“Most Nigerian debt was lent to corrupt dictators by irresponsible creditors. These creditors should now recognize their responsibility and fully cancel Nigeria’s debt.” – Otive Igbuzor, ActionAid country director for Nigeria.

An agreement to cancel the bulk of the mammoth debt of Africa’s most populous country has fueled optimism among anti-poverty campaigners, but corruption and instability in the region and requirements imposed by the West still overshadow the continent’s future.

The Paris Club of creditor nations said Thursday it had agreed to cancel about 60 percent – some US$18 billion – of Nigeria’s foreign debt. Nigeria is home to over 17 percent of sub-Saharan Africa’s 750 million people and had the biggest foreign debt on the continent.

Debt cancellation for Nigeria comes after a decision by the G-8 group of the world’s richest nations in June to cancel US$40 billion (euro33 billion) of debt owed by 18 other poor nations, most of them in Africa.

International development agency ActionAid welcomed the Paris Club move for “a country which has been crippled by the burden of external debt.” Campaigners point to countries including Uganda and Tanzania as proof debt relief leads to higher spending on health and education.

For Uganda, the first African country to benefit from debt relief in the 1990s, “even limited relief . . . was enough to enable them to abolish primary school fees,” says Caroline Pearce, of Britain’s Jubilee Debt Campaign. After receiving debt relief, Tanzania managed to double the number of its teachers within three years, while Mozambique used debt relief to introduce a free children’s immunization program, says Pearce.

“Any sort of debt relief must be a good thing for Nigeria,” said Warris Alli, director of research at the Nigerian Institute of International Affairs. Alli said an anti-corruption crackdown and financial reforms by President Olusegun Obasanjo have better positioned the government to make good use of the money made available by debt relief.

Nigeria was left out of debt relief negotiations in the 1980s and 1990s because it did not have an agreement with the IMF and was ruled by military dictators until 1999. Obasanjo, elected in 1999, has pursued reforms under IMF monitoring, and made debt relief a key priority in relations with wealthy nations.

In its debt relief announcement Thursday, Paris Club members “welcomed the ambitious economic program implemented by the Nigerian authorities.”

But the jury is still out on how well the money will be used in the oil-rich nation, where some 70 percent of its 130 million people live on less than US$1 a day. Nigeria was rated the sixth most corrupt nation in the world in a survey released this week by Berlin-based Transparency International. Ten of the 20 lowest-ranking nations in the survey were African.

In the country’s main city of Lagos, policemen armed with assault rifles routinely set up makeshift barricades on major roads, demanding money from motorists. It is the most public face of corruption, which persists despite the push for reform.

“There’s no guarantee, particularly in Nigeria, that it (debt relief) will be spent on the right things,” said Richard Dowden, head of the Royal African Society in London.

“As soon as Obasanjo goes, will it just slip back into old ways?” Dowden said.

Anti-debt campaigners such as Pearce believe Africa is turning the tide against corruption.

Despite the progress on debt relief, some argue that tough conditions may still make it hard for African countries to improve the lives of their people and meet the ambitious U.N.-backed Millennium Development Goals, which include cutting extreme poverty by half by 2015.

The nations that qualified for debt forgiveness under the G-8 initiative had graduated from a tough World Bank reform program.

In return for the debt relief announced Thursday, Nigeria has promised to spend US$12 billion on paying arrears and buying back bonds the country had issued on international markets. With over US$20 billion in foreign reserves, Nigeria can afford this. But Otive Igbuzor, ActionAid country director for Nigeria, is among those who say the money could be better spent alleviating poverty.

Igbuzor also expressed concern Nigeria would now have to cut spending and expand privatization – goals Obasanjo has at any rate aggressively pursued.

“These policies have often hurt, rather than helped those most in need.” Igbuzor said. “Most Nigerian debt was lent to corrupt dictators by irresponsible creditors. These creditors should now recognize their responsibility and fully cancel Nigeria’s debt.”

Asked how to ensure money saved on debt payments would be put to good use, David Ugolor of the African Network on Environmental and Economic Justice in Lagos replied: “It is the responsibility of Nigerians to demand that from the Nigerian government.”

Daniel Balint-Kurti, Business Week Online, October 20, 2005