Cancelling debt of Nigeria, others will not help Africa, says Adeyemi

The Group Managing Director and Chief Executive Officer of the Pan African Banking Group, Ecobank Transnational Incorporated, Ade Ayeyemi, has warned against the idea of African countries seeking debt cancellation from multilateral institutions, bilateral lenders, and international financial organizations.

It can be recalled that in April, African Finance ministers, including that of Nigeria, Mrs. Zainab Shamsuna Ahmed, asked for debt relief from multilateral Institutions like the International Monetary Fund, World Bank and the European Union amid the coronavirus crisis.

The African countries who asked for immediate relief from debt service obligations from these multilateral institutions including the G20, canvassed for a portion of their debt to be forgiven or converted into long term, low interest loans. This is to help free up funds for the more than 50 poor African countries to deal with the coronavirus pandemic.

Reacting to such a request during an interview at the Bloomberg Invest Global virtual conference on Monday, July 22, 2020,  Adeyemi stated that canceling the debt of heavily indebted African countries would only come back to haunt them.

According to Ayeyemi, “Forgiveness is not helpful because your debt is somebody else’s savings. When you go to the market to borrow money, the market is looking at your current and past behavior.”

His view was also corroborated by the Chief Executive Officer of Kenya’s largest bank, Equity Group Holdings, James Mwangi, when he said that forgiveness was a form of default, which distorted markets. He pointed out that the call for debt forgiveness was one area where the continent should be conscious of the unintended consequences.

China, according to reports, had last week expressed the intention to exempt some African countries from repaying their interest-free loans that are due at the end of 2020. It also expressed its willingness to provide further support, including loan maturing extensions, to free up funds needed to deal with the pandemic