Economy

Global Economic Uncertainty Threatens FDI Flows to Africa

Published

8 years ago

10/05/2017

By Modupe Gbadeyanka

The flow of Foreign Direct Investment (FDI) into Africa is being threatened by global economic uncertainty and if nothing is done promptly about this, the continent may continue to suffer economic hardship.

For African governments, part of what is at stake are much needed foreign direct investments and access to affordable financing necessary to spur development and, specifically, to close the estimated $900 billion infrastructure gap.

Equally, the private sector stands to lose billions of Dollars in lost opportunities if the requirements for a favourable investment environment are not adequately addressed.

To address this problem, a roundtable event was held in Nairobi, where Ministers from across Africa sat together with investors and the private sector to determine how best to tackle the investment and credit risk hurdles in order to make African risks bankable.

Participants to the roundtable saw the event as timely because it came at time of geopolitical uncertainties which, according to The World Bank, could lead to “higher borrowing costs or cut off capital flows to emerging and frontier markets”.

The half day forum, the 4th Roundtable to focus on Political and Credit Risks in Africa, took place on the side lines of the African Trade Insurance Agency’s (ATI) Annual General Meetings. The event opened with pointed remarks from H.E. Patrice Talon, President of Benin.

Subsequent discussions focused on possible solutions to the challenges facing governments from the private sector and export credit agencies from panellists such as: Patrick Chinamasa, Minister of Finance & Economic Development, Zimbabwe; Romuald Wadagni, Minister of Economy & Finance, Benin; Felix Mutati, Minister of Finance, Zambia; Chamsou Andjorin, Director Government Affairs & Market Development, Boeing Intl; Helen Mtshali, Syndication Lead – Sub-Saharan Africa, Industrial Finance Solutions, GE; and Nisrin Hala, Senior Director, Global Trade Finance Bus. Development Emerging Markets, SMBC.

Investors are not immune to political and social developments in emerging regions like Africa. In fact, with reduced earnings – the benchmark emerging-market stock index has lost approximately 4 percent annually since 2010 from a high of 22 percent annual return in the preceding decade – investors are now focusing on more than the bottom line in these markets. During the boom years of the last two decades, Africa was experiencing unprecedented GDP growth rates but depressed commodity prices have seen growth in the sub-Saharan Africa region slow to 1.5 percent rate in 2016. According to World Bank estimates, oil exporters account for most of the slowdown owing to their two-thirds contribution to regional output.

In a Bloomberg article published in March 2016, emerging market investors from some of the most prominent companies noted the dramatic change in their investing tactics due to global fragility, which they see as unveiling institutional weakness, corruption, poor governance and efficiencies. In this current climate, investors are now keenly tracking social indicators such as corruption rankings, gender parity and the extent that rule of law is respected within emerging markets.

“Africa is in a period of realignment in this new global order but I don’t think anyone should bet against its resilience. We are still home to some of the fastest growing economies in the world – as of 2017, the World Economic Forum ranks Côte d’Ivoire, Tanzania and Senegal on the list of the top ten fastest growing economies in the world,” notes George Otieno, ATI’s CEO.

In this climate, it is more imperative than ever for African governments to focus on economic diversity to maintain growth while addressing risks to investors. As an internationally respected African institution, the African Trade Insurance Agency (ATI) offers the ideal solution precisely because the company has strong relationships with governments and because its risk assessments and mitigation solutions are seen as credible by global financiers and investors. With ATI involved in a transaction, governments are able to provide security to investors and suppliers against a range of investment risks.

In 2016, ATI insured close to $2 billion (KES202.8 billion) worth of trade and investments and the company is increasingly supporting some of the continent’s most important transactions such as Ethiopian Airline’s fleet expansion and a USD660 million investment in Lake Turkana, Africa’s largest wind farm and, to date, the single largest investment in Kenya.

In this environment, ATI’s products are being seen as a valuable tool to enable lenders to take sub-investment grade risk in Africa thus allowing governments and corporates to access more affordable financing. Importantly, in its role as an investment insurer of last resort, ATI is also providing the necessary comfort to support continued investments into the continent amidst a period of uncertainty.

Economy

IPMAN Considers Dangote Petrol for Competitive Pump Price

Published

13 hours ago

17/01/2025

Aduragbemi Omiyale

By Aduragbemi Omiyale

More petroleum marketers are looking to take advantage being offered by the Dangote Refinery in Lagos through its bulk-purchase incentives, allowing petrol stations to sell premium motor spirit (PMS), otherwise known as petrol, cheaper to motorists.

Recall that recently, Dangote Refinery entered into a deal with MRS Oil Nigeria, Ardova Plc, Heyden for the purchase of petrol at least two million litres at N909 per litre.

With this agreement, MRS Oil has been able to dispense to customers at a pump price of N935 per litre across its stations in Nigeria.

For those not under this arrangement, they have been battling with price instability, especially after depot owners recently increased their price to N950 per litre from N909 per litre because of the rise in crude oil prices in the international market.

Worried by this and attracted by the bulk-purchase agreement incentives of Dangote Petroleum Refinery, the Independent Petroleum Marketers Association (IPMAN) is already having talks to buy directly from the Lagos-based oil facility.

