalisation by the international capitalist system.       

The Nigerian-American Chamber of Commerce (NACC) also accused the Nigerian political environment to be 

characterized by democratization crisis, human rights abuses, insecurity, drug trafficking and official corruption 

(Obasanjo, 1997). This made the environment to be unhealthy for foreign investment. To this end, in July 1997, 

four major US cities, Amherst, Berkeley, Massachusetts and Oakland imposed trade embargoes on Nigeria 

(Dinneya, 2006). This trade embargoes further reinforced the Export Credit Guaranteed Agencies to suspend their 

insurance cover for Nigerian imports. This affected business at activities in the country.       

The 1999 Constitution of the Federal Republic of Nigeria, as well as the regional and international 

conventions, have empowered Nigeria and other countries of the world to provide their citizens with economic 

rights to food, shelter, work and income; social rights to security, physical and mental health; and cultural rights to 

education and non-discrimination.  Section 18 sub-section 3 of the 1999 Nigerian Constitution prescribes that the 

government shall strive to eradicate illiteracy and where applicable provide free, compulsory and universal primary 

education; and free secondary, tertiary and adult literacy programme. Similarly, Article 26 Section 1 states that: 

Every one has a right to education. Education shall be free at least in the 

elementary and fundamental stages. Elementary education shall be compulsory. 

Technical and professional education shall be made generally available and 

higher education shall be equally accessible to all on the basis of merit.         

Article 55 of the International Convention of Economic, Social and Cultural Rights (ICESCR) states that: 

In accordance with article 55 and 56… with well-established principles of 

international law, and with the provisions of the [ICESCR] itself, international 

cooperation for development and thus for the realization of economic, social and 

cultural rights is an obligation of all states. It is particularly incumbent upon 

those states which are in a position to assist others in this regard. 

Within the context of global external debt predicament, the article stipulates legally that the creditors have the 

human rights obligations to fulfill in the debtor countries. Put differently, the creditors are under the law bounded 

to ensure that debt related policies ie privatization, devaluation, liberalization and deregulation do not adversely 

affect the fulfillment of human rights in the debtor nations. In connection to this argument critics of external debt 

argue that the creditor countries are:  



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Obliged to consider how individual projects, programs, and policies may affect 

the population in the countries where they are to be implemented and later to 

alter them when necessary to avoid possible human rights violations. 

On the monetary policies carried out by the creditor countries in the debtor nations critics of external debt also 

argue that: 

Substantial external effects of monetary decisions can generate obligations to 

take into account the concerns of non-citizens or justify claims on the part of 

non-citizens that they be consulted about, or included in the making of the 

decisions.  

With respect to Sanjay’s argument, prudence and foresight need to be developed by the creditors to ensure that 

their economic and social policies in the debtor nations do not undermine the debtor’s sovereign power to promote 

the human rights of their citizens. For instance, in Nigeria between 1999 and 2005 the civilian administration of 

Obasanjo made a substantial investment in education that amounted to N 400 billion in tertiary education; however 

the figure did not meet the UNESCO recommendation of 26 percent annual budget to education. Indeed, it was 

only 5 percent to 10 percent in 2001. It was also stated that over 70 percent of Nigerians are poor and that the 

average income per capita in Nigeria was $430 that was lower in sub-Saharan African countries put at $601.  

The organization also ranked Nigeria’s health facilities as the 187th among 191 member states. In the area of 

security Nigeria requires sufficient security agencies to secure an enabling environment for its nascent democracy; 

protect and prevent capital flight abroad; and encourage investment from abroad. The Federal Government 

Presidential Committee on Police Fund reported that the police department requires N 100 billion to ensure 

adequate operational tools, equipment and welfare package. With regard to food security, Nigeria tops the list of 

countries with the highest number of malnourished children in the world. According to the UNICEF Report out of 

a total of 146 million underfed children in the world, 73 percent live in Africa countries and Nigeria came first with 

6 million malnourished children. In terms of housing, the UN reported that Nigeria has a housing deficit of 17 

million units and N 31 to N 36 trillion is required to address the problem. From the above economic and social 

indexes Nigeria could not meet its human right obligations to its citizens due to scarcity and non-availability of 

resources to finance the sectors sufficiently.  

