African countries begin push for debt cancellation amid difficulty to repay loans

NEWS DIGEST – Leaders of African nations are pushing for the total cancellation of debts owed by African nations to their creditors, a favour which is believed would help many African countries leap out of debt distress.

Eleven African countries, which includes Nigeria, have accumulated unsustainable debts that they are no longer able to fulfil their financial obligations to their creditors, according to a report by the Nigerian Economic Summit Group and the Open Society Initiative for West Africa.

“This is important for ECOWAS countries to avoid a lost decade of getting to a debt crisis where debt settlement will be the government’s only agenda for years to come,” read the report.

The 10 other countries—Benin, Burkina Faso, Cabo Verde, the Gambia, Ghana, Guinea Bissau, Liberia, Niger, Senegal, and Togo—are mostly low-income countries that suffered big hits to their emerging market economies off the heels of the Covid-19 pandemic and were nudged to take a plunge into unsustainable debts.

At Tuesday’s session of the Conference of Speakers and Heads of African Parliaments, Speaker Gbajabiamila said “We [Africa] want to reset our buttons to read from zero.”

According to the Speaker, African countries were not concerned with achieving a total cancellation of existing debts owed to creditors and not debt reliefs or payment restructuring reviews.

Mr Gbajabiamila’s statement came a day after President Buhari said that talks on debt cancellation for Nigeria were at an advanced stage.

Nigeria’s debt stood at N39.56 trillion at the end of 2021, N6.64 trillion more than it was in 2020 when the public debt stock was N32.92 trillion, according to the Debt Management Office.

Despite the criticism from the masses, the Nigerian government has continued to amass more debt due to a paucity of funds to finance several capital projects. A good percentage of the new loans also went towards the payment of previous loans: in 2021, 44% of N6.64 trillion, which is N2.93 trillion, was spent on debt servicing.

As a consequence of sliding into debt distress, these African countries do not only suffer from higher interest payments that encourage the government to settle upon huge tax hikes but they also struggle to adequately respond to national problems.

“The possibility of a debt crisis in some countries in the region, particularly in Nigeria, will have adverse impacts on public and private investment, foreign investment inflows, aggregate demand and the stability of the macroeconomy at large,” added the report.

The Nigerian government is presently unable to meet the demands of striking lecturers despite past promises and assurances that the requested funds were available to meet the needs of the academics. This has resulted in a 3-months strike which is threatening to persist for even longer.

To Mr Gbajabiamila, African countries cannot continue to function with their hands tied by the debt of their past. “That is the position, and I appeal that we all support this push.”