Top officials of the American Government have agreed in principle to forgive Nigeria’s debts “For-Climate Swap deal,” running into billions of Dollar, but that such proposal would require the full policy review of the American Government.
Responding to the request by Osinbajo in that direction, when he visited the US at different forums and events, including at the White House, the Administrator of USAID, Samantha Power said that the idea is “fresh thinking that is very exciting.”
He said that the US is open to such new thinking even though it would require the full policy review of the American Government.
In his meetings with the top officials of the US government after his speech at the Centre for Global Development, the Vice President also pushed the Debt-for-Climate, DFC idea which he had previously proposed, publicly first, at the CGD.
“The proposed Debt-for-Climate swaps would be a very useful intervention and helpful as it will reduce debt burdens,” while advancing the Climate Change objectives of the international community.”
He described the idea as a Climate Change related financing instrument deserving of global consideration as it is a win-win proposal.
Professor Osinbajo 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,” specifically the DFC and the participation of African countries in the international carbon market. He reiterated that the DFC will help solve many of the debt burden challenges in Nigeria and other countries.”
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.
Professor Osinbajo explained that the “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.
“Typically, 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.”
The Nigerian Vice President justified the rationale behind such a debt swap deal, saying that the commitment to it would “increase the fiscal space for climate-related investments and reduce the debt burden for participating developing countries.”
While in Washington D.C. last week, the VP met with his American counterpart, Vice President 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.