Nigeria announces clearing of Paris Club debt

April 21, 2006

President Olusegun Obasanjo of Nigeria announced that Nigeria will complete repayment of all debt owed to the Paris Club of creditors by Friday. The Director General of the Debt Management Office (DMO), Mansur Muhtar confirmed that the Central Bank of Nigeria (CBN) would transfer $4.5 billion to the recipient countries on Friday.

The Paris Club is an informal group of creditor governments from major industrialized countries. Under the terms of an agreement signed last year, Nigeria will pay $12.4 billion in exchange for a debt cancellation of an estimated $18 billion, representing about 60% of the $30 billion Nigeria owed the Paris Club creditors. The agreement is the biggest debt relief deal for an African nation.

Nigeria, Africa's largest producer of oil, has used "windfall" earnings from the prevailing high oil prices in making these payments.

The Paris Club agreement was negotiated in October 2005, with the Nigerian delegation headed by Ngozi Okonjo-Iweala, the minister of finance. The deal is part of the free-market reforms pursued by President Obasanjo.

The announcement comes in the wake of the endorsement of the reform programme by the International Monetary Fund (IMF), which marks the last step for the debt relief deal to be completed. Nigeria is the first country to qualify for the IMF's Policy Support Instrument (PSI), which provides assessment and endorsement of a country's economic policy by the IMF, for those countries that do not require fund assistance.

Speaking before the commencement of the Federal Executive Council meeting at the Council Chambers, State House, President Obasanjo said, "By Friday, April 21, we would have cleared ourselves of all debts owed to Paris Club." He also added, "Considering the outstanding debts to the London Club and those owed internally, we are not out of the woods yet."