Nigeria, home to one in five Africans, has been the continent's most indebted nation. With $36 billion in external debt, 100 million people living on less than a dollar a day, and a fledgling democratic government attempting reforms, Nigeria should have been a strong candidate for debt relief. Yet, in part because of its oil revenues, Nigeria slipped through the cracks of various debt relief programs.
CGD began working on Nigerian debt issues in early 2004 to provide analytical support to Nigeria's ongoing efforts to persuade its creditors to agree to an appropriate debt relief package. In October 2005 Nigeria and the Paris Club announced a final agreement for debt relief worth $18 billion and an overall reduction of Nigeria's debt stock by $30 billion. The deal was completed on April 21, 2006 when Nigeria made its final payment and the books were cleared of any Paris Club debt. CGD Research Fellow Todd Moss, who leads Center's work on Nigeria's debt, explains the outcome of the deal.
CGD's Role
This watershed deal is the result of months of tireless work by both Nigerian officials and the creditors. CGD is proud that our work contributed to this historic outcome. First, a September 2004 CGD working paper, Double-Standards, Debt Treatment, and World Bank Country Classification: The Case of Nigeria argued for Nigeria's reclassification as an 'IDA-only' country within the Bank—a prerequisite for debt relief. This overdue change in status, announced in June 2005, enabled Paris Club negotiations to begin in earnest. Second, CGD's work influenced the structure of the eventual outcome. The final agreement includes the first-ever discounted buyback within the Paris Club, an innovation first proposed in an April 2005 CGD note, Resolving Nigeria’s Debt Through a Discounted Buyback.
The Center's contribution to the deal has been recognized by participants in the negotiations, by others close to the process, and by major media:
"Your catalytic work and analysis made a difference…especially the work of CGD in facilitating the reclassification of Nigeria as an IDA-only country as well as putting forward an innovative solution to the debt problem."
-Ngozi Okonjo-Iweala, Minister of Finance
"CGD has played a critically important role… I have it first hand from negotiators in the Paris Club that it was the CGD concept of a buyback that was the tipping point that led creditors to agree debt relief for Nigeria…This is a great achievement for all concerned, and is in no small part due to the work of CGD."
-Ann Pettifor, co-founder Jubilee 2000 and Director of Advocacy International
CGD was described by the New York Times as "a nonpartisan research institution in Washington that proposed elements of the [Nigerian debt] deal" (Oct 21, 2005) and by the Economist as "the Washington think-tank that first proposed the buy-back" (October 20, 2005).
Looking Ahead
Nigeria's debt relief deal is historic. Although the short-term financial windfall will be modest, the real potential impact is on the future. The long-term challenge will be to consolidate the gains from the debt deal by pushing forward with economic reform and ensuring that the benefits from debt relief are shared with the population. This is by no means assured, but the debt deal is an important step in the right direction.