Nigeria: The challenges of debt and sustenance of democracy by Olusegun Obasanjo (opinion)

Nigeria: The challenges of debt and sustenance of democracy by Olusegun Obasanjo (opinion)

Editor's Note: In a speech presented at an event, the ‘why I am alive campaign’ organised by Nigerian pastor, Itua Ighodalo, in Lagos on Friday, December 27, former President Olusegun Obasanjo expresses fear over the heavy debt burden currently facing Nigeria.

He takes a look at Nigeria's past, present and the future, saying Nigeria is like a country on its way to bankruptcy.

Disclaimer: The views and opinions expressed here are those of the author and do not necessarily reflect the official policy or position of

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When Pastor Ituah first approached me to give a talk, he wanted me to speak on Nigeria: the past, the present and the future. I agreed. On second thought, however, I decided that I should turn greater attention to our present and our future than to our past given the short time allotted to me even though the past is important to fully understand the present and to guide the future. In this discussion on our present and our future, I have chosen to focus on the issues of debt, economic development and sustenance of democracy because of the deleterious effects of these, if care is not taken, on the legacy we will be bequeathing to the successor generations of Nigerians. I consider this topic a very important one that requires a lot more introspection and indeed circumspection. I say this because I consider it a duty and responsibility as a citizen to enrich public discourse with insights and perspectives on topical national issues. This is not in any way to put anyone on the spot but rather, to ensure that we have exhausted all possible alternatives on issues before we take a particular line of action which will affect this and the next generation and beyond.

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At my age, it is safe to assume that I cannot live for another number of years that I have lived and I honestly do not pray that I live for another 80 or even 40 or 30 more years. In essence, whatever may be my concern for tomorrow, it is purely based on my concerns for the succeeding generations of Nigerians and surely not about me and/or my generation and whatever the imagined gains I might be deemed by anybody to have in mind.

I daresay that all well-meaning Nigerians who have contributed to the growth and development of our country since independence till date have a responsibility to make reasoned contributions, no matter on what side of the divide we find ourselves. There is a common collective that cannot be negotiated nor be allowed to be obliterated or tied to a mill-stone.

There is a dangerous emerging trend today in Africa and it is eerily familiar with developments on the continent in the 70s. Our political leaders have suddenly developed not just a taste for, but a voracious appetite for debt. As usual most of such debts that are procured are hardly thought through. Predictably, the ability to repay such debts is lacking. Unfortunately for us and unlike in the past, the new creditors are less tolerant of our limitations and inadequacies and are now demanding to manage institutions and agencies with a view to recouping their loans. We can extrapolate from this to decide the future impact on our already compromised sovereign existence. Current prognosis suggests that things might really get worse.

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The invitation and the choice of the topic for this gathering couldn’t have been timelier. In this case, the issue of Nigeria rapidly sinking under the weight of debt; both foreign and domestic should bother us all.

Let me state at the onset that using debt to finance growth and or development is a double-edged sword that must be wielded with a high degree of discipline, responsibility and foresight. A well-calibrated debt for infrastructure and other developmental goals could be very positive. However, we do not need to speculate. We need to examine our historical experience. Everyone knows that our governments are notoriously deficient in serious and adequate discipline and most often lack competence and consistency as well. We borrowed to build a light rail in Lagos, embarked on the project and a succeeding governor abandoned the project for his full term of four years at 65% completion when it should have started paying down on the loan. This light rail is important for the whole of Nigeria not only with respect to man hours of GDP that would have continued to be saved but also because such loans are normally federally guaranteed. At the same time, there are bus terminals that were presidentially declared open but not used. This type of situation was not in Lagos alone but variously in other States like Rivers and Cross River. And the problem is not limited to states. The federal government built a nice looking extension to the Murtala Mohammed International airport that looks completed from outside but not in service. To rub aboniki on the injury, some clowns are talking of demolishing the main airport and rebuild from scratch. Where on earth is a poor country wasting resources that way?

