Buhari seeks debt cancellation for developing countries

Nigeria's President Muhammadu Buhari recently returned to the country after a week-long engagement at the 76th session of the United Nations General Assembly. During his address at the session, President Buhari raised concerns about the impact of COVID-19 on debt servicing by many countries, particularly developing and least developed nations. He called for a review of the eligibility criteria for debt suspension and outright cancellation, highlighting the challenges faced by nations in servicing their debts amidst the pandemic. In an interview with CNBC Africa, Steve A. Schokur, Co-Managing Partner at Comercio Partners, discussed the implications of President Buhari's call for debt cancellation. Schokur emphasized the need for strong engagement with multilateral bodies and the United Nations to address the issue of unsustainable debt levels. He pointed out that Nigeria's debt service to revenue ratio is on the rise, causing concern for the government. Schokur highlighted the significant external debt Nigeria holds, standing at approximately $82 billion as of March 2021, representing 42% of the total debt. In the face of mounting debt burdens, President Buhari's appeal for debt cancellation underscores the urgent need for relief to alleviate the financial strain on developing nations. The conversation delved into the World Bank's debt service suspension initiative and the challenges faced in engaging private creditors to participate. While debt suspension provided temporary relief during the pandemic-induced economic downturn, the prospect of outright debt cancellation remains a complex issue. Schokur emphasized the importance of presenting a compelling argument to international financial institutions to secure debt relief. Furthermore, analysts have called for Nigeria to undertake difficult fiscal reforms to address low revenues and high debt levels. The government's twin challenge of revenue generation and debt management necessitates decisive actions, including the removal of fuel subsidies and implementation of fiscal reforms. As the government contemplates debt cancellation, the need for structural economic reforms remains paramount. Schokur stressed the importance of demonstrating a strong commitment to economic reforms to bolster Nigeria's position in negotiations for debt relief. Harmonizing monetary and fiscal policies, addressing currency valuation issues, and ensuring transparency in infrastructure development projects are crucial steps towards building a compelling case for debt cancellation. As President Buhari's call for debt cancellation sparks a debate on global economic recovery, the path forward for Nigeria and other developing nations hinges on proactive measures to address mounting debt burdens and foster sustainable economic growth. The dialogue surrounding debt relief underscores the interconnectedness of global financial systems and the imperative of collaborative efforts to ensure a resilient post-pandemic recovery.