Economy
International Lenders Warn on Capacity Constraints in Africa
By Dipo Olowookere
Global and African financial heads identified country risk as the biggest challenge to their ability to lend more to African countries. Speaking in Abidjan during a one-day forum on investment risks in Africa hosted by the African Trade Insurance Agency (ATI), experts acknowledged that the abundance of current liquidity in the market did nothing to alleviate the capacity constraints faced by most banks when doing business in Africa.
Lenders are bound by regulations that prevent them from lending significant amounts to sub-investment grade sovereigns, which is the case for most African countries.
Institutions such as ATI that can offer investment insurance can help to mitigate the risks and thereby bring added lending and investment capacity to African markets. Without an increased ceiling in limits, international lenders will continue to be constrained on the amounts they are able to lend both at the sovereign and corporate levels.
Experts attending the forum also noted positive movements in countries such as Ghana and Senegal for instance, which were recently put on positive watch by the rating agency S&P. This was largely based on the dividends anticipated from key infrastructure developments and investor-friendly policies. In Senegal, for example, the country has restructured its commercial laws, implemented a Public Private Partnership law that ensures all signed public contracts in the oil and gas sector are published and created a department of competition tasked with working hand in hand with investors.
Risk analysis experts at the conference cited Botswana, Côte d’Ivoire, Ethiopia, Rwanda and Zimbabwe as countries to watch in the coming months based on strong reserves in Botswana, political transitions in the case of Ethiopia and Zimbabwe, a strategy to transform its economy into a services hub in the case of Rwanda, and creating an enabling environment to attract investors in the case of Côte d’Ivoire.
Most government representatives at the meeting also noted their countries efforts to ramp up value addition in the agriculture sector along with an emphasis on removing barriers to trade within the continent.
Jean-Louis Ekra, the former President of Afreximbank observed that Africa is in fact moving in a different direction than the current protectionist tendencies of Western countries. In contrast, Africa is uniting under the banner of the African Continental Free Trade Area, which will become the world’s largest trade area.
While participants agreed that the risk perception in Africa is typically greater than the on-the-ground reality, they also recognized that making Africa less risky would require a concerted focus aimed at improving the overall business environment in order to address the risks that do exist.
According to a recent Moody’s report, 40 to 50 percent of defaults in developing markets are directly linked to country risks. During the forum, panellists discussed low-cost solutions that could help countries reduce their risk including ensuring fair adherence to existing regulations.
“One of our roles at ATI is to educate governments to make them aware of the elements that international investors consider in their assessment of country risks. If countries are made aware that any drastic changes they make to legislation, for instance, could be a key political risk factor, they may make better choices and create more fertile environments for the private sector,” commented John Lentaigne, ATI’s Chief Underwriting Officer. He added that “a stable investment climate can be demonstrably and directly linked to growth.”
Despite Africa’s perceived risks, ECGC, India’s export credit agency and international broker, BPL Global, who have a combined $142 billion worth of exposures, noted a relatively low claims and reasonable recovery experience in Africa.
Out of BPL’s $42 billion in current exposures which is insured with international investment risk providers 8 billion of this exposure is in Africa, where the company has historically recorded USD230 million in claims of which $123 million has subsequently been recovered.
International lenders and insurers commented on the importance of ATI’s participation to make projects bankable through its preferred creditor status and relationships with African governments. This was seen as ATI’s core value proposition.
In his address to participants, Pierre Guislain the Vice-President responsible for Private Sector, Infrastructure and Industrialization of the African Development Bank noted the Bank’s commitment to transform the relationship with ATI into a strategic partnership that can leverage its reach and help countries accelerate regional integration.
ATI, a multilateral investment and trade credit insurer posted record results in 2017 for the sixth consecutive year with $10 million in profits representing a 55 percent increase over 2016 and $2.4 billion in gross exposures.
By Adedapo Adesanya
The United Arab Emirates has announced its decision to quit the Organisation of the Petroleum Exporting Countries (OPEC) to focus on national interests.
This dealt a heavy blow to the oil-exporting group at a time when the US-Israel war on Iran had caused a historic energy shock and rattled the global economy.
The move, which will take effect on May 1, 2026, reflects “the UAE’s long-term strategic and economic vision and evolving energy profile”, a statement carried by state media said on Tuesday.
“During our time in the organisation, we made significant contributions and even greater sacrifices for the benefit of all,” it added. “However, the time has come to focus our efforts on what our national interest dictates.”
The loss of the UAE, a longstanding OPEC member, could create disarray and weaken the oil cartel, which has usually sought to show a united front despite internal disagreements over a range of issues from geopolitics to production quotas.
UAE Energy Minister Suhail Mohamed al-Mazrouei said the decision was taken after a careful look at the regional power’s energy strategies.
“This is a policy decision. It has been done after a careful look at current and future policies related to the level of production,” the minister said.
OPEC’s Gulf producers have already been struggling to ship exports through the Strait of Hormuz, a narrow chokepoint between Iran and Oman through which a fifth of the world’s crude oil and liquefied natural gas supplies normally pass, because of threats and attacks against vessels during the war.
The UAE had been a member of OPEC first through its emirate of Abu Dhabi in 1967 and later when it became its own country in 1971.
