Heroine of Nigeria's anti-corruption camp quits to West's dismay

Nigeria was in shock yesterday after the woman credited with masterminding the cancellation of the country's $18bn debt resigned as Foreign Minister, after the President abruptly withdrew her remaining responsibilities for economic reform.

A government statement announced that Ngozi Okonjo-Iweala had stepped down because of "a compelling need to take care of pressing family issues".

Mrs Okonjo-Iweala, a former World Bank vice-president, was in London negotiating a new debt relief package when she heard the news of President Olusegun Obasanjo's decision to demote her.

She left London without comment on Thursday, to return home to a statement of regret from the President that she had decided "to leave at this stage of our reform programme" which he said was beginning to yield "positive results".

Speaking on Nigerian television, she thanked the President, who had been "gracious enough to allow me to leave", so that she could take care of her family, who have remained in Washington.

But the resignation of such a prominent African reformist is likely to be greeted with dismay by Western donor countries which had placed great faith in her capacity to deliver.

As Finance Minister since 2004, when she was head-hunted from the World Bank, Mrs Okonjo-Iweala persuaded Western donors that Nigeria was not an oil-rich nation and should qualify for debt relief. She increased civil servants' pay, while slashing their perks, and brought in reforms in banking, insurance, pensions, income tax and foreign exchange.

But her anti-corruption campaign, which saw the Nigerian police chief jailed and a number of judges and senior customs officials sacked, brought her into conflict with the most powerful interests in the land.

Just over a month ago, President Obasanjo took a crucial decision to move Mrs Okonjo-Iweala from the finance ministry to head the foreign ministry, with no reason given.

Mrs Okonjo-Iweala, a diplomatic novice given her previous 20 years' experience as a World Bank economist in Washington, offered to resign, but was mollified by being allowed to remain as chairperson of the economic panel.

Mrs Okonjo-Iweala's successor as Finance Minister, Esther Nenadi Usman, has repeatedly said she would continue the crusade. Mrs Usman has now been promoted to head of the economic team, reuniting the main economic portfolios inside a single ministry.

Speculation has been rife in Nigeria about an ongoing rift between the President and Mrs Okonjo-Iweala. One Nigerian newspaper reported that their dispute escalated this week when Mr Obasanjo learnt that the Foreign Minister was planning to lead Nigeria's delegation to the forthcoming Singapore meeting of the World Bank and International Monetary Fund. As he ordered Mrs Usman to be confirmed as leader of the economic panel, he also reportedly asked Mrs Okonjo-Iweala to confine herself to Non-Aligned Movement issues. This is said to have been the last straw for the high-flying economist. However the most likely explanation is that Mrs Okonjo-Iweala's anti-corruption drive was causing too many waves in the Obasanjo administration, which in 2003 won the doubtful accolade as the most corrupt place on earth, according to Transparency International.

The governor of Abia state, Orji Kalu, told reporters in Lagos that he was not surprised by the resignation. "I knew Mrs Okonjo-Iweala would go because the government is trying to take all the money now and side-track her. Mrs Okonjo-Iweala has done the right thing and I congratulate her for resigning from a government that is not workable; from a government that is very corrupt, and I have told everybody that this government is very corrupt."

Under Mrs Okonjo-Iweala's stewardship, Nigeria became the first African country to be freed of its debt to the Paris club of rich nations last April, under a debt-relief deal that was supposed to clear the way for billions of dollars to be spent on reducing poverty.

She won over the donor countries by arguing that Nigeria is in fact a poor nation where most of the 130 million population live on less than 60p per day - and one in five children does not reach the age of five.

Because of its oil wealth, Nigeria was excluded from last year's landmark deal before the G8 summit in Gleneagles in which rich countries wrote off the debts of 19 of Africa's poorest countries. But Mrs Okonjo-Iweala promised that if the donor countries wrote off 60 per cent of Nigeria's debt, she would pay off the remaining $12bn with money saved by budget reforms. Her plan won the backing of Gordon Brown, the Chancellor of the Exchequer, who pushed for the deal agreed in June last year with the Paris Club.

But the oil industry remains mired in corruption. According to one telling anecdote, when she presented President Obasanjo with a report on the Extractive Industries Transparency Initiative, under which oil and other companies agree to publish what they pay and governments open their accounts to scrutiny, the Nigerian leader sealed it. He was apparently afraid that it would reveal discrepancies between government revenues and the budget.

"Obasanjo didn't want to hear about missing oil revenues, because people would assume that he stole them," one source said.