Such non-transparent credit deals are undermining the continent’s economic growth, says president of African Development Bank
Loans offered to African governments in exchange for oil and other minerals must end because such deals are contributing to the continent’s crippling debt levels, Nigerian economist and banking expert Akinwumi Adesina has warned.
Adesina, who is president of the African Development Bank (AfDB), described such natural resource-backed loans as “asymmetrical” and “non-transparent,” in an interview published by Semafor Africa on Wednesday.
“I think it’s time for us to have debt transparency accountability and make sure that this whole thing of these opaque natural resource-backed loans actually ends, because it complicates the debt issue and the debt resolution issue,” he said.
According to Adesina, whose institution helps finance development in African countries, the continent’s external debt surged to $824 billion in 2021, with some countries allocating 65% of their GDP to debt servicing. It would spend a staggering $74 billion on payments for this year alone, a stark rise from $17 billion in 2010, he added.
A report published in 2020 by the Natural Resource Governance Institute (NRGI) on 52 resource-backed loans issued between 2004 and 2018 found that 30 of these loans, totaling $66 billion, had been allocated to sub-Saharan African nations. It claimed that more than 50% of the funds were borrowed from the China Development Bank and China Eximbank, with the rest provided by international commodity traders such as Glencore, Trafigura, and Standard Chartered, mainly to Chad, the Republic of the Congo, and South Sudan.
Last month, the AfDB president told Associated Press that the uneven nature of the negotiations, with lenders typically holding the upper hand and dictating terms to cash-strapped African nations, makes the loans “just bad.”
Adesina, however, said study into resource-linked loans has no “fixation” on one country being particularly susceptible to these types of lending agreements.
