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8th March 2002 Nigeria Rejects IMF Monitoring As today's Financial Times reports, Nigeria has announced that it intends to end IMF monitoring of its economic policy. As a result, the Fund have put plans for the country's further debt relief on hold. An agreement which had allowed Nigeria to reschedule part of her $22bn debt to her official Paris Club creditors expired last October. Further relief on the country's total external debt of $28 billion depended upon accepting a medium-term IMF poverty alleviation programme, monitored by the Fund. IMF officials now consider that the government is unlikely to stick to macroeconomic targets in the run-up to the general elections next year. Nigerian economists said yesterday that members of the National Assembly are determined to increase spending above the amount outlined in the government's draft budget proposals, which already show an estimated $700m financing gap. This new crisis can only serve to emphasise the importance of establishing an independent process of arbitration to solve the problem of Nigeria's unsustainable debt. Since President Olusegun Obasanjo was elected president in 1999, he has assumed a central role in international negotiations aimed at reducing the crippling debt burden experienced by West African countries. During this time he has made it plain that he considers that debt cancellation to be essential if there is to be any hope of achieving the UN's target of halving absolute poverty by 2015. Nigeria's external debt is the largest in the region, representing 75% of GDP or 186% of export earnings at the end of 2000. As a recent report by Jubilee Research* has shown, roughly 50% of this debt can be attributed to the cost of Nigeria falling into arrears - in other words, it is 'phantom' debt accrued as a penalty for non-payment of previous obligations. Much of the earlier debt was built up as a result of irresponsible and odious loans, made to the country's military dictators over past years. When Obasanjo was elected, he promised to deliver what he described as a 'democratic dividend' to the people of Nigeria, by making the reduction of poverty the primary aim of his administration. However, servicing the country's external debts continues to act as a serious impediment to fulfilling this promise. While it is difficult to assess what effect Nigeria's present decision will have on the country's economy, it is very clear that no international framework exists at present to solve debt problems of this nature. In the case of Nigeria, substantial write-off is needed, and intermittent rescheduling agreements with the Paris Club can no longer be considered a just or satisfactory answer. Not, in any case, if poverty reduction continues to be the avowed aim of the international community.
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