Traditional economic theory predicts that capital mobility and international trade will push the world's national economies to one income level. As poorer nations race ahead, richer ones should slow down. Eventually, theory says, national economies would reach equilibrium. The reality of the last few decades, however, defies this notion; most of the poorest economies continue to lag far behind. For 50 years, foreign aid has been the main way the international community has promoted economic development. Yet it has not proven to be a silver bullet.
Although nearly all poor countries are classified by the World Bank as IDA-only, Nigeria stands out as a notable exception. Indeed, Africa’s most populous country is the poorest country in the world that is not classified as IDA-only. Under the World Bank’s own criteria, however, Nigeria has a strong case for reclassification. IDA-only status would have two potential benefits for Nigeria. First, it would expand Nigeria’s access to IDA resources and make the country eligible for grants. Second, it would strengthen Nigeria’s case for debt reduction. With a renewed economic reform effort getting under way and the emerging use of debt reduction as a tool for assisting economic and political transitions, the UK, the US, and other official creditors should support such a move as part of a broader strategy for encouraging progress in one of Africa’s most important countries.