General
The Impact of COVID-19 on Finance and Investment in Africa
By Morne van der Merwe and Wildu du Plessis
The Coronavirus (COVID-19) has resulted in mass production shutdowns and supply chain disruptions due to port closures in China, causing global ripple effects across all economic sectors in a rare “twin supply-demand shock”.
With South Africa having just reported its first cases of COVID-19, Africa is beginning to feel its full impact and plans to control and manage the humanitarian challenges of the virus are underway across the continent.
Economically, the effects have already been felt – demand for Africa’s raw materials and commodities in China has declined and Africa’s access to industrial components and manufactured goods from the region has been hampered. This is causing further uncertainty in a continent already grappling with widespread geopolitical and economic instability.
The number of cases is reportedly slowing down in China, increasing expectations that it will eventually reach a plateau and be brought under control. However, in early March the Organisation for Economic Co-operation and Development noted that “annual global GDP growth is projected to drop to 2.4% in 2020 as a whole, from an already weak 2.9% in 2019, with growth possibly even being negative in the first quarter of 2020”, with global markets plunging in the days thereafter.
Although Chinese growth will fall in the short term, it is expected to rebound quickly, some suggesting this could even happen in the second quarter of 2020 when the virus will hopefully be contained. In the meantime, central banks are implementing measures to mitigate the effects of the virus on the economy, cutting interest rates and injecting liquidity into the banking systems in some countries.
In early March, the World Bank announced it would commit $12 billion in aid to developing countries to help them to deal with the impact of the virus and limit its spread.
The bank said it would prioritise the most at-risk countries. The World Bank also introduced a pandemic bond in 2017, which, as part of the Pandemic Emergency Finance Facility intended to provide money to help developing countries in the event of a pandemic reaching certain thresholds and conditions. So far, these criteria have not been met and the bond has not paid out.
Uncertainty regarding the spread of COVID-19 is high and its impact on Africa is expected to be serious, given the continent’s exposure to China. So far, cases have been reported in Algeria, Cameroon, Egypt, Morocco, Nigeria, Senegal, South Africa, Togo and Tunisia. If there is a widespread outbreak of COVID-19 in Africa it could overwhelm already weak healthcare systems in the region.
According to ratings agency, Fitch, the Coronavirus outbreak will have a downside risk for short term growth for sub-Saharan African growth, particularly in Ghana, Angola, Congo, Equatorial Guinea, Zambia, South Africa, Gabon and Nigeria – all countries that export large amounts of commodities to China.
Impact on Merger & Acquisition activity
Africa has come through a period of prolonged political and economic uncertainty, but signs of future economic improvement, were pointing to a modest increase in M&A activity in Africa over the next few years. COVID-19 is likely to hamper this predicted upturn and result in increased short-term uncertainty in terms of how it will affect investment opportunities in Africa, the continent’s productivity and consumer demand.
There are other transactional risks. If the virus spreads rapidly in Africa, countries might have to introduce similar measures to those taken in China where areas were locked down, factories were shut, quarantines enforced and travel bans imposed.
As such, these events could potentially be significant enough to trigger a change to the terms of an M&A transaction currently in progress, and deals could be delayed as a result. COVID-19 conditions could also cause delays to M&A due diligence, necessary for a transaction to progress to finalisation. Further, the virus could qualify as a force majeure event causing more delays or terminations.
We are hopeful the rebound from COVID-19 will coincide with the implementation of the African Continental Free Trade Area (AfCFTA) in July 2020, which should provide an additional boost to deal activity in Africa the coming years. The AfCFTA is the first continent-wide African trade agreement, with the potential to facilitate and harmonise trade and infrastructure development in Africa. This boost to the investment environment will be welcome after the additional uncertainty of dealing with COVID-19 impacts.
Impact on Capital raising and IPOs
African issuers have been waiting several years for an improvement to political and economic instability in Africa before going ahead with any planned capital raising. As a case in point, Baker McKenzie’s Global Transactions Forecast showed that there were no IPOs in South Africa in 2019.
Also eroding investor confidence were the numerous global trade tensions, with capital raisers watching for signs of resolution before launching IPOs. With Africa looking to benefit from new global and regional trade agreements, the forecasts had been pointing to a potential recovery in capital markets in the next few years, but this might be delayed as the uncertainty around the impact of COVID-19 in Africa reaches its peak.
