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Evolution of Debt Landscape Over the Past 10 Years in Africa – Akinwumi Adesina

Keynote Speech by Dr. Akinwumi A. Adesina, President, African Development Bank Group, Delivered at the Paris Club on June 20, 2023



Akinwumi Adesina

Your Excellencies, ladies, and gentlemen.

Thank you for inviting me to speak at this important session on the evolution of the debt landscape over the past 10 years.

The total external debt of Africa was estimated at $1.1 trillion in 2022. This is expected to rise to $1.13 trillion by 2023. This is due to several factors: the carry-over effects of the Covid-19 pandemic on economies and their fiscal space which led to downgrades of several countries; the rising costs of energy and food prices from the Russian-Ukraine war; and the rising costs of adapting to climate change.

With the tightening of monetary policies in the US and Europe, interest rates have risen, leading to rising costs of debt servicing. These combined effects have led to 25 countries in Africa being either at the risk of high debt distress or in debt distress. As a result, the external debt service payments due for 16 African countries will rise from $21.2 billion in 2022 to $22.3 billion in 2023.

The structure of Africa’s debt has changed dramatically in the past decade or more, accentuating a trend that started in the mid-2000s.

I would like to discuss five trends.

First, non-Paris Club bilateral creditors and commercial creditors are increasingly becoming major sources of Africa’s sovereign debt. While bilateral debt represented 52% in 2000, this declined to 25% by 2021; commercial debt’s share of total debt increased from 17% in 2000 to 43% in 2021. Yearly bond issuances in Africa increased from an average of $10 billion annually in the early 2000s, to about $80 billion annually by 2016–2020. This trend was spurred by the very low global interest rates, with investors looking for yields in emerging markets.

Second, there has been a very rapid growth in debt owed to China. The share of China’s debt rose from just 1% of total debt in mid-2000s to 14% of total external debt by 2021. Most of this debt is for infrastructure.

Third, average interest rates on debt have diverged significantly over time, with multilateral debt at 1%; bilateral debt at 1.2%; China debt at 3.2%; and private debt at greater than 6.2%. The tenure on debt has also widened between creditors.

Fourth, while the maturity of official debt was 30 years (for 62% of the debt), the tenor for bonds have averaged 10 years. Thus, we now have a more shorter-term debt with higher interest rates.

Fifth, an increasing percentage of debt is now in form of resource-backed loans. Between 2004 and 2018 30 natural resource-backed loans worth $66 billion were signed by African countries. Most of the loans were backed by oil, minerals, and commodities. The commodity price crash of 2014 threw to 10 out of the 14 countries that used natural resource backed loans into serious debt problems.

What needs to be done to tackle Africa’s debt?

First, given the diverse nature of creditors, most now outside of the Paris-Club, it has become more complex to address debt treatment, debt restructuring and debt resolution. The process has become more complicated, as interests of creditors diverge. Need to expand the Paris Club to include the commercial and other-non-Paris club creditors. We need to make the G20 Common Framework work and speedily concluded for Zambia, Chad, Ethiopia, and Ghana, to build momentum for debt treatment for all creditors.

Second, there is need for greater debt transparency across all creditors.

Third, given their non-transparent nature, asymmetry of power in negotiations and compromises of countries futures, natural resource backed loans should no longer be used.

Fourth, we must expand market-derived concessional financing to support countries. This will reduce the level of dependency on expensive short-term debt by countries. The ADF market-option of the African Development Bank Group can help mobilize $27 billion for the low-income countries.

Fifth, greater use of partial credit guarantees at scale can help countries to access capital markets and issue bonds at lower coupon rates and longer maturities. For example, the African Development Bank used partial credit guarantees of $375 million to support the issuance of $500 million Panda bond by Egypt. We also used a partial credit guarantee of EUR 195 million to de-risk a EUR 350 million sustainable development loan from Deutsche Bank to Benin.

Sixth, the SDR re-channeling to the African Development Bank can be leveraged by the Bank by 3–4 times to deliver greater financing for African countries. The financial model for SDR re-channeling, with a liquidity support agreement, developed by the Bank and the Inter-American Development Bank has now met the reserve asset status of the IMF. What is needed is for 5 countries to provide SDRs to the Bank. A $5 billion allocation will be turned into $20 billion of financing for Africa. A $50 billion allocation to multilateral development banks will deliver $200 billion of new lending to countries.

Finally, efforts should be made to tackle systemic risks in Africa. Africa is the only region without liquidity buffers to protect it against shocks. To change this, the African Development Bank and the African Union are working together to establish an African Financial Stability Mechanism. Such a homegrown mechanism will mutualize our funds and ensure that we avoid spillover effects that come from global shocks.

Let’s make sustainable debt work well for countries.

Let’s support greater domestic resource mobilization for countries.

Let’s coordinate better and lower the time and costs of overly long debt resolutions. The debt treatment of the 1990s took over a decade to conclude, which led to the lost decade in Africa’s development.

Hope delayed is hope denied.

Thank you very much.