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Procuring debt in the first instance requires clarity on the purpose which must be linked with the ability to repay principal and interest as, and when due. Defaulting on repayment is very easy, and if you like very convenient. For in equal measure it seems that creditors take special delight in debtors’ inability to service debts. Delinquent behaviour allows the opportunity to impose stipulated sanctions and later appear friendly by offering to restructure your debt. At the end of the day what is done is simply to add your interest payments and other fees to the principal sum at a high premium. So, overnight a debt of USD$1million will become $5million in spite of the fact that over time you had repaid $1.2million. I say this without fear of contradiction. I have borrowed from banks as a private sector operator and I have borrowed from multilateral institutions as a political leader. So, I believe you would understand my fears and experience about jumbo loans and my agony in getting rid of our external debts and developing a sustainable approach to address our domestic debts. It was a painstaking exercise that involved not just a national strategy but a continental and international one which eventually yielded significant gains. To now see all those efforts, go to waste barely less than 15 years after that watershed moment is more than disturbing. It is painful and retrogressive.

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This warning alarm is also very important in light of Nigeria’s pivotal position on the continent. Any headwind in Nigeria has a tremendous impact on not just the West African but the continent as a whole. Nigeria accounts for nearly 20% of continental GDP and about 75% of the West Africa economy. Analysts have noted that since 2013, debt in Africa has risen rapidly with the median debt-to-GDP ratio as a percent of GDP increasing to 53 per cent in 2017. This led to about one-third of the countries in sub-Saharan Africa being classified as either in or at high risk of debt distress. Nigeria’s leadership was key in the campaign for debt relief in the late 90s/early 2000s. Our relapse into debt will be wrong signalling to the rest of the continent and could be tantamount to backing the entire continent into another era of highly indebted poor countries.

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Ladies and gentlemen, let me illustrate my concerns more concretely. Without being immodest, I can claim to have experience in matters relating to our national debt especially foreign ones. As military Head of State during the era of excess funds in banks and credit institutions abroad after an increase in oil price in the 1970s which led to a sudden upsurge in liquidity, we were begged to borrow using the same argument as we have today that we were under-borrowed. This led to the first ‘jumbo loan’, as it was called then, of one billion dollars. By the time I came back as a democratically-elected President, a little over twenty years later, we had two problems of debt – London Club which constitutes private creditors that have formed a cartel of creditors ganging up against us and making economic life difficult for us as a nation; and Paris Club which was the Western government creditors taking up what we borrowed in cash and kind from them and buying some debts of their private sector organisations.

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By the beginning of the 21st century, Nigeria had a debt burden of almost $36 billion – with about $31 billion owed to Paris Club and about $5 billion owed to London Club. We were spending almost $3 billion to service our debt annually without the quantum of the debt going down and with harsh penalty being accumulated and added to the quantum of the debt when we defaulted.

In short, the situation we found ourselves in 1999/2000 was a suffocating debt burden. Those preaching to us that we were under-borrowed had collected their commission and gone, our own political leaders and civil servants who unfortunately got convinced to lead us into the debt-trap were sitting pretty in their homes and some of them sleeping pretty in their graves. As the then political leader, I inherited an economy with a meager $3.7 billion in foreign reserve less than enough to finance or meet our import obligations for two months. What was more, crude oil was trading at about $9 per barrel. Our foreign creditors were barging down our doors demanding payment. At that time we were committed to servicing our debt with about $3 billion every year.

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The really unnerving and totally annoying part of that reality then was that there was no consolidated and accurate record of Nigeria’s debts! Unfortunately, the Federal Government had to accept responsibility for all foreign debts no matter whether the debt was incurred by Nigerian companies, state level authorities or federal authorities as Federal Government is the sovereign authority. We cleaned up by establishing a central debt management office while embarking on seeking debt relief. Because we demonstrated leadership and commitment through self-imposed reforms, we were able to secure debt relief from the Paris Club. By 2006, our quantum of debt had come down to about $3.6 billion from almost $36 billion only about 10% of what it was before we got almost $20 billion relief and we paid a little over $12 billion to the Paris Club with a little out of it to the London Club to adjust our debt.

