Loans provided to African governments in exchange for oil and other minerals need to cease due to the negative impact they have on the continent’s debt levels, as highlighted by Nigerian economist Akinwumi Adesina, who serves as the president of the African Development Bank (AfDB).
Adesina criticized these natural resource-backed loans as being “asymmetrical” and lacking transparency, emphasizing the importance of debt transparency and accountability to address the complexities surrounding debt issues and resolutions.
The African continent’s external debt has risen significantly, reaching $824 billion in 2021, with some countries allocating a substantial portion of their GDP towards debt servicing, a concerning trend that needs to be addressed urgently to prevent further financial strain.
A report by the Natural Resource Governance Institute (NRGI) revealed that a significant number of resource-backed loans were issued to sub-Saharan African nations between 2004 and 2018, with a substantial portion borrowed from entities like the China Development Bank and China Eximbank, as well as international commodity traders.
Adesina stressed the importance of exploring alternative financing options that do not exploit the continent’s natural resources unfairly, highlighting the need for a more balanced and equitable approach to lending that benefits African nations without burdening them with excessive debt.