The national president of the group, Mr Abubakar Maigandi Garima, said members are eager to sign on with Dangote Refinery for the bulk-purchase agreement.

He argued that members could not continue to depend on depot owners for products when they can buy directly from the refinery bearing in mind that the minimum quantity to buy from Dangote Refinery is two million litres at N909 per litre.

The desire to be part of the bulk-purchase agreement, it was also gathered, was also apparently being fuelled by the testimonies from motorists who have been praising the impressive burn rate of fuel sourced from Dangote Refinery and sold in MRS filing stations which they said lasts longer compared to other products imported into the country and sold by others.

The management of the Dangote Refinery, citing economic relief provided by President Bola Ahmed Tinubu’s crude-for-naira swap initiative, had announced a bulk-purchase offer incentives to the three leading downstream sector operators, so that Nigerians could heave a sigh of relief on the reduced pump price.

Economy

World Bank Forecasts 3.6% GDP Growth for Nigeria in 2025

Published

14 hours ago

17/01/2025

Adedapo Adesanya

By Adedapo Adesanya

The World Bank has projected a 3.6 per cent economic growth for Nigerian in 2025 and 2026 on the back of ongoing reforms by the federal government.

The Bretton Wood institution in its report titled Global Economic Prospects, January 2025 published on Thursday, said recent reforms, including subsidy removal, Naira liberalisation and the introduction of tax reform bills would help to boost business confidence.

“In Nigeria, Gross Domestic Product (GDP) growth increased to an estimated 3.3 per cent in 2024, mainly driven by services sector activity, particularly in financial and telecommunication services.

“Macroeconomic and fiscal reforms helped improve business confidence. In response to rising inflation and a weak naira, the central bank tightened monetary policy.

“Meanwhile, the fiscal deficit narrowed due to a surge in revenues driven by the elimination of the implicit foreign exchange subsidy, following the unification of the exchange rate and improved revenue administration,” a part of the report stated.

The World Bank noted that the wider Sub-Saharan Africa, to which Nigeria belongs would see a 4.1 per cent growth in the current year, before seeing a 4.3 per cent rise in 2026.

“Growth in Sub-Saharan Africa, SSA is expected to firm to 4.1 per cent in 2025 and 4.3 per cent in 2026, as financial conditions ease alongside further declines in inflation. Following weaker-than-expected regional growth last year, growth projections for 2025 have been revised upward by 0.2 percentage points, and for 2026 by 0.3 percentage points, with improvements seen across various subgroups. At the country level, projected growth has been upgraded for nearly half of SSA economies in both 2025 and 2026.

“Growth in Nigeria is forecast to strengthen to an average of 3.6 per cent a year in 2025-26. Following monetary policy tightening in 2024, inflation is projected to gradually decline, boosting consumption and supporting growth in the services sector, which continues to be the main driver of growth,” it added.

The global lender disclosed that oil production is expected to increase over the forecast period but remain below the 1.5 million barrels per day quota of the Organisation of the Petroleum Exporting Countries (OPEC).

Economy

Nigeria’s Unlisted Securities Close Higher by 0.35%

Published

15 hours ago

17/01/2025

Adedapo Adesanya

By Adedapo Adesanya

Four price gainers helped the NASD Over-the-Counter (OTC) Securities Exchange close higher by 0.35 per cent on Thursday, January 16.

The value of the trading platform jumped by N3.69 billion during the session to N1.072 trillion from the N1.068 trillion it closed in the preceding session, and the NASD Unlisted Security Index (NSI) made an addition of 10.67 points to wrap the session at 3,103.83 points compared with 3,093.16 points recorded at the previous session.

Industrial and General Insurance (IGI) Plc added 3 Kobo to its price yesterday to trade at 33 Kobo per unit compared with Wednesday’s closing price of 30 Kobo per unit, Newrest Asl Plc appreciated by N2.85 to N31.18 per share from N28.53 per share, 11 Plc gained N2.90 to close at N256.00 per unit versus the N253.10 per unit it finished a day earlier, and FrieslandCampina Wamco Nigeria Plc grew by 21 Kobo to N39.16 per share, in contrast to midweek’s N38.95 per share.

On Thursday. there was an 85.3 per cent increase in the volume of securities traded by investors to 1.2 million units from the 666,494 units recorded in the preceding session, the value of shares traded surged by 8.9 per cent to N18.0 million from N16.5 million, and the number of deals leapt by 65 per cent to 33 deals from 20 deals.

FrieslandCampina Wamco Nigeria Plc remained the most active stock by value (year-to-date) with 3.4 million units worth N134.9 million, trailed by Geo-Fluids Plc with 8.9 million units sold for N43.0 million, and Afriland Properties Plc valued at 690,825 sold for N11.1 million.

IGI Plc closed the day as the most active stock by volume (year-to-date) with 23.5 million units sold for N5.3 million, followed by Geo-Fluids Plc with 8.9 million units valued at N43.0 million, and FrieslandCampina Wamco Nigeria Plc followed with 3.4 million units worth N134.9 million.