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Distinguished ladies and gentlemen, as at 2015, total external debt was about $10.32 billion. In four short years by March 2019 our external debt grew to N24.947 trillion or $81.274 billion dollars!!! To service this current level of indebtedness, we must commit at least 50% of our foreign earnings!! Such a situation talks about an impending bankruptcy. No entity can survive while devoting 50% of its revenue to debt servicing. It has recently been pointed out that in 2018 that total debt service cost took over 60% of government revenue. What is more we are not doing enough to address the fundamental, deep-seated and structural challenges that inhibit the expansion of our economy. As if this is not bad enough, we are currently seeking to add another $29.6 billion loan to our already overburdened debt portfolio.

Our current budget out of which we are spending 25% to service debt is not our total earning; a lot of it is also borrowing. Simply put, we are borrowing to service what we have borrowed and yet we are borrowing more. I do not need the brain of any genius to conclude that those who use statistics to dig us deeper into debt are our enemies. Statistics can be used to serve any purpose and that is why Winston Churchill talked of “lies, damn lies and statistics” meaning statistics can be made master of lies.

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The scale of the challenge coming our way is quite enormous. There has to be an honest and frank appreciation of this by government at all levels: local, state and federal. We need nothing short of a national dialogue or debate on our short-, medium-, and long-term plans as a nation, which to me, is phased in five years, ten years and twenty years and even beyond.

My biggest worry is that with the scale of debts we are walking into with our eyes wide open, there are already fiscal challenges to meet our obligations. The current situation where we are already spending significant percentage of our budget on debt servicing and another chunk on recurrent expenditure, leaving very little or nothing for capital investments is not a durable and sustainable approach to development and progress. This will even get worse when oil with gas that we rely on will no longer command premium demand as in the past. For one thing at least, 50% of countries in Africa have discovered oil and gas in reasonable quantities and are offering more attractive terms to investors than we are offering and drawing away serious investors from us. There are even more discoveries outside of Africa that have given better attractions to international oil and gas investors. There are alternatives in the wind, solar and other forms of energy that are becoming cheaper by the day with ever-improving technology in these areas. The issue of climate-change is daily making oil and gas less important than they had been up till now. Electric cars and solar-driven other forms of means of mobility and transportation will make oil and gas more in the ground than being exploited for transportation.

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Taking everything together, we may in the short-term of about five years still see ourselves as making something out of oil and gas. In the medium-term of ten years or thereabouts, our oil and gas may be more for domestic use than for earning reasonable resources from export. In the long-term, twenty years and beyond, most cars and other means of transportation might have got out of petroleum products for propulsion. What is the Nigerian strategy for this fast approaching time when pure water will be worth much more than oil? And international hue and cry on climate change may not even permit us to use our oil and gas for energy generation? What are we going to have for energy generation and in what mix? The fate of other minerals will be similar to oil and gas as wasting assets that are not renewable. We must make hay while the sun shines.

This is when the real impact of these debts we are piling up will start to bite. What is more, we may never secure another debt relief. Remember that Algeria and President Bouteflika tried everything they could to secure debt relief which I did secure for Nigeria, they never got it. I know for a fact that the cornucopia of the international community’s mercy is decidedly thin. It is unlike God’s rains that falls on the just and the wicked alike.

I fear for the future we are bequeathing to our children and to their children and their children’s children. I believe that it will be foolhardy, irresponsible and wicked for us to tie a mill stone of debt around the neck of the successor generations of Nigerians. We need to take hard and important decisions that will facilitate a balanced allocation of resources to both capital and recurrent expenditures.

At this juncture the important question to ponder will surely be to ask, if there are no other options to debt that is being incurred? Surely in the global investment and capital market, there are other options. First, if our infrastructure is well packaged, private sector investment can be encouraged and mobilized. Well-packaged infrastructure can be made to pay in the medium-term. Another option will be to use public-private partnership to fund some of the various infrastructural projects. I guess the concern will be the management and ownership would not be vulnerable to local political manipulations. For once, all Nigerians need to rise up and shout in one voice and call on the National Assembly to rise up to its core duty and responsibility and save our children and our grandchildren and great grandchildren from being mired in debt. Let us use other options. Saudi Arabia I understand will be raising over 20billion to finance projects through private equity. We can do likewise. We have several national assets that could be used to raise some of the funds that we need in this respect for infrastructural development to give assurance to private sector investors and PPP investors if necessary. We should then open the economy widely and incentivisely but guardedly to private sector development and investment.

