Nigeria and Paris Club’s Debt Relief

This paper examined debt relief and economic development in Nigeria. The methodology of this research was based on content and qualitative analyses. The paper argued that Nigeria obtained and managed its external debt to finance trade, support balance of payment and achieve economic development. Despite the management of it external debt, debt crisis became manifest. This resulted from poor lending and inefficient loan utilization, mismanagement of external loans, unequal trade, accumulation of arrears and penalties, increase in interest and exchange rates, and poor debt management. Others include the import dependent industrialization, lack of effective feasibility studies on project to be financed with external debt and the adoption of Structural Adjustment Programmes (SAPs). The paper also argued that the debt crisis has affected budgetary allocations for the provision of social services; discouraged foreign investment and contributed to the crisis of development in Nigeria. In addition, the paper argued that the state requested for debt relief from the international financial institutions on the grounds that the country’s debt was unsustainable; that the debt burden imposed on the country was too high and has affected budgetary allocation for the provision of social services; and the magnitude of the country’s debt was illegitimate and odious. Despite this, the paper argued that the IMF, World Bank and Paris Club refused to granted debt relief for Nigeria because it debt was sustainable, it is a middle income country that could not be granted debt forgiveness and that the burden of Nigeria’s debt should not be shouldered by the creditors but the country itself. The paper concluded that Nigeria was only granted debt relief after it has expressed its commitments to pay the sum of $12.4 billion in a year under a debt-buy back scheme. Despite the debt relief, the save resources were not properly channeled into poverty reduction strategies hence attainment of economic development becomes a mirage.