Results of the 2005 debt relief agreement between the Paris Club and Nigeria
An evaluation conducted by
ECORYS/OPM in 2010/11 for IOB
Presentation by Geske Dijkstra, team leader (Erasmus University Rotterdam and IOB)

Methodology: Theory-based
Inputs
Stock Flow
US$ 18 billion cancellation and
US$ 12 billion payment
Outputs Reduction in debt stock
Outcomes Creditworthiness
FDI, private investment
Impact
Reduction in debt service
Government investment
Economic growth
Conditionality
Conditions for policy and governance
Policy change
Investment,
MDGs, etc.

Debt stock in US$ billion, by creditor
25
20
15
35
30 multilateral bilateral private
10
5
0
19
78
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
20
08

• 1999: President Obasanjo; promise UK, US..
• Second term Obasanjo 2003: policy changes
• The 2005 agreement:
– Nigeria paid arrears plus buyback, US$ 12 billion
– Paris Club cancelled US$ 18 billion, in 2 phases
– Conditions:
• IMF Policy Support Instrument (PSI)
• Virtual Poverty Fund (VPF)

• Most likely counterfactual: US$ 1 billion paid out of US$ 3 billion due
(2005)
→ flow effect still negative by end 2009, positive only by 2016
→ stock effect positive

External debt stock in US$ billion, actual and counterfactual
60
50
40
30
20
10
0
Counterfactual debt stock
Actual debt stock
Difference = stock effect
(output)
0
2002 2003 2004 2005 2006 2007 2008 2009

• Very effective before 2005
– Debt management
– Macro-economic policies
– Anti-corruption policies
– Improved poverty reduction policies
• To some extent also after 2005
– PSI with strict fiscal and monetary targets
– Virtual Poverty Fund was established
• Money: US$ 750 million annually, 75% spent
• Institutional effect: planning, implementation, M&E

• Debt sustainability
– External debt very sustainable
– Domestic debt increased
• Macroeconomic stability
– Lower inflation
– Cushioning 2009 crisis
• Creditworthiness, higher FDI
• Poverty reduction
– Improvement in some indicators

2004 2009 Threshold
NPV debt/GDP
NPV debt/Exports
NPV debt/Revenues
Debt service/Exports
Debt service/Revenues
NPV debt/GDP
NPV debt/Exports
40
90
116
8
13
2
7
10
1
6
31
98
40
150
250
15
25
40
150
NPV debt/Revenues
Debt service/Exports
Debt service/Revenues
138
9
13
250
15
25

Poverty headcount (’04)
Primary enrolment (’04 and ‘08)
Ratio girls to boys in primary education (’04 and ‘08)
Infant mortality
U5 mortality
Skilled birth attendance
Maternal mortality
2003 2008
52
81 89
81
100
201
36
800
85
75
157
39
545

• Positive outcomes → debt relief had some impact on economic growth
• Indirect effect on income poverty reduction
– Via high agricultural growth
• Sustainability?
• Better result than in other studies:
– Stock fully eliminated
– Pre-conditions effective

30
25
20
15
10
5
-10
-15
0
-5
2002 2003 2004 2005 2006
GDP
GDP oil
Agriculture
2007 2008 2009