Africa’s energy transition: Nigeria proposes debt-for-climate swap deal

Nigeria has proposed a Debt-For-Climate (DFC) Swap deal in order to ensure a principle energy transition for African nations.

Leading the Energy Transition Implementation Working Group (ETWG), Vice President Yemi Osinbajo presented the proposal in the United States.

The VP and other government officials are seeking global partnerships and support for Nigeria’s recently launched Energy Transition Plan.

Osinbajo delivered a lecture at the Center for Global Development in Washington D.C. on the DFC concept on an equitable energy transition for Africa.

He said debt for climate swaps is a type where debt is forgiven by creditors in exchange for a commitment by the debtor to use the debt service payments for climate action programmes.

The creditor country or institution, Osinbajo explained, agrees to forgive part of a debt if the debtor country would refund in a local currency into escrow, and then use the funds for agreed climate projects.

The Nigerian deputy leader noted that the idea increases the fiscal space for climate-related investments and reduces the debt burden for participating developing countries.

“For the creditor, the swap can be made to count as a component of their Nationally Determined Contributions (NDC)”, he said.

Osinbajo also proposed the greater participation of African countries in the Global Carbon Market while exploring financing options for energy transition.

The VP called for collaboration on the opportunities presented by the financing of clean energy assets in growing energy markets.