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*Todd Mossco-authored this post.
Prospects for the success of Nigeria's economic reforms took a step backward with the recent resignation of the finance minister, Ngozi Okonjo-Iweala. She had been the driving force for major improvements in the budget and a vigorous foe of corruption. While in the past oil revenues were always spent and usually wastefully, under her watch the government managed to amass some $38 billion in reserves. As a result largely of her efforts, creditors agreed to $18 billion in debt relief and Nigeria was able to buy back the rest of its debt using part of those saved oil earnings. But now that Ngozi is gone, does that doom the reform effort and signify that debt relief was a mistake?
We say no. Many of the other key reformers remain in place and it was always expected that some fiscal laxity would occur in the run up to the (increasingly contentious) elections to replace the retiring President Obasanjo. The absence of a debt burden makes it more likely that the some of the reform will outlive this government, and that Nigeria can edge, even if less than would be hoped, away from the patronage and cronyism that dominates public policy. More importantly, the debt itself was never an effective lever for creditors to exert influence on Nigeria. The debt wasn't being serviced and instead popular resentment inside the country was growing.
The key now for the international community will be to remain engaged. Growing dependency on West African oil and the array of transnational threats that can emanate from Nigeria--crime, disease, radical Islam, among others--means giving up and walking away is not an option.
CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise. CGD is a nonpartisan, independent organization and does not take institutional positions.