Debt Forgivness and Its Impact in the Growth of Nigerian Economy
HISTORICAL BACKGROUND OF THE STUDY
From a trivial debt stock of $1billion in 1971, Nigeria had towards the end of 2005 incurred close to $40 billion debt with over $30 billion of the amount owed the Paris Club alone. Although Nigeria’s debt was more than the total of those of the 18 other poor countries (14 of them African countries) classified as Heavily Indebted Poor Countries (HIPCs), it had been a herculean task convincing the creditors that debt cancellation was the most desirable option. Prior to Nigeria’s $18 billion debt cancellation deal, these 18 other poor countries i.e. Benin Republic, Bolivia, Burkina- Faso, Ethiopia, Ghana, Guyana, Honduras, Madagascar, Mali, Mauritania, Mozambique, Nicaragua, Niger, Rwanda, Senegal, Tanzania, Uganda and Zambia had secured a 100 percent debt cancellation totaling $40 billion (Semenitari, 2005).
The debt burden on less developed countries can be traced to the early 1980’s after the oil price increase of the 1970’s. It was the product of reactions by the international community to “oil price shocks”. One of the legacies of African countries from the crisis has been an increasing debt burden, which constituted a major constraint to growth and development.
External debt became a burden to African countries because contracted loans were not optimally deployed, therefore returns on investments were not adequate to meet maturing obligations and also hindering economic growth. African economies have not performed well, partly because of the increased outflow of resources to service debt obligations and partly because the necessary macro-economic adjustment has remained elusive for most of the countries in the continent.
INTRODUCTION
The Nigerian President, Olusegun Obasanjo, had waged a six-year war on debt cancellation. He had to hire an ex-World Bank official, Nigerian-born Ngozi Okonjo-Iweala as Finance Minister to prosecute the war. In their bid, they joined several other anti-poverty campaigners to argue that
From a trivial debt stock of $1billion in 1971, Nigeria had towards the end of 2005 incurred close to $40 billion debt with over $30 billion of the amount owed the Paris Club alone. Although Nigeria’s debt was more than the total of those of the 18 other poor countries (14 of them African countries) classified as Heavily Indebted Poor Countries (HIPCs), it had been a herculean task convincing the creditors that debt cancellation was the most desirable option. Prior to Nigeria’s $18 billion debt cancellation deal, these 18 other poor countries i.e. Benin Republic, Bolivia, Burkina- Faso, Ethiopia, Ghana, Guyana, Honduras, Madagascar, Mali, Mauritania, Mozambique, Nicaragua, Niger, Rwanda, Senegal, Tanzania, Uganda and Zambia had secured a 100 percent debt cancellation totaling $40 billion (Semenitari, 2005).
The debt burden on less developed countries can be traced to the early 1980’s after the oil price increase of the 1970’s. It was the product of reactions by the international community to “oil price shocks”. One of the legacies of African countries from the crisis has been an increasing debt burden, which constituted a major constraint to growth and development.
External debt became a burden to African countries because contracted loans were not optimally deployed, therefore returns on investments were not adequate to meet maturing obligations and also hindering economic growth. African economies have not performed well, partly because of the increased outflow of resources to service debt obligations and partly because the necessary macro-economic adjustment has remained elusive for most of the countries in the continent.
INTRODUCTION
The Nigerian President, Olusegun Obasanjo, had waged a six-year war on debt cancellation. He had to hire an ex-World Bank official, Nigerian-born Ngozi Okonjo-Iweala as Finance Minister to prosecute the war. In their bid, they joined several other anti-poverty campaigners to argue that
References: Ahmed, A. (1998). “Short and Medium Term Approaches and Measures to Solving Africa’s Debt Problems.” Paper delivered at the Financial Times Conference, London. Semenitari, I (2005). “The Road to debt Relief” in Tell No 29, July 18, P38. Semenitari I (2005). ‘It was all God’s Doing” in Tell No. 29, July 18, P47.