Vice President Yemi Osinbajo has proposed a debt-for-climate (DFC) swap agreement to allow African countries to contribute to the achievement of global net-zero emissions targets while also facilitating energy access.
Prof Osinbajo made the proposal during a lecture on a just and equitable energy transition for Africa at the Center for Global Development in Washington D.C., according to a statement signed by the Vice President's spokesperson, Laolu Akande.
He stated that "debt for climate swaps are a type of debt swap in which creditors forgive bilateral or multilateral debt in exchange for the debtor's commitment to use the outstanding debt service payments for national climate action programs."
"Typically, the creditor country or institution agrees to forgive a portion of a debt in exchange for the debtor country depositing the avoided debt service payment in a local currency into an escrow or other transparent fund, and the funds must then be used for agreed-upon climate projects in the debtor country," he continued.
Justifying such a debt swap agreement, the Vice President stated that it would "increase fiscal space for climate-related investments and reduce the debt burden for participating developing countries."
"The swap can be made to count as a component of the creditor's Nationally Determined Contributions (NDC)," he added.
He went on to say that in order to make this efficient, "significant policy actions are obviously required to make this acceptable and sustainable."