The furore over Nigeria 's eligibility status for debt relief dates back to 1998 when it was mysteriously dropped from the group of Heavily Indebted Poor Countries (HIPC), which were then entitled and qualified to receive a minimum of 67% reduction in their debt stocks. Nigeria 's disqualification was ostensibly on the grounds that it was a blend country. That is, Nigeria was deemed to belong to a group of countries which were eligible for both non-concessionary (commercial-rate) loans from the International Bank for Reconstruction and Development (IBRD) as well as concessionary loans from the soft lending arm of the World Bank, the International Development Association (IDA). This was even though Nigeria had not borrowed from the IBRD since 1993. However, Nigeria did not intend to re-seek HIPC status for debt relief, but preferred to pursue the “Evian approach” (see Box 1) , which works on a case by case basis.

Box 1: The Evian Approach
The ‘Evian Terms', adopted in October 2003 in Evian, France, enable debtor countries to get their debts restructured by the Paris Club with facilities that reflect their specific financial needs, not predefined facilities. The Evian Terms are a more orderly way of attaining long-term debt sustainability.

Prior to the adoption of the Evian Terms, the Paris Club used two broad criteria to treat debtor countries: income and degree of indebtedness. The poorest countries with access only to IDA loans were entitled to a 67% debt stock reduction under the Naples Terms. HIPC were entitled to around 90% debt reduction under the Cologne Terms. All other indebted states – including Nigeria – were entitled to rescheduling for 20 years under the Houston Terms: aid loans rescheduled on a concessional basis, but no debt write-offs.

The Evian Terms are an improvement to this rigid method of classifying countries, and provide a more flexible way of dealing with debtor nations. Countries entitled to Evian Terms are not treated via pre-defined rules; they are treated on a case-by-case basis, with their individual circumstances coming into play.

How do the Evian Terms work? They begin with the IMF conducting a debt sustainability analysis (DSA) for a country. The DSA assesses the long term cash needs of the country, not just its short-term cash position. If the DSA reveals that the country's debt position is unsustainable, the Paris Club will then consider long-term solutions like reducing the country's debt stock.

Which debtor countries are entitled to the Evian Terms? All “blend countries” that can borrow from both the IDA and the IBRD, and all low and middle-income countries that are not entitled to the HIPC Cologne Terms. In addition, a formal agreement with the IMF is necessary.

What benefits does the Evian Approach have? Countries like Nigeria are entitled to some form of debt relief, not just mere debt rescheduling. The Evian Terms also improve the Paris Club's relationships with the private sectors of debtor countries, improving the transparency record of the Club.



From most accounts, Nigeria 's debt is unsustainable. All available poverty and debt indicators point to the fact that Nigeria deserves substantial debt relief. Nigeria has a very high incidence of poverty with close to 57% of the population living below the poverty line, defined by the world community as living on less than $1 per day. Nigeria has been ranked 151 st out of 177 countries in the 2004 United Nations Human Development Indicator ranking. While the major indicators have improved considerably over the last three decades, life expectancy of 51 years and adult literacy of 65% are still among the lowest in the world, even when compared with other developing countries. Infant mortality at 110 per 1,000, and maternal mortality at 1,000 per 100,000 live births are among the highest in the world. Nigeria may be perceived as a rich country, but with a population of over 130 million, in per capita terms, Nigeria does not match up with other comparable oil exporting Sub-Saharan African countries like Gabon and Angola , and is more aligned to other HIPC countries like Cameroon .

Box 2: Nigeria 's IDA Status – A Case of Double Standards 1
Impoverished states with little or no access to financial markets are labelled by the World Bank as ‘IDA only,' making them eligible for long term concessional loans. Nigeria has failed to get ‘IDA only' status despite asking for it for over a decade.

There are three main criteria for ‘IDA only' status. First, a country must have a per-capita GNI of less than $895. Nigeria 's GNI in 2003 was $320, yet it is still being exempted from the list. Second, IDA eligible countries must lack the creditworthiness needed for borrowing from both private creditors and the IBRD. Nigeria did not receive any money from private creditors from 1992-2002. The World Bank itself publicly stated that Nigeria is “not currently creditworthy for IBRD assistance.” Yet Nigeria has failed to become an ‘IDA only' country.