Now is the time for bold actions. Rhetoric and bare minimum reforms will not yield the desired change we want. This is an opportune moment to mobilize the best brains within and outside the country to prepare a Nigerian Agenda 2050 – a thirty-year agenda to make Nigeria become one of the ten leading nations of the world by UN standard at all socio-economic levels. The agenda must be based on post-oil-and-gas book. Such plan must be fashioned in a way that it becomes a socio-economic contract that will guide any government coming to power in the next thirty years. We have a lot to do beyond partisan politics to get us out of the 25th position among the poorest nations in the world and still going further down.

Such Agenda should among other things be predicated on seven critical areas for which I strongly believe resources can be mobilized and incentivized to make Nigeria a country of hope and glory for every Nigerian and resident of Nigeria by 2050. My only fear is that in Nigeria, most economic plans only last maximum four years. And the history of Nigeria seemed to be made to begin with each mostly poorly planned and digested programme like seven-point agenda. No nation can transform, develop and grow on such adhocry and ill-conceived and digested, inconsistence and unsustainable programme.

One area is education. Access to quality and continuing relevant education should be the key watchword here. We need to invest heavily in educating our people for the realities of work for today and tomorrow. Our educational goals must be such that they align, enable and power the realization of our Agenda 2050 goals. The reforms around education must resonate with global discussions on the place of Science, Technology, Engineering, Arts and Mathematics (STEAM) in the future of work. We already have the population to drive the change we want if adequately educated, enabled, skilled and resourced. Already, we have an obvious starting point in the 14 million out -of-school children in the country. We can adopt Morning and Afternoon schools to cope with the number of children that we have to educate. Over the next 30 years, we should target to have at least 10 of our Universities in the first 25 best African Universities and 5 among the best 1000 Universities in the world. Popular education is a must at this stage. The first decade of Agenda 2050 must get us to education for all: education up to secondary school free and compulsory for all Nigerian children taking us beyond UPE and UBE.

Second area is on health and social well-being. We need to re-invent our primary and basic healthcare system as well as encourage universal coverage of our health insurance scheme. The private sector should be encouraged to establish state-of-the-art medical facilities, treatment from which can be covered by health insurance and/or private payments currently going as outflows to India, Europe and America. Our target should be to increase qualitative, affordable and accessible health services to all our people by 2050. We need to revisit primary health-care. Housing must be left essentially to private sector with government providing encouragement, support and insurance for the use of contributory pension and health insurance fund.

Manufacturing and industrialisation is the third area. Our quest for industrialization is now a matter of survival. There is a need to transform our manufacturing sector, providing goods and services for our domestic consumption and exports. We have to be positioned to take full advantage of the African Free Continental Trade Area by improving on critical infrastructure like power, transportation, water and sanitation. We need to get the policy mix right in a way that it encourages private capital to complement public responsibility. The guiding question should be; what percentage of the envisaged intra-Africa market growth is Nigeria aiming to attract and how? Power, transportation (including ports & rail), housing, telecommunication as well as the right business environment require sustained growth and concrete actions. We need to repeat the same feat we achieved with mobile telephony in various other sectors. Government must put in place the right policies and get out of the operational way of business and private capital to thrive and drive industrialization. There are funds out there that can be mobilized for our transformation, development and growth but developmental fund with investible fund goes to where it is wanted, appreciated and encouraged to stay, work and make handsome return for repatriation to the foreign investor.

Fourth is infrastructure which includes availability of power at reasonably price, land and water transportation, communications, water supply, housing and sanitation. A situation where an importer of goods to Nigeria has to pay more to take a container from Apapa to Mainland, Lagos than it costs to take the same container from Europe to Apapa leaves much to be desired. It makes cost of doing business in Nigeria prohibitive. The worst area of infrastructure is power. The privatization of the power sector was carried out with little or no integrity and diligence. Power must take a special space and attention in 20:50:10 programme, strategy and agenda. Power is central in our socio-economic development, growth and progress and indeed in our security, peace and political stability and predictability.

