Rich Western creditor nations yesterday rewarded determined efforts by Nigeria’s Government to reform its economy and tackle corruption with a write-off of $18 billion of debt.

Rich Western creditor nations yesterday rewarded determined efforts by Nigeria’s Government to reform its economy and tackle corruption with a write-off of $18 billion (£10.2 billion) of debt that has handicapped the country’s economic fortunes.

Nigerian officials joined the secretive Paris Club of 19 rich Western government lenders in hailing the agreement as a means to stimulate increased foreign and private investment in the African state. However, the landmark deal ran into criticism from debt campaigners, who attacked the Paris Club’s continuing requirement for Nigeria to repay $12 billion of its total $31 billion in sovereign debt and arrears owed to foreign governments.

Although Nigeria is the eighth-largest oil exporting nation, its general population remains deep in poverty, with among the lowest incomes per head of any country worldwide.

Under the debt-relief package, the Paris Club will apply so-called “Naples terms,” which will allow the ultimate cancellation of 67 per cent of the face value of Nigeria’s debt.

In the first phase, Nigeria will pay its arrears while the Paris Club will scrap 33 per cent of eligible debts. A second phase, from next March, should see a further tranche of 34 per cent of debt cancelled, while Nigeria will buy back the remaining debt still outstanding. In total, $18 billion of debts will be written off, but $12 billion will be repaid.

Nigeria’s Senator Udoma Udo Udoma, who took part in three-day talks to finalise the deal in Paris, said: “It will open Nigeria up to greater trade and investment, and stimulate the private sector.”

Lobby groups for developing nations said the money Nigeria will still pay back would be better spent on health and education for its population.

Gary Duncan, Times Online (UK), October 20, 2005