The final criterion for ‘IDA only' eligibility is growth friendly economic policies. Nigeria 's macroeconomic performance has not been significantly worse than that of the 39 African countries classified as ‘IDA only.' In fact on fiscal discipline, Nigeria outshines 26 of these countries. In 2004, Nigeria kept a single digit inflation rate, something few ‘IDA only' states have been able to achieve.

Apart from Nigeria , there are three ‘IDA only' oil producers: Cameroon , Congo and Angola . Nigeria may produce a third of the continent's oil, but Angola and Congo produce five times more oil per capita than Nigeria . The World Bank insists that Nigeria 's oil money can be used to curb poverty, but Nigerians earn less than fifty cents a day per capita from oil. Nigeria 's inflation is today below 10 percent. Angola 's is in triple digits. Angola 's GNI is twice Nigeria 's. Its fiscal discipline is worse. Yet Angola is an ‘IDA only' country and Nigeria is not.

The World Bank has continued to call Nigeria a ‘blend' country, even though it has the characteristics of an ‘IDA-only' country. This double standard continues to limit Nigeria 's access to concessional credit and substantial debt relief.

1 For more detail, see Moss, T., S. Standley and N. Birdsall (2004). ‘Double Standards, Debt Treatment, and World Bank Country Classification: The case of Nigeria ', Working Paper Number 45, Centre for Global Development. Available at: http://www.cgdev.org/Publications/?PubID=147


Indeed, there is the strong perception that Nigeria may have been accorded unequal treatment, with clear instances of double standards on the issue of the application of debt relief to deserving countries (see Box 2 ). Further, although Nigeria is poorer than Iraq and its oil wealth per capita falls far below that of Iraq , the latter has benefited from substantial debt cancellation, obviously for political and strategic reasons. These, if analysed carefully, may well apply to Nigeria . Additionally, aid to Nigeria of less than $2 per capita is amongst the lowest in the world. Despite this aid, after debt service payments, a net transfer is made from Nigeria to rich governments of over $12 for every Nigerian annually. Therefore, given its high debt level and debt servicing obligations, it is doubtful that Nigeria will meet the millennium development goals (MDGs) target date of 2015 (see Box 3 ). Indeed, of the $3.2 billion debt service due in 2005, (of which $2.5 billion is owed to the Paris Club), and an additional $4.3 billion in arrears, only $1.7 billion has been allocated in the budget for the year.

To date, Nigeria has obtained debt relief through a series of debt rescheduling agreements, mainly with the Paris Club, and opportunistic buy-backs. However, the general belief is that these measures are not adequate to address the high debt burden of the country. There is therefore the need to complement the above “conventional” approaches with deeper debt relief in the form of substantial debt cancellation.

Box 3: The Millennium Development Goals
In September 2000, the international community agreed to embrace eight quantifiable targets for the tackling of poverty. They were named the Millennium Development Goals (MDGs), and all UN member states committed to achieving them by 2015. They are:

Goal 1: Eradicate extreme poverty and hunger

Goal 2: Achieve universal primary education

Goal 3: Promote gender equality and empower women

Goal 4: Reduce child mortality

Goal 5: Improve maternal health

Goal 6: Combat HIV/AIDS, malaria and other diseases

Goal 7: Ensure environmental sustainability

Goal 8: Develop a Global Partnership for Development

Nigeria has embarked on a major programme of reform to increase the efficiency of public service delivery and expenditure management, cut corruption and promote the rule of law.

This is important because Nigeria needs to address head-on the concerns of creditors that savings from debt relief would be mismanaged, or that it would simply open another avenue for corruption. Creditors need to be assured that savings would go to the neediest of areas, in education, health and other critical sectors, that impact directly on poverty alleviation, and that a transparent and effective system for the allocation of the resources would be put in place.

Specific actions that the Federal Government is embarking on towards this end are:

•  A public expenditure management programme and the establishment of a Virtual Poverty Fund (VPF), to provide a framework for a transparent and effective system of resource allocation.

•  The formulation of a Fiscal Responsibility Bill, the aim of which is to ensure transparency and accountability in public governance, and the setting up of government agencies, like the EFCC and ICPC, to deal with corrupt practices.