The Paris Club cartel of creditor nations confirmed this week a proposed debt relief deal that would grant Nigeria a debt write-off of 67 per cent ($18 billion). Under the arrangement, Nigeria would still be required to repay $12 billion of its total $31 billion in sovereign debt and arrears owed to foreign governments, as well as abide by the conditions of an International Monetary Fund (IMF) economic program, which includes cuts in social spending and increased privatization of public services.

Debayani Kar, the communications and advocacy coordinator for Jubilee USA, said the Paris Club write-off “demonstrates the partial success of the Nigerian parliament’s threat to cancel its own debt through repudiation, which helped to force the hand of these creditors”. But, she said, “we don’t think it makes sense to make an impoverished country like Nigeria pay $12 billion when that money should be spent on AIDS, health, and education”.

Sony Kapoor of Christian Aid (UK) while welcoming confirmation of the Paris Club deal agreed that “it took the threat of repudiation to get this cancellation”.

Nigeria’s House of Representatives passed a non-binding resolution in March to halt payments on the country’s external debt, the highest of any country in Africa. The resolution stated Nigeria’s economy had been “devastated by a series of military regimes from 1984 to 1999, who stole billions of dollars from state coffers” and compared Nigeria’s situation to that of “countries emerging from war.” However, the Nigerian Senate later voted to honour debt servicing for this year.

As if “the obvious need of the people and the odious nature of much of the debt were not enough,” Sony Kapoor adds, “what is worse is that creditor countries are extracting a pound of flesh in the form of $12 billion worth of payments from Nigeria and have put in place a new IMF program despite Nigeria not owing anything to the Fund.”

On a more positive note, he said, “the deal has set the scene for a more assertive negotiating stance by other indebted developing countries.”

David Ugolor, president of the African Network for Environment and Economic Justice (ANEEJ), weighed in, saying: “The Paris Club cannot expect Nigeria, freed from over 30 years of military rule, to muster $12 billion to pay off interest and penalties incurred by the military. Since the debt, by [the current president’s] own admission, is of dubious origin, the issues of the responsibilities of the creditors must be put on the table at the Paris Club.”

Dr. Paul Zeitz, director of the Global AIDS Alliance, took aim at creditors and declared they should be “ashamed of themselves if they simply take this money”.

According to Dr. Zeitz: “These creditors often knew that [their loans] would be siphoned off by [African] dictators and deposited in western banks.”

Other commentators are skeptical whether monies freed up from debt relief will be spent on real improvement for Nigerians, given the country’s long struggle with corruption. In its most recent corruption survey, global graft watchdog Transparency International ranked Nigeria as the sixth most corrupt nation in the world, although sixth-place does mark an improvement over its previous listing as the world’s third most corrupt nation.

Asked how to ensure money saved on debt payments would be put to good use David Ugolor of ANEEJ said “it is the responsibility of Nigerians to demand that from the Nigerian government,” Business Week Online reports.

However, as reported previously by Odious Debts Online, debt cancellation far from holding looters responsible, sets them free. Although the threat of repudiation might prompt creditors to negotiate write-offs, unless odious debts are challenged legally respect for people’s rights, the rule of law and due diligence will be set aside as well.

“An odious debts challenge by Nigeria under international rules of arbitration would serve all citizens around the world who are burdened with odious debts: it would set an important precedent and it would give future creditors – public and private – a clear incentive to lend only for purposes that are transparent and of public benefit. It would also help change the culture of international lending and reduce the moral hazard that has destabilized international finance for the past 60 years,” says Patricia Adams, who resurrected the International Doctrine of Odious Debts in her seminal book, Odious Debts: Loose Lending, Corruption, and the Third World’s Environmental Legacy (Earthscan, 1991).

But most important, Ms. Adams adds, it would serve Nigerians’ best interests by signaling that the current Nigerian administration will be guided by the rule of law rather than the rule of cronies.

“That will do immense good for economic confidence in Nigeria and public confidence in the country’s future.”

Debt campaigner Jubilee USA claims a threat by Nigeria’s parliament earlier this year to halt foreign debt payments helped pressure rich Western creditors to negotiate a debt write-off deal worth $18 billion.