The Paris Club of creditor nations has agreed a debt relief deal with Nigeria worth $18 billion.

The club said it was impressed by an economic programme implemented by Nigerian authorities since 2003.

The deal will see Nigeria pay a chunk of its debt arrears, receive debt relief on two-thirds of eligible debts and buy back the last third.

About $30bn of Nigeria’s debt is owed to members of the 19-nation-strong Paris Club.

‘Definitive solution’

Nigeria is the world’s seventh-largest oil exporter and Africa’s most populous nation, but also one of its poorest.

It has not received any fresh loans since 1992, but the country has repaid $8bn debt since then.

With the large debt relief included in this agreement, Paris club creditors extend their strong support to Nigeria’s economic development policy and its fight against poverty

Paris Club statement

Part of Nigeria’s case in asking for debt relief has been that most of the money it received was lent to corrupt military dictators, a fact the African country says was well known by foreign banks and governments.

“In total this agreement allows Nigeria to obtain a debt cancellation estimated at $18bn (including moratorium interest) – representing an overall reduction of about 60% of its debt to the Paris Club of around $30bn,” a Paris Club statement said.

“This exceptional treatment of Nigeria’s debt offers a fair, sustainable and definitive solution to Nigeria and Paris Club creditors.

“With the large debt relief included in this agreement, Paris club creditors extend their strong support to Nigeria’s economic development policy and its fight against poverty.”

IMF approval

The Paris Club, formed in 1956, is an informal group of creditor governments from major industrialized nations.

The members of the club which participated in the Nigeria debt reorganisation were; Austria, Belgium, Brazil, Britain, Denmark, Finland, France, Germany, Italy, Japan, the Netherlands, the Russian Federation, Spain, Switzerland, and the US.

The accord came less than four months after the club reached the deal in principle.

The International Monetary Fund (IMF) paved the way for the deal after it endorsed Nigeria’s economic management on Monday.

British Broadcasting Corporation (BBC), October 20, 2005