IPOs in the region are therefore expected to decline, not directly because of the virus as is the case with equities, but because COVID-19 will have an effect on the underlying business case for IPO companies, which will impact on their ability to raise capital
Impact on financial institutions
Global financial institutions are currently assessing the impact of COVID-19 and reacting to its economic impact, ensuring they are able to adjust to new and unprecedented circumstances brought about by the virus. It remains to be seen whether the huge global economic downturn caused by decreased output in China will impact on African lenders and compel financial institutions on the continent to be more lenient towards borrowers and cut them some slack.
Impact on Local Markets
Since global economic growth is a key driver of commodity prices, local prices have been driven down by the virus’s global impact. The uncertainty of the impact of COVID-19 on local markets is expected to lead to increased risk aversion from investors who are waiting to see its potential impact in Africa. On the plus side, a temporary fall in share prices provides opportunities for prudent investors.
Impact of the Insurance sector
Both businesses and individuals in Africa might find they are uninsured for any COVID-19 impacts as losses related to an epidemic or pandemic would usually not be covered in insurance policies, irrespective of whether the insurance covers business interruption, property damage, product losses or personal life and non-life insurance or even travel insurance.
As COVID-19 is a new disease, it would not have been specifically listed in existing insurance contracts. Many business interruption policies will include clauses for extended damage, but it is unlikely that these extensions will provide coverage under the current circumstances. As such, the wording of policies should be carefully checked.
Some insurance companies who provide cancelled event coverage that specifically includes references to epidemics or pandemics could be impacted. Reuters reported that financial services firm Jefferies estimated the insured cost of the Tokyo Olympics to be around USD 2 billion – including television rights, hospitality and sponsorship.
Morne van der Merwe, Managing Partner, and Wildu du Plessis, Head of Africa, Baker McKenzie Johannesburg
By Adedapo Adesanya
President Bola Tinubu has said state governments are now receiving substantially higher allocations to drive development, while renewed investor confidence is attracting fresh investments into Nigeria.
Speaking at the maiden State House Media Dinner in Abuja on Thursday, the president described the development as evidence that his administration’s economic reforms are beginning to deliver positive results.
He defended the reforms introduced by his administration, acknowledging that they were difficult but necessary to reposition the economy for sustainable growth.
According to Mr Tinubu, stronger public revenues have enabled increased allocations to states, while improvements in the investment climate have boosted confidence among domestic and foreign investors.
“The difficult but necessary reforms undertaken by this administration are yielding results. Our economy is stabilising. Public revenues have strengthened significantly,” he said.
“State governments are receiving substantially higher allocations to support development. Investor confidence is returning.
“Our foreign reserves have improved considerably. The oil and gas sector is attracting renewed investment. The stock market has witnessed remarkable growth. Key economic indicators are moving in the right direction,” Mr Tinubu stated.
The president also said the administration was laying the groundwork for long-term prosperity through a combination of tax and fiscal reforms, infrastructure development and improvements to the business environment.
“Through tax reforms, fiscal reforms, infrastructure investments, and improvements in the business environment, we are laying the foundations for a more competitive, productive, and prosperous economy,” he said.
Although acknowledging that more work remains, Mr Tinubu maintained that the country was firmly on the path to sustainable economic growth.
“The journey is not yet complete, but the direction is clear, and the foundations for long-term growth are being firmly established,” he added.
On security, the president said his administration had sustained a multi-dimensional strategy that has produced measurable gains across different parts of the country.
He noted that intensified military operations, improved intelligence gathering, stronger inter-agency coordination, and expanded regional and international cooperation had led to the neutralisation of thousands of terrorists and criminal elements, the rescue of numerous hostages, and the recovery of communities previously under siege.
President Tinubu reiterated his administration’s commitment to ensuring peace and security across the country, saying every Nigerian should be able to live, work and prosper without fear.
The president also commended the media for its contribution to Nigeria’s democratic development while urging journalists to uphold professionalism by reporting accurately and responsibly.
“We are adversaries only in the democratic sense, as the media constantly distrust those in power. In nation-building, we are partners,” he said.
He described government and the media as institutions with complementary responsibilities, noting that while government serves through leadership and public policy, the media serves by holding those in power accountable on behalf of the people.
By Adedapo Adesanya
Shell Nigeria Exploration and Production Company Ltd (SNEPCo) has launched a $3 billion Contract Finance Facility in partnership with nine Nigerian banks to improve contractors’ access to funding and strengthen local participation in the oil and gas industry.
