According
to Morrisey (2001) aid is found to have a positive impact on economic growth
through social mechanisms as (i) aid increases investment (ii) aid increases
the capacity to import capital goods or technology (iii) aid does not have an
adverse impact on investment and saving (iv) aid measures the capital productivity
and promotes endogenous technical change. But Reiffel (2005) noted that Nigeria is a
particularly unique case in Sub-Saharan Africa for two reasons:
i.
While it has one of the largest debts in the
region, it does not qualify as a heavily indebted poor country (HIPC) and
consequently was excluded from the 1996 World Bank Initiative to broaden the
number of poor countries involved in lessening the debt burden by granting
relief.
ii.
Nigeria
receives the least amount of aid per capita in the region.
The largest
international aid contributor to Nigeria is the Paris Club, an
informal grouping of creditor countries whose mission is to coordinated debt
policies in an effort to find sustainable solutions for debtor nations with
pragmatic difficulties (Hauser, E.M.) In 1986) Nigeria for the first time went
to the Paris club for debt rescheduling which according to creditor member principles
requires adherence to IMF reforms and reviews. Debt servicing in 1966 include rescheduling
of more than $7 billion in medium and long term debt (Reiffel, 2005). Nigeria was
forced to obtain further rescheduling in 1989 and 1991 of $6 billion and $3
billion respectively (Reffel, 2005). Thus, in 1993 when the possibilities of
debt rescheduling in any form was zero, the unsustainable previous debts merely
increased as debt arrears compounded by expanding interest. During the period
from 1993 to 1998 (the Abacha regime) Nigeria started discriminating the debts
it repaid and whom it repaid, neglecting the Paris club debts.
Consequently, debt to these creditors
increased from $7 billion in 1985 to $30.4 billion in 2004 (Reiffel, 1005). In
total, Nigeria’s
2004 debt equalled $35.9 billion, $30.4 billion fo which was accountable to the
Paris club.
With the establishment democracy in
1999 and a home grown policy known as the National economic Empowerment and
Development Strategy, the United
Kingdom pushed the Paris club creditor members to back the plan
for Nigeria’s
debt relief because of its endorsement to aid Africa.
Thus $ 18 billion (i.e 60 %) of its $ 30.4 billion debt was written off,
leaving the country with $12.4 billion to pay. Taking a critical look at the
aid received from the Paris club, we would realise that it did little or
nothing to alleviate the poverty situation of the people and compounded the
economy with suffocating pressure to service debt which has accumulated
interest for greater than the original aid.