Fifth is agribusiness for food security, nutrition, security, industrialization through value addition and processing, export and marketing, foreign exchange earnings and employment generation. Agribusiness covers the value chain from manufacturing of equipment for land clearing and land preparation to food on the table. It is the largest sector to provide hope and employment for the youth not only in land clearing to food on the table but also in tourism and hospitality. It is particularly interesting to note that of the seventeen sustainable development goals, agribusiness has implications directly and indirectly on fourteen of them. It is right, therefore, to attach youth employment to agribusiness as co-travellers since agribusiness is, by all calculation, the biggest instrument of providing empowerment, skill and employment for the youth. Agribusiness should be the centre point of our socio-economic ventures. It can be undertaken in all parts of Nigeria by all Nigerians and it is renewable and sustainable for all generations.

Sixth is getting our politics right and understanding that politics is a means to an end and not an end in itself. We must be able to ask ourselves, what sort of political atmosphere, rhetoric and disposition will help to drive the transformation we so desire? We simply cannot have a tone-deaf political attitude that is diametrically opposed to the goals of the Nigerian Agenda 2050. The current situation of the prevalence of politics of cooptation, wherein the military, the judiciary and the National Assembly have all been fitfully coopted cannot be the road to follow for healthy democracy. Votes don’t seem to matter anymore in Nigerian elections as declarations are made by coopted INEC to be ratified by cowed and coopted judiciary in accordance with the wishes and desires of the powers that be. No wonder, an editorial declared Democracy as already being in intensive care unit in Nigeria. It is the responsibility of all democrats in and out of the country to join hands to defend and save democracy in Nigeria for the good of all Nigerians. Failure in this regard is ominous and forebodes an impending disaster for the country. I have been a victim of undemocratic Nigeria and I can assure and attest that it is the worst thing that anybody can wish, plan or do for Nigeria. Our politics must enable growth and transformation. Our politics must respect and venerate diversity because that is what makes us what we are as Nigerians. Our politics must enhance our governance agenda and power our regional and global ambitions. There has to be a synchronization not just at the federal but also at all federating units including states and local governments. Where there is need for reform in our politics and political arrangement and system, we must not fight shy to embark on such reform in the interest of a great and united Nigeria. Maybe recognition has begun with President Buhari at his 77th birthday acknowledging the flaws of this year’s elections by promising that he would work for free, fair and credible elections next time around. I hope and pray that the promise will be backed by credible actions.

Great efforts and resources have been devoted to survival politics and unfortunately, it was at the altar of unity, development, growth, transformation and progress. Most of these efforts destroy competition which is indispensable in a democracy and market economy. For the remaining time in the second term of the current administration, it is absolutely imperative that some consensus policies and programmes should be discussed, debated and agreed as the direction for political reform and socio-economic programmes and progress of this country in unity, mutual respect, human dignity and democracy that thrives, works and delivers. Nigerian cannot withstand another year like 2019 in its democratic practice and socio-economic management. It should be a national, all-embracing and all-party programme of political and electoral reform, socio-economic development, transformation, growth and progress. We are where we are because of who we are and what we do or fail to do. It takes guts to do what is right for majority of people instead of for a few and let us have the guts to act rightly.

Last but not the least for me, is our standing at the regional and international levels. What seem to have happened is that we have quietly ceded our normal position in regional and international affairs. We are by all that God has given us a leading African nation. We have to wear and play that role boldly, assertively and intentionally but mindful of concern and interest of others. We should be at the forefront of key regional projects and programmes such as the African Continental Free Trade Agreement, AfCFTA, freedom of movement of persons, peace and security and advancing democratic governance. We must not just be big brother, we must be exemplary. We must use our influence at these levels to attract positive attention to our goals as a demonstration of the domestication of agreed shared values at the continental level as well as in contribution to the goals of the African Union Agenda 2063 and United Nations Sustainable Development Goals (SDGs) 2030.

