By Abdullahi Mohammed, Abuja
Vice President Yemi Osinbajo Nigeria’s debt-for-climate swap deal tabled at different forums and events at the United States of America would make the country reap a huge debt relief from some creditors.At his meetings with the top officials of the US government Osinbajo pushed the debt-for-climate idea.“The proposed Debt-for-Climate swaps would be a very useful intervention and helpful as it will reduce debt burdens,”
Osinbajo said while advancing the climate change objectives of the international community.Osinbajo also described the idea as a climate change-related financing instrument deserving of global consideration as it is a win-win proposal.The Vice President 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.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,” adding that the US government is open to such new thinking even though it would require the full policy review.Osinbajo had in his CGD speech explained that the “debt-for-climate swap 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 programmes.
“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,” he said.Justifying the rationale behind such a debt swap deal, the Vice President said the commitment to it would “increase the fiscal space for climate-related investments and reduce the debt burden for participating developing countries.”Osinbajo also proposed a significant addition to conventional capital flows from public and private sources to Africa through a 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.While in Washington D.C. last week, Osinbajo met with his American counterpart, Ms 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.