The facility is designed to provide credit support for local contractors executing projects for SNEPCo operations and will be available in both Naira and US Dollars.
The participating banks are First Bank, Guaranty Trust Bank, Zenith Bank, Access Bank, United Bank for Africa, Stanbic IBTC, Standard Chartered Bank, First City Monument Bank and Fidelity Bank.
Speaking at the signing of the Memorandum of Understanding in Lagos, the SNEPCo Managing Director, Mr Ronald Adams, said, “The initiative reflects the spirit of the Nigerian Oil and Gas Industry Content Development Act, which is aimed at in-country value retention.”
“Our partner banks offer capital and discipline. SNEPCo brings contracts and domiciliation of payments that de-risk lending. On their part, the contractors provide performance. Each is accountable to others, and the mutual accountability gives the arrangement its strength,” he added.
Also speaking, the Vice President for Finance at Shell Nigeria, Mr C. J. Akwaeze, said the scheme reflects Shell’s commitment to the growth of oil and gas operations in Nigeria.
The chairman of the indigenous oil and gas contractor group, the Petroleum Technology Association of Nigeria (PETAN), Mr Wole Ogunsanya, represented by Mrs Joan Faluyi, lauded the scheme as a “gateway to unlocking contractor financing issues which will also drive efficiency in contract execution.”
Representatives of the banks commended SNEPCo for the opportunity to partner on an initiative aimed at empowering contractors and assured the company of their continued support and cooperation.
Nigerian companies have continued to play key roles in supporting SNEPCo’s operation and project execution. Earlier this year, 43 wholly Nigerian companies took part in the turnaround maintenance exercise at the Bonga Floating Production and Offloading (FPSO) vessel out of the total of 53 companies involved.
By Adedapo Adesanya
Nigeria has joined the International Energy Agency (IEA) as an associate member, making Africa’s largest crude producer the first member of the Organisation of the Petroleum Exporting Countries (OPEC) to do so.
The governing board of the Paris-based agency unanimously agreed for Nigeria to join the IEA family, deepening its cooperation with Africa’s most populous nation in a major advance for global energy governance.
“I am thrilled that Nigeria is joining the IEA – it is Africa’s most populous country and a major international energy player. Nigeria becoming part of the world’s energy authority marks a milestone for global energy governance. I am very thankful to President Tinubu and Minister Ekpo for their trust in the IEA,” said IEA Executive Director, Mr Fatih Birol.
“As Nigeria works to strengthen energy security, support economic growth and expand energy access, deeper cooperation with the IEA will bring important benefits for both sides. We look forward to building on our already strong partnership and welcoming Nigeria to the IEA,” he added.
On his part, Nigeria’s Minister of State for Petroleum Resources (Gas), Mr Ekperikpe Ekpo, lauded the decision, saying it will contribute to helping the country utilise its energy resources.
“I am elated with the decision of the IEA Members to officially welcome Nigeria to the IEA Family as an Association country,” he said. “It is an honour for Nigeria to join this leading energy agency, and I will take this opportunity to encourage the African continent to embrace the IEA, as we all work together to achieve key development goals including universal energy access and industrialisation.”
Nigeria’s growing role in international energy markets has been highlighted by recent developments in its refining sector. During recent periods of market disruption, increased fuel exports from Nigeria helped strengthen resilience in African and international fuel markets.
The IEA, in a statement, noted that Nigeria has emerged as one of the world’s fastest-growing markets for decentralised solar solutions and is stepping up efforts to expand access to electricity and clean cooking.
The IEA governing board’s decision builds on a strong history of engagement and collaboration between Nigeria and the IEA since 2014.
In September 2025, the IEA, Mr Ekpo as Minister of Petroleum Resources and the African Energy Commission (AFREC) jointly convened a Regional Roundtable on Turning Methane Pledges into Action in Abuja, bringing together energy stakeholders from across the region to advance efforts to reduce methane emissions from the energy sector.
As an associated country, Nigeria and the IEA will work more closely across a wide range of energy issues, including on the Agency’s engagement in sub-Saharan Africa.
Created in 2015, the IEA Association programme allows the agency to deepen ties with its partner countries, bringing together major energy-producing and consuming countries from around the world.
Nigeria joins a network of 13 other Association countries that work with the IEA to advance secure, affordable and sustainable energy systems worldwide. As a result of this expansion, the IEA’s share of global energy demand has increased from 40 per cent in 2015 to over 80 per cent today.
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