The Paris Club of creditor counties on Thursday agreed to cancel 60 percent, or 18 billion US dollars of Nigeria's debt owed to it, the biggest ever debt write-off for sub-Saharan Africa. In a statement published on its website, the 19-member group said it agreed with Nigeria, Africa's most populous country, on "a comprehensive treatment of its debt" following a three-day meeting between them this week.
"This exceptional treatment of Nigeria's debt offers a fair, sustainable, and definitive solution to Nigeria and Paris Club creditors," it said.
"With the large debt relief included in this agreement, Paris Club creditors extend their strong support to Nigeria's economic development policy and its fight against poverty."
The agreement, which came about four months after the creditors agreed in principle a deal for Nigeria and three days after the International Monetary Fund (IMF) endorsed its economic management, will be implemented in two phases.
In the first phase, Nigeria undertakes to pay arrears due on all categories of debts worth 6 billion dollars and Paris Club creditors grant a 33 percent cancellation of eligible debts.
In the second phase, Paris Club creditors will grant a further tranche of cancellation of 34 percent on eligible debts, and Nigeria will buy back the last third by March next year.
In all, Nigeria will only pay off an amount of 12.4 billion dollars in return for a debt cancellation estimated at 18 billion dollars. The Paris Club, formed in 1956, is an informal group of creditor governments from major industrialized countries. It meets on a monthly basis in Paris with debtor countries in order to agree with them on restructuring their debts.
Nigeria is the largest oil producer in Africa but three- quarters of its 130-million-strong population still live in abject poverty on less than one dollar per day. It also owes about 36.2 billion dollars to foreign creditors as at end 2005, out of which around 30 billion dollars are due to the Paris Club.
Nigerian President Olusegun Obasanjo had claimed that the amount was unpayable and had repeatedly begged foreign creditors for debt relief since he took office in 1999. But the West hinged that on the country's economic policy and its war against rampant corruption.
Obasanjo thereby in 2003, when he won his second term as president, introduced home-grown economic reforms, and invited the IMF to monitor. Meanwhile, he intensified his anti-graft fight, resulting in the dismissal of two ministers and his police chief this year.
On Monday, the IMF eventually approved a two-year Policy Support Instrument for Nigeria, signifying its endorsement of Nigeria's economic policies and also paving the way for final negotiations leading to the debt cancellation.
Following the approval, the representatives of the Paris Club creditors and Nigerian officials met for three days in Paris. In Thursday's statement, the representatives said they "welcomed the ambitious economic program implemented by the Nigerian authorities since 2003 and their desire to secure an exit treatment from the Paris Club."
Earlier this year, Mansur Muhtar, head of the west African country's Debt Management Office, said the debt relief "draws a line under the past and gives Nigeria a fresh start," reports Xinhua. I.L.