What Did US $18 bn Achieve? The 2005 Debt Relief to Nigeria

Abstract
Since 2003 Nigeria's economic growth has been consistently above 6% and this growth has been driven by non-oil sectors. The aim of this paper is to assess the contribution of the 2005 debt relief agreement to Nigeria to this higher growth. This agreement eliminated Nigeria's US$ 30 billion to Paris Club creditors; the creditors cancelled un unprecedented US$ 18 billion, while Nigeria paid US$ 12 billion. The paper traces the three possible impact channels of debt relief, namely the flow (reduced debt service), the stock (removal of debt overhang) and the conditionality channel. It concludes that the debt relief agreement played a key role in the country's improved economic performance, in particular through successful conditionality.