Africa, Development & Aid, Economy & Trade, Headlines

FINANCE: Paris Club Offers Nigeria Debt Relief – For a Price

Emad Mekay

WASHINGTON, Oct 20 2005 (IPS) - The Paris Club of bilateral creditors said Thursday it would drop 18 billion of the 30 billion dollars in debt owed by Nigeria, Africa’s largest oil producer, if the nation met certain conditions, including paying arrears up front.

Anti-debt groups said the conditions would force Nigeria, an impoverished nation with 100 million of its 130 million people living on one dollar a day, to pay 12.4 billion dollars in debt service in just six months.

They also say the deal ties Nigeria to a new programme sponsored by the International Monetary Fund (IMF), which is not a creditor of Nigeria. The programme, which allows the Washington-based fund to monitor the country without actually disbursing loans, was approved by its board three days ago, in effect giving the seal of approval to Nigeria’s economic restructuring plans designed to attract foreign investors.

The Western-controlled IMF has often been blamed for imposing stringent, and frequently contentious, economic policies that benefited international corporations and local elites at the expense of the poor.

The agreement with the Paris Club follows months of negotiations that saw the Nigerian parliament earlier this year calling on the pro-western government of President Olusegun Obasanjo to threaten to repudiate the country’s burdensome debt, which totals 36 billion dollars.

The deal now allows Nigeria to obtain a debt cancellation of around 18 billion dollars, including a moratorium on interest. This represents about 60 percent of its total debt of 30 billion dollars owed to the 19-member Paris Club.

The agreement will be implemented in two phases. First, Nigeria will have to pay arrears due on its debts to get the first 33 percent cancellation.

In the second stage, planned for March 2006, the Paris Club, which is made up of wealthy industrialised countries, will grant another slice of the write-off at 34 percent of eligible debts after Nigeria tops its payments to 12.4 billion dollars, opening the door to the country to buy back the remaining eligible debts.

But as one of the world’s poorest nations, 12.4 billion dollars is still a hefty price, critics say. The country has already paid over 54 billion dollars in debt service.

“We don’t think it makes sense to make an impoverished country like Nigeria pay 12 billion dollars when that money should be spent on AIDS, health, and education,” said Debayani Kar of the Jubilee USA Network, an anti-debt group.

Some activists have also raised the issue of the responsibility of creditors themselves in pushing loans to dictators and military rulers in the past.

“The Paris Club cannot expect Nigeria, freed from over 30 years of military rule, to muster 12 billion dollars to pay off interest and penalties incurred by the military,” said David Ugolor, president of the African Network for Environment and Economic Justice (ANEEJ) in Nigeria, in a statement.

“Since the debt, by President Obasanjo’s own admission, is of dubious origin, the issues of the responsibilities of the creditors must be put on the table at the Paris Club.”

This view is echoed in Washington by Salih Booker, who directs Africa Action, an advocacy group here. “This creditor cartel of 19 rich countries is equally culpable for Nigeria’s massive and illegitimate external debts, as it was these same countries that financed Nigeria’s military kleptocracies over the years and shared in Nigeria’s oil profits,” Booker said.

But Todd Moss, an expert with the Washington-based Centre for Global Development, says Nigeria can use oil revenues to pay its arrears, especially with oil prices at record highs. Nigeria is a member of the Organisation of Petroleum Exporting Countries (OPEC).

Another positive aspect of the deal, Moss argues, is that it will guarantee the flow of Nigerian oil to rich nations.

“The Nigerian debt deal is a win-win solution,” said Moss. “It is a huge boost for Nigeria, where the current leadership is working to break the stranglehold of cronyism and corruption. It is also good news for the U.S. and other rich countries, since greater stability in Nigeria reduces the risk of a major disruption in global oil supplies.”

Groups that call for a more equitable international economic order have continued to fault the write-off, arguing that it falls far short of 100 percent cancellation, long demanded by anti-debt campaigners, and is conditioned on harmful economic reforms.

“Campaigners worldwide have long called for the complete and unconditional cancellation of Nigeria’s odious debts,” said Marie Clarke Brill of Africa Action. “The Paris Club deal might soothe the conscience of its members, but it will not satisfy the demands of Nigerian and U.S. civil society.”

The Club had said in its statement announcing the deal that it was acting to reward the West African nation for its pro-free market economic restructuring plans and its deal with the IMF.

Jubilee USA says that past impoverished country experiences with similar IMF programmes have shown that such programmes lead countries to privatise essential services and cut social sector spending.