Dr. Ngozi Okonjo-Iweala, the finance minister of Nigeria, says that a significant portion of the nation's revenues can be re-targeted to improve the lives of Nigerians, now that most international debt has been retired. She says health care and education are areas where the government aims to make significant investments towards meeting the United National Millennium Development Goals of reducing extreme poverty around the world.
On Friday, the country's Debt Management Office announced that a final $4.5 billion payment had been made to the "Paris Club" group of wealthy creditor nations. Under a June agreement, Paris Club nations wrote off U.S.$18 billion owed by Nigeria, which pledged to use earnings from high oil prices to retire an additional $12 billion in debts and penalties.
Friday's transfer was the final payment of that obligation. Nigeria still owes $5 billion to the "London Club" group of private creditors, which is primarily composed of banks.
There has been a lively debate in Nigeria, as in many developing countries, about whether foreign debt should be repaid at all. Many non-governmental organizations and end-the-debt activists have argued that most of Africa's crushing debt burden was incurred by lligitimate borrowing from authoritarian regimes, and that arrears and penalties have grown to dwarf the original loans.
Nigeria is a case in point. An August 2005 report by the Brookings Institution, a Washington DC think tank, noted that Nigeria owed $19 billion in 1985 and had borrowed $15 billion more. By last year the country had repaid more than $35 billion but still owed $36 billion.
Okonjo-Iweala, who has won wide international respect for implementing policies aimed at curbing corruption and boosting economic growth in Africa's largest oil producing nation, says that Nigeria's history of financial mismanagement was a betrayal of government responsibility to the country's 130 million people. The last three years, in particular, she says, have been ones of reform, with all oil revenues now published on the public website of the Nigeria Extractive Industries Transparency Initiative.
She says that by repaying, rather than repudiating, the remaining debt, Nigeria will be in good standing with the international financial institutions, the industrialized nations and private lenders. She predicts that the result will be an acceleration of foreign direct investment that can create jobs and improve living standards.
A statement by the International Monetary Fund (IMF) said that Nigeria's reform policies had already increased investor confidence. Africa's biggest oil producer is the first country to qualify for the IMF's new Policy Support Instrument (PSI), designed for poor countries who may not need IMF loans but still require its endorsement of their economic policies.
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Nigeria's debt reduction is part of a wider international movement to reduce the burden of debt for developing countries - a key demand of demonstrators at World Bank and IMF meetings in recent. Progress towards those goals have made this year's spring meetings, now taking place in Washington DC, the first in some time that have not been greeted with large-scale protests.
This month the Board of Directors of the African Development Fund (ADF) and the African Development Bank (ADB) approved US$ 8.5 billion for financing debt relief of 33 low-income countries in Africa under the ADF's Multilateral Debt Relief Initiative.The ADF Board of Governors is expected to adopt a resolution in May that will authorise further debt cancellation and a financing mechanism of the debt relief. An ADF statement said that the Board's action was the culmination of an extensive and historic process of consultations with shareholders and donors.
