Contents:
Press Release: Paris Club October 20, 2005 [Agreement to implement a
comprehensive debt treatment framework for Nigeria]
http://www.clubdeparis.org/en/news/page_detail_news.php?FICHIER=com11297988840
Press Release: IMF, October 17, 2005 [IMF Executive Board Approves a
Two-Year Policy Support Instrument for Nigeria]
http://www.imf.org/external/np/sec/pr/2005/pr05229.htm
Press Release: Paris Club, June 29, 2005 [Expression of readiness to
enter into negotiations with the Nigerian authorities on a
comprehensive debt treatment]
http://www.clubdeparis.org/en/news/page_detail_news.php?FICHIER=com11201201230
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http://www.clubdeparis.org/en/news/page_detail_news.php?FICHIER=com11297988840
October 20, 2005
Nigeria
The representatives of the Paris Club creditor countries met on 18, 19
and 20 October 2005 and agreed with the representatives of the Federal
Republic of Nigeria on a comprehensive treatment of its debt.
This agreement implements the debt treatment framework for Nigeria
announced by the Paris Club on 29 June 2005.
The representatives of the Paris Club creditor countries welcomed the
ambitious economic program implemented by the Nigerian authorities
since 2003 and their desire to secure an exit treatment from the Paris
Club. This agreement takes place after the approval by the Executive
Board of the International Monetary Fund of the Policy Support
Instrument (PSI) on 17 October 2005 and includes a debt reduction
under Naples terms on eligible debts and a buy back at a
market-related discount on the remaining eligible debts after reduction.
This agreement will be implemented in two phases in consonance with
the implementation of the PSI:
- in the first phase, Nigeria undertakes to pay arrears due on all
categories of debts and Paris Club creditors grant a 33% cancellation
of eligible debts;
- in the second phase, after the approval of the first review of the
PSI by the Executive Board of the IMF, planned for March 2006, the
Nigerian Government will pay amounts due under post-cut off date debt,
Paris Club creditors will grant a further tranche of cancellation of
34% on eligible debts, and Nigeria will buy back the remaining
eligible debts.
In total, this agreement allows Nigeria to obtain a debt cancellation
estimated at US$ 18 billion (including moratorium interest)
representing an overall cancellation of about 60% of its debt to the
Paris Club of around US$ 30 billion. Paris Club creditors will be paid
an amount of US$ 12.4 billion, representing regularization of arrears
of US$ 6.3 billion, plus a balance of US$ 6.1 billion to complete the
exit strategy.
This exceptional treatment of Nigeria's debt offers a fair,
sustainable, and definitive solution to Nigeria and Paris Club
creditors. With the large debt relief included in this agreement,
Paris Club creditors extend their strong support to Nigeria's economic
development policy and its fight against poverty.
Background notes
1. The Paris Club was formed in 1956. It is an informal group of
creditor governments from major industrialized countries. It meets on
a monthly basis in Paris with debtor countries in order to agree with
them on restructuring their debts.
2. The members of the Paris Club which participated in the
reorganization of Nigeria's debt were representatives of the
governments of Austria, Belgium, Brazil, Denmark, Finland, France,
Germany, Italy, Japan, the Netherlands, the Russian Federation, Spain,
Switzerland, the United Kingdom and the United States of America.
Observers at the meeting were representatives of the governments of
Australia, Canada and Norway as well as the International Monetary
Fund, the World Bank, the African Development Bank, the European
Commission, the Organization for Economic Cooperation and Development
and the Secretariat of the U.N.C.T.A.D.
The delegation of the Federal Republic of Nigeria was headed by Dr
(Mrs) Ngozi OKONJO-IWEALA, Minister of Finance. The meeting was
chaired by Mr. Xavier MUSCA, Director General of the Treasury and
Economic Policy Department of the Ministry of Economy, Finance and
Industry, Chairman of the Paris Club.
Technical notes
1. The Policy Support Instrument (PSI) concluded by Nigeria with the
International Monetary Fund was approved by the Fund's Executive Board
on 17 October 2005.
2. The total stock of Nigeria's public sector has been estimated as at
end 2005 at US$ 36.2 billion, out of which around US$ 30 billion due
to the Paris Club (source: IMF staff report and Paris Club creditors).
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http://www.imf.org/external/np/sec/pr/2005/pr05229.htm
Press Release No. 05/229
October 17, 2005
International Monetary Fund
700 19th Street, NW
Washington, D.C. 20431 USA
IMF Executive Board Approves a Two-Year Policy Support Instrument for
Nigeria
The Executive Board of the International Monetary Fund (IMF) today
approved a two-year Policy Support Instrument (PSI) for Nigeria under
the IMF's newly created PSI framework, and which is intended to
support the nation's economic reform efforts.
Nigeria's PSI is based on the National Economic Empowerment and
Development Strategy (NEEDS), Nigeria's Poverty Reduction Strategy,
and focuses on rapid and sustainable non-oil growth and poverty
reduction. The PSI will assist Nigeria to develop a well-articulated
and sound policy framework, including prudent macroeconomic policies,
a strengthening of institutions, and ensure a governance structure
conducive to private sector activity. Approval of a PSI for Nigeria
signifies IMF endorsement of the policies outlined in the program.
