Debt-for-climate deal will ease Nigeria’s debt burden—Osinbajo

Vice President Prof. Yemi Osinbajo said the debt-for-climate swap deal he proposed at various forums and events, including at the White House, would reduce Nigeria’s debt burden and other multi-billion dollar African countries.

According to a statement signed on Sunday by his senior special assistant on media and publicity, Laolu Akande, Osinbajo also described the idea as a climate change financing instrument deserving of global consideration as it is a winning proposition. -winner.

The vice president had first proposed the idea on Thursday at a conference on a just and equitable energy transition for Africa at the Center for Global Development in Washington DC, United States.

In subsequent meetings with senior U.S. government officials, the Vice President had pushed the idea of ​​debt-for-climate, saying that “debt-for-climate swaps are a type of debt swap where bilateral debt or is canceled by creditors in exchange for a commitment by the debtor to use outstanding debt service payments for national climate action programs.

He explained that “the creditor country or institution agrees to cancel part of a debt, if the debtor country would pay the payment of the avoided debt service in a local currency into an escrow or other transparent fund and the funds are then to be used for agreed climate projects in the debtor country.
Justifying the rationale for the concept, the Vice President noted that the proposed debt-for-climate swaps would be a helpful and helpful intervention as they will reduce the debt burden while advancing the international community’s climate change goals. .

According to Akande, Osinbajo’s proposal received positive reviews among senior US government officials, with some describing it as “new thinking”.

He also pushed for the idea of ​​opening up the carbon market in Africa so that the actions of African countries on climate change can be adequately verified by the international community through the assessments of appropriate verification institutions.

“We hope to get international support and endorsements for these ideas,” he said, particularly the DFC and the participation of African countries in the international carbon market.

Responding to the Debt-for-Climate proposal, USAID Administrator Samantha Power told the vice president that the idea was “a novel thought that is very exciting.”

She added that the United States is open to such new thinking, even if it would require a full review of US government policy.

“Experts say that under the DFC, sovereign debtors and international creditors will cancel some or all of the external debt often running into the billions in a country like Nigeria, in exchange for the country’s commitment to invest , in national currency, in specific climates or energy transition projects for a mutually agreed period.

“Debt-for-climate swaps are expected to reduce debt levels and free up fiscal resources to invest in clean energy projects in Nigeria and other countries on the program once accepted by the countries. creditors,” the statement said.

Similarly, the Vice President, during his address to the CGD, also proposed a significant addition to conventional capital flows from public and private sources to Africa through greater participation in the global carbon finance market.

“Currently, direct carbon pricing systems through carbon taxes are largely concentrated in high- and middle-income countries. However, carbon markets can play an important role in catalysing the deployment of sustainable energy by channeling private capital into climate action, improving global energy security, providing diversified incentive structures, especially in developing countries, and giving a boost to clean energy markets when the economics of pricing seem less compelling – as it is today,” he said.

He encouraged developed countries to help Africa become a global provider of carbon credits, ranging from biodiversity to energy credits, which would be a leap forward in aligning carbon pricing and related policy around of a just transition.

Osinbajo’s visit to Washington DC last Wednesday included meetings with his U.S. counterpart, Vice President Kamala Harris at the White House, U.S. Treasury Secretary Ms. Janet Yellen, and USAID Administrator Samantha Power.

He also held an interactive session with a group of Nigerian staff from the World Bank and IMF, before speaking at the Center for Global Development.

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