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  • Business - Economy
  • Updated: June 23, 2020

Buhari's Request For Debt Cancellation Will Cost People Their Money - Ecobank CEO

Buhari's Request For Debt Cancellation Will Cost People Thei

With President Muhammadu Buhari and many other African Presidents seeking debt cancellation, the Group Managing Director and Chief Executive Officer of Ecobank Transnational Incorporated, Ade Ayeyemi, has stated that such request will bounce back to hurt Nigeria and other countries.

Ayeyemi said the debt cancellation will lead to some individuals losing their money as the debt owed to multilateral institutions, bilateral lenders and international financial organizations is savings. He made it known that when such an option as debt forgiveness is approved, it will affect the credit ratings of the country as these lending institutions are monitoring the ability of the debtors to repay their loans.

Buhari Wants Debt Forgiveness

Allnews had reported that President Buhari urged international financial institutions to cancel debt obligations considering the impact of COVID-19 on countries, during a virtual summit with other heads of states from the Non-Aligned Movement (NAM). NAM is the largest grouping of states globally after the United Nations.

President Buhari called for an “outright debt cancellation,” - this, he believes will cushion the fallout from the virus which has led to a global economy shutdown. Currently, Nigeria has an external debt stock of $27.67 billion with the World Bank Group topping the list with $10.1 billion, Beijing-based Export-Import Bank of China is second on the list with loans totaling $3.2 billion, while Eurobonds account for a total $10.86 billion or 39% of external debt.

The Debt Market Is Watching Nigeria, Others

According to Ayeyemi, the debt market is watching Nigeria and other African countries on how they handle their current and past debt service, and when Nigeria approaches the international financial institutions for credit, they will be checking these records, "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." He told Bloomberg during an interview.

Also supporting the statement of the Ecobank CEO is the Chief Executive Officer of Kenya’s largest bank, Equity Group Holdings, James Mwangi, who said default is no different from debt cancellation and this could affect the debt market. Mwangi said the debt cancellation or forgiveness could attract unintended consequences, so African countries must be conscious of the unintended consequences.

IMF, China Ignored Buhari's Demand For Debt Forgiveness

The International Monetary Fund (IMF) ignored President Buhari's request for an outright cancellation of debt, opting for debt freeze instead. China also is expected to snub the demand and rather delay loan repayment as it was stated that countries don't need debt cancellation as the infrastructures built with the loans have the potential of generating income for the African countries.

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