The IMF's framework for PSIs is designed for low-income countries that
may not need, or want, IMF financial assistance, but still seek IMF
advice, monitoring and endorsement of their policies. PSIs are
voluntary and demand driven. PSI-supported programs are based on
country-owned poverty reduction strategies adopted in a participatory
process involving civil society and development partners and
articulated in a Poverty Reduction Strategy Paper (PRSP). This is
intended to ensure that PSI-supported programs are consistent with a
comprehensive framework for macroeconomic, structural and social
policies to foster growth and reduce poverty. Members' performance
under a PSI is normally reviewed semi-annually, irrespective of the
status of the program. (see Public Information Notice No. 05/145).
In commenting on the Executive Board decision, Ms. Anne O. Krueger,
First Deputy Managing Director and Acting Chair, stated:
"Over the past 18 months, Nigeria has made commendable progress in
implementing its economic reform program, aimed at accelerating
economic growth, reducing poverty, and meeting the Millennium
Development Goals. More recently, the authorities requested a Policy
Support Instrument in support of a comprehensive reform program based
on their National Economic Empowerment and Development Strategy.
" The authorities' program is designed to sustain and strengthen
macroeconomic performance and encourage economic growth and
diversification with front-loaded structural reforms. The program
emphasizes pro-growth and export-oriented reforms that-along with
prudent fiscal, exchange rate, and monetary management-will boost
external competitiveness over the medium term. It is formulated with
quantitative and structural assessment criteria that reflect policies
meeting the IMF's standard of upper credit tranche conditionality-the
same policy standard that would warrant IMF financial support beyond
the first credit tranche. The continuing close relationship with the
Fund envisaged under the PSI approved today should support Nigeria in
developing a well-articulated and sound policy framework and
implementing the next phase of reforms, and promote and facilitate
private sector activity and debt relief.
"A key challenge going forward will be to maintain an appropriate
stance and mix of fiscal and monetary policies, in view of the
importance of reversing the upsurge in inflation that was associated
with the expansionary monetary and fiscal policies in early 2005.
While the government is committed to containing spending in 2005 below
budget appropriations, the projected increase in spending is still
large, and the resulting fiscal expansion will place more of the
burden of controlling inflation on the central bank. Following the
failure to sterilize the buildup of excess liquidity in the first half
of the year, the Central Bank of Nigeria (CBN) has recently taken
stronger measures to reduce money growth-including increased sales of
foreign exchange, more aggressive open market operations, and a
further increase in cash reserve requirements-which have put the
year-end monetary targets within reach. In addition, the prospective
adoption of a 2006 budget that reduces the primary non-oil deficit
well below the projected outturn for 2005 will further improve the
policy mix. At the same time, the government aims to strengthen
expenditures on poverty-related programs, allocating an extra US$1
billion to well-defined programs related to the Millennium Development
Goals.
"The authorities have initiated a broad and ambitious structural
reform program aimed at improving public service delivery and the
business environment. The program includes measures to strengthen
budget procedures, advance civil service reforms, restructure the
banking system, unify foreign exchange markets, rationalize the
external tariff system, and improve governance and transparency. The
authorities' recent decision to allow oil marketers to increase
gasoline prices by about 25 percent will help reduce allocation
distortions and implicit subsidies.
"Implementation of the agreement in principle that Nigeria has reached
with Paris Club creditor countries should improve investor confidence
and free up resources for poverty reduction. Negotiations on a
comprehensive debt treatment are expected to take place in the near
future.
"The authorities' homegrown program supported by the PSI provides an
important opportunity for Nigeria to consolidate the gains achieved so
far and address the significant remaining challenges stemming from
past economic mismanagement and resistance to reform from vested
interests. Achievement of the program objectives hinges on timely and
rigorous implementation of the envisaged polices. The authorities
fully recognize these challenges and are firmly committed to strict
adherence to the program. The broad domestic ownership and support at
all levels of government bode well for the success of the program. The
continued provision of technical assistance will be essential for
bolstering implementation capacity. More generally, the support of the
international community for Nigeria's economic reform program is
crucial at this juncture," Ms. Krueger said.
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http://www.clubdeparis.org/en/news/page_detail_news.php?FICHIER=com11201201230
June 29, 2005
Nigeria
The representatives of the Paris Club creditor countries met in Paris
on 29 June 2005 and expressed their readiness, consistent with their
national laws and regulations, to enter into negotiations with the
Nigerian authorities in the months to come on a comprehensive debt
treatment. They took note of the economic reform program implemented
by the Nigerian authorities since 2003 and of their willingness to
take advantage of exceptional revenues in order to finance an exit
treatment from the Paris Club.
This announcement takes place after Nigeria has recently been declared
eligible to IDA-only borrowing status and at a time when Nigeria has
decided to renew closer relations with the International Financial
Institutions. Creditors welcomed Nigeria's willingness to conclude a
policy support instrument (PSI) as soon as this new instrument is
approved by the board of the IMF, to pay all its arrears towards Paris
Club creditors and to treat them equitably. On this basis, this debt
treatment would include debt reduction up to Naples terms on eligible
debts and a buy back at a market related discount on the remaining
eligible debts after reduction.
This Agreement would be phased in relation with appropriate IMF review
under the PSI. This exceptional treatment of Nigeria's debt would
offer a fair, sustainable and definitive solution to Paris Club
creditors and Nigeria. The significant debt relief would ensure long
term debt sustainability and would represent an important contribution
by Nigeria's Paris Club creditors to its economic development. It
would also help Nigeria in its fight against poverty.
Paris Club creditors are ready to invite Nigeria to negotiate in Paris
as soon as it has concluded a policy support instrument with the IMF.
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