AfDB offers solutions to Foreign Exchange challenges

The African Development Bank (AfDB) has given insights into how Nigeria and other African countries can address foreign exchange problems.

Prof. Kevin Urama, the Bank’s Vice President for Economic Governance and Knowledge Management, discussed Nigeria’s debt profile and stated that public debt was not necessarily a bad thing.

“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,’’ he said.

The rising prevalence of expensive, short-term commercial loans in African nations, which carry greater refinancing risks, alarmed the professor.

“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.

“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,” he said.

Regarding trade and foreign exchange, Urama identified a crucial issue for reform as Africa’s reliance on imports, particularly food.

He recognised how ongoing geopolitical conflicts, such as the conflict in Ukraine, had disrupted global supply lines and impacted wheat supplies into Africa.

However, given the continent’s enormous agricultural potential, the professor advised African nations to reduce their reliance on imports.

Manomsi Mallum / NAN