While the International Monetary Fund (IMF) debt sustainability analysis as of February 2021 shows that the majority of countries in West Africa have remained in moderate debt distress, a further analysis indicates that debt accumulation prior to the outbreak of Covid-19 outpaces the ability of growth performance to support debt servicing.
Sadly, of the fifteen-member states of the Economic Community of West African States (ECOWAS), eleven of them are currently in debt distress. A new report by the Nigerian Economic Summit Group and the Open Society Initiative for West Africa has disclosed that Nigeria and 10 other Economic Community of West African States countries are currently in debt distress based on debt sustainability analysis. The 10 other countries are Benin, Burkina Faso, Cabo Verde, the Gambia, Ghana, Guinea Bissau, Liberia, Niger, Senegal, and Togo. The report, titled ‘Debt Management, Restricting and Sustainability in ECOWAS’, was recently launched at the Debt Management Office here in Abuja.
Statistics from the DMO shows that Nigeria’s public debt stood at N87,379,401.75 trillion as at June 30 2023 and in the same vein, Ghana’s public debt stock rose to 569.3 billion cedis ($49.7 billion) at the end of April, 2023, according to figures obtained from the Bank of Ghana. Sierra Leone’s debt is classified as being at high risk of debt distress, largely due to heightened solvency and liquidity risks arising from the COVID–19 pandemic.
For us in Civil Society, this is quite a disturbing trend, and this is because most ECOWAS revenues are now being channelled to debt servicing obligations at the peril of basic social services, climate and other development exigencies. The debt crisis imperils the attainment of the Sustainable Development Goals and achievement of the Paris Climate Agreement in West Africa. This becomes even more worrisome when viewed against the backdrop that Nigeria remains the world poverty capital as designated by the World Poverty Clock report of 2023. It means debt will drive more Nigerians and indeed, West Africans into extreme and multidimensional poverty if urgent and drastic steps are not taken by our governments and the international community.
High fiscal deficits in many African countries have made it difficult to build resilience and tackle the multiple shocks (i.e., Covid-19 pandemic, natural disasters and insecurity occasioned by terrorism and banditry). As at last year, eight African countries were in debt distress and thirteen at high risk of debt distress.
Against this backdrop, African leaders, recently who gathered at the Africa Climate Summit in Nairobi in September, called for debt relief across the continent to allow countries to get on with responding to the climate and other development crisis.
Recall that at the peak of the Covid, Climate and Economic crisis in 2021, the Board of the International Monetary Fund approved the release of $650bn Special Drawing Rights (SDR) to help boost the liquidity of member countries. African countries received US$33.8bn out of which Nigeria received $3.35bn as its share. There are concerns that the allocation of the 2021 SDR was insufficient to support post-covid economic recovery especially for low-income countries like Nigeria.
Furthermore, there have been some specific proposals on the amount of SDR on-lending which include: the French President’s call at the Summit on the Financing of African Economies to reallocate 100 billion SDRs to African countries; the request by six African Heads of State to on-lend at least 25% of the new SDR issuance, equivalent to US$ 162 billion, to boost the COVID-19 recovery and contribute to the fight against the climate crisis and; a request by the Ministers of Finance of Côte d’Ivoire, the Democratic Republic of the Congo, Ghana and Nigeria for G20 to consider on-lending at least US$ 30 billion in SDRs to a new facility that would catalyze investments in Africa, reduce liquidity premiums on middle-income countries’ sovereign bonds and incentivize environmentally sustainable investments.
In April 2022, the International Monetary Fund (IMF), announced a new Resilience and Sustainability Trust (RST) which came into effect 1 May 2022. The new Trust aims to help low-income and vulnerable middle-income countries address longer-term structural challenges that pose macroeconomic risks, including climate change and pandemic. According to the IMF, the RST seeks to amplify the impact of the US$650 billion SDR allocation implemented August 2021 by channelling resources from economically stronger members to countries where the needs are greatest.
There are, however, no organized movements and Civil Society actions in West Africa that are tracking how the SDR and the RST are drawn and applied in West African countries to hold governments across board to account and eventually enable a green economic recovery. In view of this, the Africa Network for Environment and Economic Justice (ANEEJ) in collaboration with Africa Centre for Energy Policy (ACEP) Ghana commissioned two researches on the allocation and utilization of SDRs in Ghana and Nigeria. The outcome of the research have been shared at our technical sessions.
I wish to flag the fact that the conversation on Special Drawing Rights (SDRs) in Africa remains a highly technical subject with little access to information available to policymakers and the public about how they work. Also, parliamentary oversight is noted to be weak from studies conducted by ANEEJ in Nigeria and Ghana. To enlighten the understanding of development stakeholders on this subject, various enlightenment activities would be rolled out by ANEEJ in the days and weeks ahead. We have produced two policy briefs from the research findings for use by CSOs to engage our governments in Nigeria and Ghana. In fact, we are also organising a two-day workshop back-to-back with this conference for Civil Society and media actors to deepen their knowledge and equip them with skills to engage government on issues around the SDR and how to hold government to account.
We seek to review the utilisation of SDRs in Nigeria and Ghana as well as take a deep dive into current debates around SDR reallocation to countries in most need such as Nigeria and Ghana without having to exacerbate the debt crisis. We hope that we all play our part to deepen discussions around the SDRs, and to come up with meaningful outcomes for governments of Nigeria, Ghana and indeed for the development of Africa.