Over the next five years, the African Export-Import Bank (Afreximbank) plans to disburse $40 billion to stimulate intra-African commerce.
Nigeria is anticipated to profit from the money because it has expressed an interest in contributing to intra-African trade prospects.
Afreximbank President Benedict Oramah announced this on Monday during the opening session of the 2021 Intra-African Trade Fair (IATF) in Durban, South Africa.
He stated that the bank is committed to supporting Africa’s drive to create institutions as well as the implementation of the African Continental Free Trade Agreement (ACFTA).
AfCFTA is a trade agreement between African Union member states that aims to create a single market, followed by free movement and a single currency union.
Since the establishment of the World Trade Organization in 1995, the free-trade zone is intended to be the largest in the world.
“Trade agreements have worked in more mature markets because they are supported by institutional mechanisms.” Africa is starting to establish its own institutions. One of them is Afreximbank. That is why the Bank remains steadfast in its support for the AfCFTA,” Oramah stated.
“For example, we have committed to disbursing 40 billion US dollars over the next five years to support intra-African trade, building on the 20 billion US dollars disbursed in the previous five years.”
He also stated that the bank is issuing letters of credit confirming lines to African commercial banks in order to facilitate cross-border trade.
“Our goal is to onboard 500 banks with total lines of over $8 billion.” “The bank has onboarded nearly 480 customers so far and is now the bank with the most messaging links with African banks,” Oramah noted.
He stated that the bank has developed a pan-African payment and settlement system (PAPSS) in collaboration with the African Union (AU) and the AfCFTA secretariat to ease cross-border payments in national currencies.
PAPSS, which is presently being tested in the West African Monetary Zone (WAMZ), will strengthen national currencies, integrate Africa’s payment infrastructure, and save the continent $5 billion in transfer fees, according to Oramah.
Above all, he claimed, it will return to Africa, where significant amounts of trade have been diverted due to currency concerns.
Oramah stated that Afreximbank is funding the pilot with $500 million and hopes to increase this to $3 billion once it is fully implemented across Africa.
According to Oramah, Afreximbank is also launching an African collaborative transit guarantee scheme that would allow for the uninterrupted flow of commodities across various borders using a single transit bond and a risk-sharing platform with country-specific issuers.
He stated that Afreximbank will contribute $1 billion to the project.
“We anticipate that this scheme will save the continent more than $300 million in transit costs per year.” And with it, items can be moved easily from Cape Town to Cairo, saving time and money,” Oramah explained.
“We are collaborating with the AfCFTA secretariat to establish an 8 billion US dollar AfCFTA adjustment facility to cushion African countries from fiscal revenue losses associated with AfCFTA tariff removals and to assist the private sector in retooling their operations as they reorient their operations towards the continental market.”
Oramah also informed fairgoers that the bank has established a fund to help manufacturing by simplifying access to equity financing.
“The Bank is also collaborating with several African governments to establish or expand industrial parks (IPs) and special economic zones to address infrastructure bottlenecks to industrialization,” he added.
“Projects totaling approximately 1.2 billion US dollars have been implemented or are in the planning stages in ten countries.”