Seven British charities are campaigning for the UK not to accept any Nigerian repayment which was part of the Paris Club debt relief agreement reached in October. Their pleas to Gordon Brown, most recently in a new brief, are no doubt well-intentioned. But their attack on the deal is politically naive and ultimately misguided.
The deal, which includes a 75% write-down in the non-arrears portion (and a 60% overall reduction) is worth $18 billion--and is a better deal for Nigeria than could have been imagined a few years ago.
Their main complaint is that Nigeria is poor (true) and that Nigeria's $12 billion in payments is a lot of money (also true). But it does not follow that the deal is bad. Given Nigeria’s past trouble keeping its reserves from being stolen, repayment is actually an efficient use of the money that locks in future benefits (the current team won’t be in office forever!). In fact, Nigeria is already reaping benefits from the deal, even before it’s complete, including its first ever credit rating.
The worries by the charities that the $12 billion payments (about 1/4 of which is to Britain) will undermine efforts to reach the MDGs are unfounded. Poverty-related spending in Nigeria is rising as planned. The debt repayments will come, not out of the regular budget, but out of reserves which have been built up as oil prices have spiked. (By the time of the deal, Nigeria had built up $30 billion in reserves, three times the $10 billion target under the national poverty reduction plan. Even after the repayment, the government expects reserves to hit $42 billion by end-2006.) If anything, the debt deal will help the budget in the long-term, as it frees up money that otherwise would have gone to future debt service.
Most importantly, however, it is the Nigerians who have chosen to use part of their oil windfall to erase the debt for their future generations. The deal was designed and negotiated over many months by Nigerian officials with strong input from parliament. It seems to me patronizing at best for foreign charities to now paint the deal that the Nigerians themselves have brokered as patently unjust. Their efforts undermine the careful case that the Nigerian government has been making at home to get the deal done. If the charities convince enough Nigerians that it is a raw deal, they could derail the whole debt relief agreement--and would seem to go against the principles of country ownership and accountability that the charities themselves claim to espouse.