Distinguished, ladies and gentlemen, let us take stock of the last sixty years which have been mixed blessings. But facing the truth, our performance in totality as a nation is inadequate. Whatever we have planned, we have fallen short of it by a wide margin. By 2020, we will put sixty years of Nigeria as an independent country behind us. There should be no lamentation or self-condemnation but critical and honest appraisal and examination. Our collective challenge should be how to ensure that we grow our economy at least at twice the rate at which we grow our population. And better still, we should grow at double digit rate for a considerable length of time to be able to make 20:50:10.

The forecasts now are scary. At the present rate, Nigeria’s population by 2050 will be well over 400 million and Lagos alone will be over 40 million. If we continue as we are going now and as we have gone: start and stop, in the past we will be one of the most wretched of the world and maybe the most wretched in Africa. However, we have a chance today. I believe so strongly in our ability as a nation to pull together under a committed leadership to snatch victory from the jaws of division, poverty and death. What gives me the greatest hope is our youth – dynamic, resourceful, irresistible and outgoing. Given encouragement and opportunities, they will fly above the cloud and get Nigeria there. We must tap the tremendous power and resources of our youth laced with morality, high principles and cherished values. I count on them for our redemption. The President and his team have a golden opportunity for being at the helms of the affairs, as Nigeria clocks sixty on the 1st of October 2020. We should seize the opportunity of that day and the significance of it to launch the Nigeria Agenda 2050 as a national programme and guide for a future assured. It will be an important legacy for the current leadership to bequeath a clear and sustainable plan, programme and strategy of a politically-united, socially-integrated, economically-dynamic and internationally relevant and respected Nigeria.

Without mincing words, in addition to impunity, incompetence, corruption, gross electoral malpractices and mismanagement of diversity, the greatest threat to our democracy is poverty. The concern is that if we do not marshal a clear plan and idea on how our politics should lead to human capital development, we might be in for challenging times ahead. What this means practically is that social and economic frustrations will push people to the edge and they will begin to question the instrumental value of democracy to them. Democracy that does not deliver to majority of the people with tangible dividend cannot be seriously embraced by the victims which 70% of Nigerians are today. The youth are already losing hope and confidence in the present system practiced and operated by the political elite. It is a bad and dangerous signal.

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Distinguished audience, ladies and gentlemen, once again, as I conclude, if anybody tells us that adding more debt to what we have is the way to go, he will either need to prove it to us beyond reasonable doubt or he will have to have his or her head examined. It is even important to note that the World Bank is saying something different to those claiming we are under-borrowed. The way to go is to make Nigeria the irresistible destination for private investors in Africa. We need to grow the economy to increase the size of the cake rather than consuming what should have been used to grow and enlarge the economy. Growing the economy should be left with genuine entrepreneurs not on tribal or religious sentiments but with conducive and sustained inviting conditions and environment. Total energy of the nation must be released, unleashed and directed for the general good of all. The pernicious division, insecurity, inequity, deepening poverty, and widening inequality must be stopped to build a united, cohesive, dynamic, fast-developing, growing, secure, prosperous and progressive country playing its natural, fitting and proper role in Africa and within the international community. The quantity and the quality of investments matter. I reiterate that there are funds that can be incentivized into Nigeria for all our developmental needs. But the environment must be conducive and return on investment must be right, appropriate and adequate. Nigeria lost the last two decades of the last century and the little progress made in the first decade of this century has been wiped out. But let’s put the last two decades of the last century and the first two decades of this century behind us and plan and execute vigorously for the next three decades so that when by 2050 the population of Nigeria will be over 400 million, and those who will make it happen are already born and with Lagos having over 40 million as 86 people come into Lagos every hour (the highest of any city in the world), we can happily say we are getting there. That can only be achieved not by closing in but by opening up and out and letting ideas, views and resources contend. May God give us the enabling environment of the commitment, service and sacrifice that this season symbolizes and demands.

It is still not too late to continue to wish ourselves the blessings of the Christmas and the hope, happiness and success of the New Year, 2020, which will be the 60th year of Nigeria as an independent country.

Thank you and God bless Nigeria and all Nigerians always. ( - We have upgraded to serve you better.

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