On Buhari’s calls for Africa’s debt cancellation
By Moussa Ilallah
For both developed and developing countries, borrowing in the world is not just a hobby, but a necessary evil to meet the searing and depressing financial needs of countries during critical times. It is a norm to take loans, grants or aid to facilitate development and stabilize economies.
In 1988, under the banner of the Jubilee 2000 campaign, 70,000 people surrounded the G-7 summit in Birmingham, UK, demanding that the debts of 52 poor countries be canceled by the year 2000.
Uganda, became the first country to benefit from debt cancellation under the Heavily Indebted Poor Countries Initiative, but its debt was reduced by only 20%, while in 2001 , Tanzania qualified for debt relief after fulfilling the condition to privatize its water supply system in Dar es Salaam.
Then came Malawi which entered a food crisis just a year after being forced to sell off its grain reserves as a condition for debt relief. Malawi finally obtained debt relief in 2006.
Ghana became in 2004 the 14th country to benefit from debt relief under the Heavily Indebted Poor Countries Initiative, thus obtaining the cancellation of 50% of its debt.
In total, 14 countries have had their debts canceled for $ 29 billion by their various creditors.
In 2005, under the ‘Make Poverty History’ banner, 250,000 people marched through Edinburgh, UK, to the G-8 summit calling for debt cancellation, trade justice and more aid. abundant and better. The G-8 called on the IMF and the World Bank to write off all debts owed to them by countries that completed the “Heavily Indebted Poor Countries” process on loans before 2003. The total debt canceled in the program framework at the end of 2005 was $ 77 billion. for 18 countries.
However, international loans to the governments of the poorest countries increased from $ 56 billion in 2008 to $ 151 billion in 2014.
Global commodity prices fell rapidly from the middle of the year, causing sharp declines in incomes and exchange rates for commodity exporters like Ghana and Mozambique. Falling exchange rates quickly increased the amount of debts owed in US dollars and other foreign currencies.
In response to the global campaign, the IMF accepted an additional $ 100 million in debt relief from countries affected by the Ebola crisis – Guinea, Liberia and Sierra Leone.
Back home, precisely in 2005, during President Olusegun Obasanjo’s second term, Nigeria and the creditors reached a $ 30 billion debt deal with the Paris Club. Creditors wrote off $ 18 billion in arrears against Nigeria while the country repaid $ 12 billion. Most of the $ 18 billion was saved as aid, justifying the question of whether the cancellation contributed to Nigeria’s development.
It can be clearly remembered that after Nigeria emerged from recession in 2017, the level of new borrowing at the federal level and all levels of government, as indicated in the annual appropriation laws, had declined as part of the commitment and measures of the Buhari administration to moderate the rate. growth in outstanding public debt in order to ensure debt sustainability.
New borrowing to partially finance budget deficits has declined steadily, from N236 trillion in 2017 to N201 trillion in 2018; 1.61 trillion naira in 2019 and 1.59 trillion naira in the initial appropriation law of 2020.
Unfortunately, the trend reversed in 2020 due to the economic and social impact of the COVID-19 pandemic, with new borrowing in the revised 2020 finance law amounting to 4.20 trillion naira.
This was not peculiar to Nigeria, as many countries, including developing, developed and advanced countries, have also increased their borrowing levels in the wake of the COVID-19 pandemic.
It should therefore be noted here that in addition to the new domestic borrowing of 2.3 trillion naira, the other new borrowings were concessional loans from the International Monetary Fund (IMF) to the tune of $ 3.34 billion and other multilateral lenders. and bilateral.
This additional borrowing to partially finance the 2020 budget and the additional issuance of promissory notes were to settle certain federal government arrears. This has undoubtedly contributed to the increase in the stock of public debt. New domestic borrowing by state governments also contributed to the growth in the stock of public debt.
Total public debt to gross domestic product as of December 31, 2020 has been estimated at 21.61%, which is within Nigeria’s new 40% limit.
The various government initiatives to increase revenues such as the Strategic Income Growth Initiative and the 2020 Finance Law are expected to help strengthen government revenues and reduce the debt service-to-income ratio.
Meanwhile, President Buhari has sought approval from the National Assembly for a new external borrowing plan of 2,343 billion naira (approximately $ 6,183 billion) as reflected in the 2021 national budget.
This new borrowing will bring Nigeria’s outstanding debt to around 36.3 trillion naira, while the Debt Management Office (DMO) said at the time that “total public debt in relation to gross domestic product as of December 31, 2020 was 21.61%, which is within Nigeria’s limits. new limit of 40 percent. He added that the proposed new capital raising is the new external borrowing already provided for in the 2021 finance law.
The president also urged the National Assembly to approve a list of all donor-funded projects under the federal government’s 2018-2020 rolling external borrowing plan.
During the last summit in Paris, President Muhammadu Buhari called on European countries and global financial institutions to consider canceling the debt of African countries in order to reduce the devastating effects of the Corona virus pandemic on African economies by restructuring the debt portfolios, opting for full relief and releasing vaccines to the continent, which still lags behind in protecting the majority of its citizens.
He noted that falling commodity prices as Covid-19 weighed on the global economy has further slowed growth in some countries and strained healthcare facilities.
“It is with this in mind that we are requesting the support of the French government with its influence in the European Union to lend its voice to the efforts made to mobilize additional resources for developing economies more particularly Africa in order to strengthen the amount investments to our economies. This financial support should also be extended to the private sector, ” he said.
The President took the unique opportunity offered by the rally to call on the European Union to encourage fair and equitable distribution of COVID-19 vaccines in less developed countries and to further promote the establishment of manufacturing facilities.
The President rightly noted that many African countries were already in debt distress. He felt that the suspension of debt service by France and the G-20 countries did not go far enough, adding that it was necessary to find more sustainable and affordable financing solutions, including debt relief. debt and further debt restructuring.
On the Paris agreement on climate change, President Buhari noted that African countries would need financial support for investments in green energy and the COP-26.
He said Nigeria will refocus on gas, while adopting a strategic revenue growth initiative.
On the topic “Private Sector in Africa – Reforms – Infrastructure”, President Buhari who spoke on a number of burning issues affecting African countries revealed that the public-private partnership, PPP will be fully explored to ensure more precision. in development, reduce waste and reduce the risk of corruption.
“The government intends to leverage the public-private partnership to strengthen its job creation and fight against corruption. In terms of job creation, Nigeria has an abundant workforce as 30.5% of its population is between 25 and 54 years old, ” he said.
- Ilallah writes from Emeka Anyaoku Street in Abuja.