Nigeria faces uphill struggle for debt relief

Nigeria, Africa's most populous country, faces an uphill struggle to obtain debt cancellation from the West despite calls from Britain to extend relief to the world's poorest continent, analysts said on Friday. Oil exporter Nigeria has one of the lowest per-capita incomes in the world, but its refusal to sign up for a formal IMF programme and limited track record of reform has made some creditors doubtful.
"Even if you accept that Nigeria merits debt forgiveness to support poverty alleviation, we still believe it will be difficult for the Paris Club (of creditor nations) to write off debt in the absence of a formal IMF programme," said Peter Worthington of CSFB bank in London.
Britain intends to use its presidency of the Group of Seven to push for debt relief to Africa and the rich-nation club will discuss the issue at a meeting in London starting on Friday.
"We are perhaps the most sympathetic of all Nigeria's creditors," said Chris Mullin, a junior minister for Africa, at a news conference in Nigeria earlier this week.
Most of Nigeria's $34 billion debt is held by the Paris Club, including Britain, whose decisions are taken by consensus.
"We will certainly take up Nigeria's case in the Club of Paris ...but what Nigeria has to do is to persuade the creditors that the proceeds are spent on Nigerians," Mullin said.
One in five sub-Saharan Africans are Nigerian, so any development in the West African giant could have a big impact on Africa's poverty indicators as a whole.
Some 27 African countries have already seen their foreign debt cut drastically by a special programme for heavily indebted poor countries started by the IMF and World Bank in 1996.
But Nigeria was excluded because candidates needed to show a track record of reforms, unsustainable debt dues and join an IMF programme to qualify.
"Giving debt relief to Nigeria without an IMF programme would set a bad precedent," said one international banker, asking not to be named.
The government of Olusegun Obasanjo has drawn up new policies aimed at controlling spending, stemming corruption and reducing extreme poverty as part of a home-grown reform agenda similar to an IMF programme. But, unlike a formal IMF programme, there are no financial penalties for non-performance.
The reforms saw their first year of implementation in 2004 during which tighter fiscal control helped the government double the size of its foreign reserves to $18 billion.
But Paris Club debt repayments have remained fixed at $1 billion a year, less than half its dues, and mounting arrears swell the debt further every year.