The head of the African Development Bank is calling for an end to loans given in exchange for the continent's rich supplies of oil or critical minerals, which have left some African countries in financial crisis.
Akinwumi Adesina told AP news agency the loans “are just bad, first and foremost, because you can’t price the assets properly.”
“If you have minerals or oil under the ground, how do you come up with a price for a long-term contract? It’s a challenge,” Adesina stressed.
The shift to renewable energy and electric vehicles has caused a spike in the demand for critical minerals, driving these kinds of loans.
Adesina, whose Abidjan, Ivory Coast-based institution helps finance development in African countries, said these arrangements come with a litany of problems.
Uneven negotiations
He highlighted the uneven nature of the negotiations, with lenders typically holding the upper hand and dictating terms to cash-strapped African nations.
This power imbalance, coupled with a lack of transparency and the potential for corruption, creates fertile ground for exploitation, Adesina said.
“These are the reasons I say Africa should put an end to natural resource-backed loans," Adesina said. He pointed to a bank initiative that helps "countries renegotiate those loans that are asymmetric, not transparent, and wrongly priced.”
At least 11 African countries have taken dozens of loans worth billions of dollars secured with their natural resources since the 2000s.
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