The oil cartel, based in Vienna, has seen some of its market power wane as the US has increased its production of crude oil in recent years.
Additionally, the UAE and Saudi Arabia have increasingly competed over economic issues and regional politics, particularly in the Red Sea area.
The two countries had joined a coalition to fight against Yemen’s Iran-backed Houthis in 2015. However, that coalition broke down into recriminations in late December when Saudi Arabia bombed what it described as a weapons shipment bound for Yemeni separatists backed by the UAE.
By Adedapo Adesanya
Central Securities Clearing System (CSCS) Plc bested four price decliners on the NASD Over-the-Counter (OTC) Securities Exchange on Monday, April 27. The alternative stock market opened the week bullish during the session with a 0.03 per cent uptick.
According to data, the security depository company added N2.61 to its share price to close at N76.26 per unit compared with the preceding session’s N78.87 per unit.
As a result, the market capitalisation of the platform increased by N820 million to N2.425 trillion from N2.424 trillion, and the NASD Unlisted Security Index (NSI) gained 1.38 points to finish at 4,053.97 points compared with the 4,052.58 points it ended last Friday.
The four price losers were led by NASD Plc, which slumped by N3.80 to sell at N34.70 per share versus N38.50 per share. FrieslandCampina Wamco Nigeria Plc fell by N1.45 to N98.10 per unit from N99.55 per unit, Food Concepts Plc slid by 27 Kobo to N2.43 per share from N2.70 per share, and Geo-Fluids Plc dipped by 9 Kobo to N2.91 per unit from N3.00 per unit.
The value of securities transacted by market participants went down by 82.0 per cent to N7.4 million from N41.3 million units, the volume of securities declined by 28.5 per cent to 319,831 units from 447,403 units, and the number of deals dropped by 34.1 per cent to 29 deals from 44 deals.
Great Nigeria Insurance (GNI) Plc was the most active stock by value on a year-to-date basis with 3.4 billion units worth N8.4 billion, followed by CSCS Plc with 59.6 million units sold for N4.0 billion, and Okitipupa Plc with 27.8 million units exchanged for N1.9 billion.
Also, GNI Plc was the most traded stock by volume on a year-to-date basis with 3.4 billion units valued at N8.4 billion, followed by Resourcery Plc with 1.1 billion units traded for N415.7 million, and Infrastructure Guarantee Credit Plc with a turnover of 400 million units worth N1.2 billion.
By Adedapo Adesanya
The first trading day of the week in the currency market was bearish for the Naira in the Nigerian Autonomous Foreign Exchange Market (NAFEX) on Monday, April 27.
Yesterday, it lost N5.80 or 0.43 per cent against the United States Dollar to trade at N1,364.24/$1, in contrast to the N1,358.44/$1 it was traded last Friday.
In the same vein, the Nigerian currency depreciated against the Pound Sterling in the official market by N13.70 to close at N1,847.72/£1 versus the preceding session’s N1,834.02/£1, and slumped against the Euro by N11.56 to sell at N1,602.29/€1 versus N1,590.73/€1.
Also, the Nigerian Naira tumbled against the greenback during the trading day by N5 to quote at N1,385/$1 compared with the previous rate of N1,380/$1, and at the GTBank FX desk, it traded flat at N1,370/$1.
The poor performance of the domestic currency could be attributed to liquidity shortage at the official currency market on Monday, which came amid surging demand for international payments. At $76.50 million, interbank liquidity printed higher across 79 deals, up from the $43.572 million reported on Friday.
Nigeria’s gross external reserves declined to $48.45 billion amid a month-long decline in inflows, amid uncertainties in the global commodity market. The depletion of foreign reserves could be partly attributed to the Central Bank of Nigeria’s intervention in the FX market.
The market remains perturbed by persistent concerns over liquidity constraints, policy transparency, and weakening confidence in Nigeria’s FX market, while boosters, including oil prices, continue to look rocky due to stalled discussions and unclear ceasefire negotiations between the US and Iran.
A look at the cryptocurrency market, Bitcoin (BTC) has been rejected near $79,000 three times in eight sessions, leaving the level as the de facto ceiling of its current trading range even as major cryptocurrencies trade lower over the past day. It lost 0.9 per cent to sell at $77,003.61.
Analysts say that upcoming US Federal Reserve policy decisions and top tech firms’ earnings this week could provide the catalyst to push bitcoin decisively above $80,000.
The market also continued to weigh Iran’s interim deal proposal to reopen the Strait of Hormuz, which failed to advance over the weekend. The White House said US officials were discussing the latest Iranian proposal but maintained “red lines” on any deal to end the eight-week war.
Solana (SOL) dropped 1.8 per cent to $84.25, Ripple (XRP) went down by 1.6 per cent to $1.39, Ethereum (ETH) depreciated by 1.3 per cent to $2,290.00, Binance Coin (BNB) declined by 0.5 per cent to $625.18, and Cardano (ADA) fell by 0.2 per cent to $0.2480.
However, Dogecoin (DOGE) rose by 2.0 per cent to $0.1002, and TRON (TRX) appreciated by 0.2 per cent to $0.3242, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) remained unchanged at $1.00 apiece.
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