African Development Bank (AFDB) president, Akinwumi Adeshina revealed that AFDB has launched a $10 billion Crisis Response Facility to support African countries to meet the fiscal and economic challenges posed by the pandemic.
Adeshina stated this at the Federal Inland Revenue Service tax dialogue, which had president Muhammadu Buhari, governors, ambassadors, honourable ministers, and chairman of Fhe Muhammad Nami in attendance.
He added that, The Bank provided $288 million in budget support to Nigeria to cope with the fiscal challenges posed by the pandemic.
The African Development Bank also launched a $3 billion fight COVID19 bond on the global market, the largest ever social bond in world history. It is now listed on the London Stock Exchange, the Luxembourg Stock Exchange and the Nasdaq.
Before the pandemic, 6 of the 10 fastest growing economies in the world were in Africa. With the pandemic shock, growth plummeted. Africa’s GDP growth declined by 2.1% last year, the worst in two decades. As economies went into lockdowns, people’s incomes declined, millions lost their jobs, trade volumes fell, and demand for goods and services declined. Cumulative loss to Africa’s GDP is estimated at $173-236 billion for 2020 and 2021, respectively.
Nigeria has not been spared. The economy shrunk by 3% in 2020 on account of falling oil prices and effects of the lockdowns on economic activity.
Nigeria’s Debt-to-GDP ratio will push debt service payments beyond more than 60% of federally collected revenues. With shrinkage in oil revenues, debt service payments pose the greatest risk to Nigeria.
The African Development Bank Africa estimated that Africa faces an additional financing need of $125-154 billion by the end of 2020 to respond to the crisis. IMF estimates that Africa will need $345 billion in additional fiscal space by 2023.
Africa’s debt also is rising. Debt-to-GDP, which has been stable at 60%, has risen to 70-75% of GDP. The bulk of the debt has been for private bond issuances on the global capital markets — Eurobonds. As countries’ currencies devalued and external reserves plummeted, in the face of declined economic activity, many African countries face risks of debt distress.
Out of 38 African countries for which Debt Sustainability ratings are available, 14 are in high risk of debt distress, while 6 are already in debt distress.
To put a human face on the pandemic effects, we estimate that 28-40 million people in Africa are projected to fall into extreme poverty, and 30 million jobs would be lost due to the pandemic.
The African Development Bank has been very responsive in supporting Africa.
I wish to commend the leadership of President Buhari and all the State Governors, and the private sector, in tackling the pandemic. It has been very challenging, given the second wave of the pandemic.
But let us not be deterred. Nigeria and Africa will overcome this pandemic.
African economies are projected to recover this year. The African Development Bank projects that GDP growth will recover to 3.4% for Africa, as economies open up, commodity prices recover, tourism bounces back, and global value chains recover their manufacturing capacities.