High borrowing costs choking Africa’s infrastructure drive – Oyedele

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The Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, has said high financing costs and limited access to affordable long-term capital are constraining Africa’s efforts to finance critical infrastructure and meet its development needs.

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Oyedele also identified currency risks and additional premiums attached to African borrowers as major obstacles to attracting capital into energy and other infrastructure projects across the continent.

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He spoke at the United Nations Dialogue on Solutions to Climate Finance on the sidelines of the 81st Session of the United Nations General Assembly in New York, according to a statement issued on Wednesday by the Federal Ministry of Finance.

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The statement read, “He said Africa’s development ambitions, particularly its energy needs, continue to be constrained by high financing costs, currency risks and limited access to affordable long-term capital.”

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He argued that despite Africa’s relatively low contribution to global carbon emissions, countries on the continent continued to bear additional costs when attempting to raise financing for development.

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According to the statement, Oyedele described the additional financing burden as a “prejudice premium” and “narrative cost”.

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He also identified currency risks and what he termed a “stereotype tax” as additional challenges confronting African countries seeking capital for critical energy and other development assets.

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Oyedele called for a shift in the global approach to climate finance, including simpler access to affordable capital for developing countries and financing arrangements that better reflect their economic and development realities.

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He also urged the international community to increase investment in gas and other transition energy sources in Africa to expand access to reliable and affordable energy.

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According to him, additional investment in the continent’s energy sector could also diversify global energy supplies and reduce concentration risks, particularly amid disruptions affecting the Gulf region.

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The minister maintained that Africa’s transition to cleaner energy must take into account the continent’s substantial energy-access deficit.

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“The Minister stressed that Africa’s energy transition must take account of the continent’s significant energy-access deficit, noting the need for greater investment to enable countries to meet their development needs while pursuing a practical transition to cleaner energy sources,” the statement read.

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For Nigeria, Oyedele said the government’s immediate priority was to implement policies and programmes aimed at reducing poverty, expanding economic opportunities and accelerating the distribution of shared prosperity.

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He said achieving those objectives would require stronger international cooperation and a financing system that allowed developing countries to mobilise sufficient capital for infrastructure.

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The statement added, “He said achieving these objectives would require stronger international cooperation and a financing framework that enables developing countries to mobilise the capital required to invest in infrastructure and improve the lives of their people.”

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