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

Stock Flow Conditionality

Inputs US$ 18 billion cancellation and US$ 12 billion payment

Conditions for policy and

governance

Outputs Reduction in debt stock

Reduction in debt

service

Policy change

Outcomes CreditworthinessFDI, private

investment

Government investment

Investment,MDGs, etc.

Impact Economic growth

Debt stock in US$ billion, by creditor

0

5

10

15

20

25

30

35

multilateral

bilateral

private

The 2005 agreement with the Paris Club

• 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)

Outputs:Stock and flow effects

• 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

0

10

20

30

40

50

60

2002 2003 2004 2005 2006 2007 2008 2009

Counterfactual debt stock

Actual debt stock

Difference = stock effect(output)

0

Conditionality effect

• 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

4. Outcomes

• 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

External debt sustainability ratios, actual and counterfactual, in %

2004 2009 Threshold

NPV debt/GDP 40 2 40

NPV debt/Exports 90 7 150

NPV debt/Revenues 116 10 250

Debt service/Exports 8 1 15

Debt service/Revenues 13 6 25

NPV debt/GDP 31 40

NPV debt/Exports 98 150

NPV debt/Revenues 138 250

Debt service/Exports 9 15

Debt service/Revenues 13 25

Some poverty indicators

2003 2008

Poverty headcount (’04) 52

Primary enrolment (’04 and ‘08) 81 89Ratio girls to boys in primary

education (’04 and ‘08) 81 85

Infant mortality 100 75

U5 mortality 201 157

Skilled birth attendance 36 39

Maternal mortality 800 545

5. Impact and conclusions

• 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

Growth rates, in %

-15

-10

-5

0

5

10

15

20

25

30

2002 2003 2004 2005 2006 2007 2008 2009

GDP

GDP oil

Agriculture