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Experts recommend G20 framework as Africa’s debt default rate surges

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The growing debt profile of many African countries continues as a disturbing trend across the continent, and a reworking of the G20 framework has been proposed as a likely solution to managing the situation.

These were the issues of discourse at the African Conference on Debt and Development (AfCoDD III) which started in Senegal on Wednesday. It was noted at the event that more African countries were currently showing signs of either defaulting on their national debt or needing to apply to the G20 common framework.

The level of indebtedness in African countries is at its highest in more than a decade, largely due to the COVID-19 pandemic, Russia’s invasion of Ukraine, and skyrocketing inflation. African nations were forced to incur even more debt, and as a result, 21 low-income African nations are currently either insolvent or at great risk of experiencing debt hardship.

Five African nations have so far formally defaulted on their national debt: Zambia, Ghana, Ethiopia, Chad, and Sri Lanka. Zambia successfully applied for a debt restructuring plan under the G20 framework, a deal that has not yet been finalised.

The Board Chair of the African Forum and Network on Debt and Development (AFRODAD), Barbara Khalima-Phiri, noted that the debt crisis in most cases is the consequence of irresponsible borrowing.

She added, “Several countries on the continent have shown signs of wanting to apply for G20 common framework. Africa’s debt burden is directly becoming a burden on Africans who are having to pay the price of both irresponsible borrowing and equal irresponsible lending.”

The G20 is a framework under which bilateral official creditors are, during a limited period, suspending debt service payments from the poorest countries (73 low- and lower-middle-income countries) that request the suspension.

Some panellists at the AfCoDD III align with the position to have Africa’s debt reworked. AFRODAD Executive Director, Jason Braganza, pointed out that having a seat at the G20 common framework meant that the continent had to give up on some clubs such as the Borrower’s Club.

Patrick Ndzana Oloma, a policy advisor for the African Union Commission, said that if the continent’s nations continued to be underrepresented at the G20 common framework, they ran the possibility of having to negotiate debt agreements with odd terms.

Beyond Africa, some other countries have already concluded debt restructuring, for example, Argentina and Ecuador, while others like Lebanon are bent on debt restructuring.

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Dangote insists refinery has 500 million litres of petrol to meet Nigeria’s needs

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Aliko Dangote, the chairman of Nigeria’s Dangote oil refinery, has claimed a 500 million litre gasoline stockpile, refuting claims by some oil marketers that they had to augment Dangote’s supplies with imports to address fuel shortages.

Africa’s wealthiest man claimed to be a guest of the Nigerian President, Bola Tinubu, along with the finance minister, the head of the state-owned NNPC, and oil regulators at a meeting in Abuja on Tuesday.

The goal was to reconsider a policy mandating that NNPC sell crude oil to the Dangote refinery in local naira currency in an attempt to relieve pressure on foreign exchange and assist the massive refinery in obtaining enough crude to meet its 650,000-barrel-per-day capacity.

After the discussion, Dangote explained that he should not be held responsible for fuel shortages in Africa’s top oil-producing nation because his company does not deal in the retail sale of petrol.

He added that it costs him money to keep fuel in storage tanks.

“I expect the NNPC and marketers to stop importing. They should come and collect; we have everything they need,” said Dangote.
Two weeks ago, local fuel traders began increasing imports, claiming that the Dangote refinery was unable to meet domestic demand, exacerbating fuel shortages.

In September, the Dangote Oil Refinery in Lagos started processing petroleum to produce 25 million litres per day. The objective is to progressively boost output to 35 million litres per day, which Dangote thinks will be enough to satisfy regional demand. However, the industry regulator stated at an oil conference in Lagos on Monday that Nigeria uses 45 to 50 million litres of petrol every day.

President Tinubu advised stakeholders to concentrate on providing enough petrol for domestic consumption to lessen reliance on imports, according to a government spokesperson’s statement.

In order to settle the naira pricing of oil and refined goods, he also instructed them to use Afreximbank, the financial adviser for the naira crude sale plan.

The refinery was forced to rely on costly imports after Dangote filed a complaint alleging that oil majors were preventing it from accessing locally produced oil by selling it above market value or claiming it was unavailable. Previously, Dangote had to purchase crude on the international market.

The plan to sell crude in naira will continue, according to Wale Edun, Minister of Finance and Coordinating Minister of the Economy, and the government would not meddle in setting the oil industry’s exchange rate.

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Ghana considers imports from Nigeria’s Dangote oil refinery

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The head of Ghana’s oil regulator stated on Monday that once Nigeria’s Dangote Oil Refinery was fully operational, Ghana might purchase petroleum products from the facility, reducing the need for more costly exports from Europe.

Mustapha Abdul-Hamid, the chairman of Ghana’s National Petroleum Authority, stated at the OTL Africa Downstream oil conference in Lagos that this might result in the elimination of $400 million in petroleum imports from Europe each month.

“If the refinery reaches 650,000 bpd a day capacity, all that volume cannot be consumed by Nigeria alone, so instead of us importing as we do right now from Rotterdam, it will be much easier for us to import from Nigeria and I believe that will bring down our prices,” Hamid said.

The Nigerian billionaire Aliko Dangote constructed the Dangote Oil refinery, which is anticipated to run close to capacity by the end of the year and maybe reach full capacity in the first quarter of 2025, according to analysts.

Hamid claimed that by eliminating freight expenses, buying from Nigeria instead of Europe would result in lower prices for other goods and services. He predicted that African nations would eventually settle on a single currency, which would reduce demand for US dollars.

In the second quarter of 2024, Ghana’s GDP rose 6.9% year over year, primarily due to the robust growth of the extractive industry, which increased demand for petroleum.

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