African Development Bank Urges End to Natural Resource-Backed Loans

The President of the African Development Bank, Akinwumi Adesina, in an interview with the Associated Press, urged African nations to cease reliance on loans backed by natural resources. Adesina criticized these agreements, emphasising the difficulty in accurately valuing such assets and the imbalance of power in negotiations. He cited a bank initiative aimed at assisting countries in renegotiating these loans.

Linking loan repayment to future natural resource exports is often seen as a means for funding infrastructure projects while mitigating lenders’ risk. However, Adesina pointed out many issues associated with these arrangements, including unequal negotiation dynamics and the potential for corruption.

Adesina highlighted the challenges these loans pose for development banks like his and the IMF, as countries may struggle to obtain or repay loans while relying on revenue from their vital natural resources. He cited Chad’s financial crisis following an oil-backed loan and mentioned other African countries seeking IMF support due to similar issues.

At least 11 African nations have secured loans with their natural resources since the 2000s, with China being a major funding source. Western entities like Glencore, Trafigura, and Standard Chartered have also been involved in oil-for-cash deals. Adesina stressed that no single country was solely responsible for these types of loans.