- The African Development Bank says African governments should prioritise borrowing longer-term loans with lower interest rates
- AfDB’s Vice-President says the continent halt its dependence on food importation
- He says political instability is the bane of economic development and growth
The African Development Bank (AfDB) has advised African governments to focus on borrowing longer-term loans with lower interest rates as a solution to the continent's debt challenge.
AfDB’s Vice-President for Economic Governance and Knowledge Management, Professor Kevin Urama, in an interview with the News Agency of Nigeria (NAN), said such loans should be underpinned by clear investment plans that can generate returns capable of repaying the debt.
Prof Urama noted that strategic borrowing and political stability were critical for growth in the continent, adding that public debts are known ways of growing economies.
He said, “Debt for growth is a known way of growing economies. However, the quality and structure of the debt are crucial factors in determining its long-term impact.
“The problem arises when countries borrow short-term loans and are unable to repay them before investments mature. This cycle forces countries to continuously refinance, often at unfavourable terms.
“It is therefore important for African governments to focus on borrowing longer-term loans with lower interest rates, underpinned by clear investment plans that can generate returns capable of repaying the debt.”
In the case of Nigeria, Prof Urama said higher borrowing doesn’t pose a problem, rather that such loans be channelled to profitable and economy-stimulating ventures.
He said, “For Nigeria, the key question should not be whether the country is borrowing more, but rather how borrowed resources are being used.
“If borrowed funds are invested in infrastructure that drives growth both in the short and long term, it is a smart move.”
Africa should depend less on food importation
The AfDB’s Vice President also called for an end to Africa’s dependence on imports, especially food importation, and instead harness its resources.
Prof Urama noted that the continent has enough arable land and other agricultural potential to be food-sufficient, citing the Ethiopian example of becoming a wheat exporter within just four years of focused agricultural investment.
He said, “Africa has no business importing wheat from Ukraine because we have 65 per cent of the remaining arable land in the world.
“We also have a vibrant, youthful population eager to engage in productive activities. Africa has the capacity to feed itself and the world.
“And this can be achieved through initiatives such as the AfDB’s AgriPreneur and Special Agro-Industrial Processing Zones (SAPZ) programmes which are crucial tools for unlocking the continent’s agricultural potential.”
Political stability key to economic growth
Prof Urama also noted the impact of political instability on the economic underdevelopment of the continent.
He restated the importance of political stability and sound macroeconomic policy management, noting that stable governance and good policy could reduce capital costs, increase foreign investment, and improve economic growth, as is the case in Botswana.
“When political stability and good governance are in place, the cost of capital decreases, and investments flow more freely.
“By doing so, African countries can reduce their dependence on external financing, stabilise their currencies, and ultimately foster sustainable economic growth,” he said.
40% of African countries face rising debt crisis – ECA
Meanwhile, TheRadar earlier reported that the United Nations Economic Commission for Africa (ECA) raised alarm over rising debts across Africa, saying that 40 per cent of countries on the continent are either in debt distress or at high risk.
The commission said it is worried that most African nations in the crisis are appropriating more funds to debt interest payments than to critical sectors that could stimulate development.