Nigerian Banks’ Borrowings from CBN Surge 835% in a Month, Raising Liquidity Concerns



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The Nigerian banking sector has witnessed an unprecedented 835% surge in borrowings from the Central Bank of Nigeria (CBN) in the span of just one month, igniting concerns over the nation’s liquidity stability.

Data reveals that banks’ dependence on the CBN has reached new heights, with their borrowings skyrocketing from a relatively modest N323.97 billion in August to N3.03 trillion in September. This remarkable increase underscores a growing reliance on the CBN’s support in times of financial stress.

This surge in borrowing activity has primarily been attributed to the CBN’s stringent monetary policies aimed at curbing inflation and managing the demand for foreign exchange. These policies have, in turn, squeezed commercial banks, compelling them to tap into the CBN’s Standing Lending Facility (SLF) for immediate liquidity needs.

Despite the escalating dependence on CBN funds, the Monetary Policy Committee (MPC) of the apex bank insists that the Nigerian banking sector remains fundamentally robust. MPC member Adenikinju Festus highlighted key indicators, including Capital Adequacy Ratio (CAR) and Non-Performing Loan (NPL) ratios, which still align with prudential standards. Furthermore, liquidity ratios have improved, and returns on equity and assets have risen.

However, the banking industry’s persistently high operating costs are raising alarms. In comparison to international standards, Nigerian banks are grappling with substantially higher operating expenses, prompting concerns about their long-term sustainability.

In a parallel development, the CBN’s Development Finance Department has disbursed a total of N9.714 trillion to various sectors of the economy over the past three years, with manufacturing and industries receiving the largest share at 32.6%.

Other sectors, including energy, agriculture, services, micro, small, and medium enterprises (MSMEs), export, and health, have also benefited significantly from these disbursements.

While the CBN remains committed to fostering sustainable economic growth, the surging dependence of Nigerian banks on short-term borrowings from the central bank is casting shadows on the sector’s long-term stability.

As Nigeria grapples with these liquidity concerns, the financial industry and regulators face the challenging task of charting a course towards a more resilient and sustainable banking environment.

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Banking Sector

Central Bank of Nigeria Postpones 293rd Monetary Policy Committee Meeting



Central Bank of Nigeria - Investors King

The Central Bank of Nigeria (CBN) has announced the postponement of its 293rd Monetary Policy Committee (MPC) meeting, originally scheduled for September 25th and 26th, 2023.

Dr. Isa AbdulMumin, the bank’s Director of Corporate Communications, released a statement on Thursday confirming the decision.

In the statement, Dr. AbdulMumin stated, “The Monetary Policy Committee of the Central Bank of Nigeria has deferred its 293rd meeting, which was initially planned for Monday and Tuesday, September 25th and 26th, 2023, respectively. A new date will be communicated in due course. We regret any inconvenience this change may cause our stakeholders and the general public.”

While the CBN did not provide an official reason for the postponement, some industry experts suggest it may be related to the pending approvals for the newly appointed governor and deputy governors of the bank.

President Bola Tinubu recently nominated Yemi Cardoso as the potential head of the CBN. Additionally, Tinubu has endorsed the nominations of four new deputy governors for the apex bank, who are expected to serve for an initial term of five years, pending confirmation by the Senate.

The nominated deputy governors are Emem Usoro, Muhammad Abdullahi-Dattijo, Philip Ikeazor, and Bala Bello. However, the appointment of the CBN governor is contingent upon Senate confirmation, which is currently on a yearly recess.

The CBN assures stakeholders and the public that the rescheduled MPC meeting date will be communicated promptly as soon as it is confirmed.

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Banking Sector

Currency in Circulation Surges by N1.7 Trillion Amidst Rising Cash Transactions



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The currency in circulation in Nigeria has surged by N1.7 trillion, driven by a surge in cash transactions.

According to data obtained from the Central Bank of Nigeria (CBN), as of the end of August, the currency in circulation rose to N2.7 trillion.

This substantial increase in currency in circulation comes after a 235.03 percent dip to N982.1 billion as of the end of February 2023 from N3.29 trillion at the close of October 2022, primarily due to the naira redesign policy spearheaded by the CBN.

However, the currency in circulation began its steady ascent once the policy concluded. Cash that had been previously withdrawn from circulation to promote electronic payments was reintroduced into the economy, contributing to this significant boost.

The data obtained from the CBN reveals that a whopping N2.3 trillion was removed from circulation during this period.

The CBN defines currency in circulation as all legal tender currency in the hands of the general public and within the vaults of Deposit Money Banks, excluding the central bank’s vaults.

The CBN further elucidated its methodology, stating that it employed an “accounting/statistical/withdrawals & deposits approach” to calculate the currency in circulation in Nigeria. This approach meticulously tracks the movement of currency in circulation on a transaction-by-transaction basis.

Under this methodology, each withdrawal made by a Deposit Money Bank at one of CBN’s branches results in an increase in currency in circulation (CIC), while each deposit made by a DMB at one of CBN’s branches leads to a decrease in CIC.

This surge in currency in circulation reflects the evolving landscape of financial transactions in Nigeria and underscores the importance of flexible monetary policies in facilitating economic growth and stability.

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