The scarcity of resources was warranted by high debt burden and looting of the public treasury by the leaders. 

It was argued that massive debt repayments undermine the resource capacity of the poorer debtor countries to 

perform their human rights obligations. He identifies three ways through which debt repayments undermine the 

sovereign power of a state to fulfill its human rights obligations. These are: a debtor nation that diverts it resources 

for debt repayments and fails to utilize them maximally; when a debtor nation becomes incapable to satisfy the 

minimum level of its human rights obligations because debts repayments have drained the available resources; and 

when a debtor nation deliberately adopts certain measures to save and allocate more funds for debt repayments.  

Antagonists of external finances further argue that: 

On the basis of their extraterritorial human rights obligations- a necessary 

offshoot of their duty of international cooperation and assistance – creditor 

countries have a corresponding obligation not to undermine or frustrate debtor 

countries’ efforts to realize their peoples’ ESC rights. Creditor countries’ 

insistence on debt repayments, despite the clearly adverse impact on debtor 

countries’ ability to realize ESC rights, is legally incompatible with such a duty.   

In fact, excessive external debt repayments over the years have undermined the sovereign power of Nigeria to 

allocate sufficient resources to meet its human rights obligations to its citizens. 

Debt-equity swaps allow debt to be bought from the secondary market and sell it to debtor countries in 

exchange for local currency. The proceeds are later utilized in financing business ventures in the debtor countries. 



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For instance, Ford Motor Company (Ford) bought $50 million Mexican debt from the secondary market at $29 

million. Later, the company sold it to the Mexican government at $43.5 million in local currency. Similarly, this 

was adopted in Nigeria during the regime of Babangida.  

The debt-equity swaps or debt conversion was conducted through the establishment of Debt Conversion 

Committee (DCC) in February 1988.  Between July 1988 and June 1989 the total amount of debt converted was 

$160.7 million and the discounted value was $88.6 million representing an average discount of 44.8 percent. The 

cumulative external debt converted between 1992 and 1996 was $448.5 million. The implications of debt-equity 

swaps on the economy and political sovereignty are numerous. Debtor countries are subjected to political control 

due to foreign control of the local assets and investment opportunites; exchanging local currency for debt causes 

inflation in the country; there is the danger of local currency devaluation because the debtor countries perhaps may 

need more local currency to purchase foreign debt. 

Political conditionalities are new external loan criteria designed by the IMF and the World Bank. These are 

respected for human rights, democracy and good governance and fight against corruption. In 1992, the 

international financial institutions suspended loan facility to Kenya for its failure to implement adjustment 

programmes. But in 1993, the institutions agreed to negotiate with the government of Kenya for the disbursement 

of loan facility subject to implementing economic reform agenda, fighting corruption, respect for human rights and 

good governance.  

The institutions also directed Kenya to pay its debt arrears. Despite the directives given by the financial 

institutions, Daniel Arab Moi reversed the economic and political conditionalities with domestic ones. He argued 

that it became necessary to reverse the conditionalities because they could only intensify the existing 

unemployment, decline in per capita income, devaluation, cut in expenditure for crop production and affect the 

sovereignty of the country. Similarly, Zambia had complained of undue interference by the international financial 

institutions and protested against imposing governance and performance without agreed parameters and precise 

definitions. In fact, the interference was very intensive that the IMF and Paris Club conditionality for renegotiation 

of debt terms has conditioned many African countries confronted with debt problems to submit to perpetual 

negotiation with IMF over their economic policies. This tantamounts to external control and promotes a 

relationship that affects the sovereignty of the debtor nations.  

 

4. CONCLUSION 

Sovereignty is an important characteristic of a state. It provides the state the power to make independent 

decisions that protect its national interest. As Nigeria applied for an IMF loan facility, the international financial 

institutions imposed certain conditionalities for obtaining the loan. These include devaluation, privatization, 

deregulation, and trade liberalization. The adoption of these conditionalities has integrated the country into the 

international capitalist system and subjected Nigeria to political control. This paper concludes that the sovereignty 

of the country would continue to be infringed as far as the country continues to commit itself to neo-liberal policies.  

 

Funding: This study received no specific financial support.    
Competing Interests: The author declares that there are no conflicts of interests regarding the publication 
of this paper. 

 

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