The Vice President, Professor Yemi Osinbajo, said the debt-for-climate swap deal he proposed at various fora and events including at the White House would reduce the debt burdens of Nigeria and other African countries by billions of dollars.
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 related financing instrument deserving of global consideration as it is a win-win proposal.
The VP had first proposed the idea on Thursday during a lecture on a just and equitable energy transition for Africa at the Center for Global Development in Washington D.C, USA.
In the subsequent meetings with top US government officials, the VP had pushed the Debt-for-Climate idea saying “debt for climate swaps is a type of debt swap where bilateral or multilateral debt is forgiven by creditors in exchange for a commitment by the debtor to use the outstanding debt service payments for national climate action programs.
He explained that “The creditor country or institution agrees to forgive part of a debt, if the debtor country would pay the avoided debt service payment in a local currency into an escrow or any other transparent fund and the funds must then 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 useful intervention and helpful as it will reduce debt burdens while advancing the Climate Change objectives of the international community.
According to Akande, Osinbajo’s proposal has received positive reviews amongst senior US government officials with some describing it as “fresh thinking.”
He also pushed the idea of opening up the Carbon Market in Africa so that the Climate Change actions of African countries can be adequately verified by the international community through the assessments of the appropriate verification institutions.
“We are hoping to get support and international buy-ins for these ideas,” he said, specifically the DFC and the participation of African countries in the international carbon market.
Responding to the Debt-for-Climate proposal, the Administrator of USAID, Samantha Power, told the Vice President that the idea is “fresh thinking that is very exciting.”
She added that the US is open to such new thinking even though it would require the full policy review of the American Government.
“Experts say under the DFC, sovereign debtors and international creditors will forgive all or a portion of external debt often running into billions in a country like Nigeria, in exchange for a commitment by the country to invest, in domestic currency, in specific climate or energy transition projects during a commonly agreed period.
“The expectation is that Debt For Climate swaps will reduce the level of indebtedness and free up fiscal resources to be invested in clean energy projects in Nigeria and other countries signed up for the programme once accepted by creditor-nations,” the statement read.
Likewise, the VP at his CGD address also proposed a significant addition to conventional capital flows both from public and private sources to Africa through greater participation in the global carbon finance market.
“Currently, direct carbon pricing systems through carbon taxes have largely been concentrated in high and middle-income countries. However, carbon markets can play a significant role in catalyzing sustainable energy deployment by directing private capital into climate action, improving global energy security, providing diversified incentive structures, especially in developing countries, and providing an impetus for clean energy markets when the price economics looks less compelling – as is the case today,” he said.
He encouraged developed countries to support Africa to develop into a global supplier of carbon credits, ranging from bio-diversity to energy-based credits, which would be a leap forward in aligning carbon pricing and related policy around achieving a just transition.
Osinbajo’s visit to Washington D.C. last Wednesday featured meetings with his US counterpart, VP Kamala Harris at the White House, the US Secretary of the Treasury, Ms. Janet Yellen, and the USAID Administrator Samantha Power.
He also held an interactive session with a group of Nigerian staff members of the World Bank and the IMF, before he spoke at the Centre for Global Development.
