Nigeria and other member-countries of the African Export-Import Bank (Afreximbank) would soon benefit from a financing programme by the pan-African trading bank that would provide more than $3.5 billion to its member countries to enable them adjust to current adverse economic shocks, especially commodity price and terrorism-induced ones.
A statement by Obi Emekekwue, Afreximbank’s external communication made available to BusinessDay said the package has received the blessings of the Bank’s board of directors.
“The Counter-Cyclical Trade Liquidity programme, approved by the board of directors at its quarterly meeting held in Seychelles on 12 December, has an initial life of two years; and allows Afreximbank to deploy up to 40 percent of its approved annual gross commitment limit to providing trade finance liquidity to central banks and selected commercial banks in eligible countries, with the available funding for 2016 totalling some $3.5 billion,” the statement said.
Nigeria, an oil-rich country, with a melange of faulty policy and regulation lethargy has been extremely hit by the current global crude oil glut, which has also exposed its economy to huge shocks.
The country’s foreign reserves are rapidly depleting in attempts by the Muhammadu Buhari administration’s efforts to cushion the economy from an impending recession. While it’s national currency, the Naira has been under intense pressure amid continued depreciation.
In information released after the approval, Afreximbank said that it planned to attract other lenders and financiers to the programme in order to more than double the available funding.
The Afreximbank’s programme would provide unfunded facilities, by way of guarantees, letters of credit and similar instruments, to commercial banks in eligible concerned countries.
It would also make funded facilities available to the countries to enable them meet obligations under trade finance payment rights that fall due, but which they are unable to meet due to non-availability of foreign exchange from their central banks or usual markets.
“This facility enables us to help our member countries bridge the significant trade financing gap confronting them as a result of current economic shocks until normal funding conditions are restored,” said Benedict Oramah, president of Afreximbank.
He said: “It is Afreximbank’s response to the exceptional circumstances that demand urgent and decisive large-scale support to ensure that the continent is not thrown into recession due to a sudden drying up of trade flows. It also helps us to minimise the potential impact on normal bank operations.”
Oramah, a Nigerian national, who assumed Afreximbank’s headship last September, said: “We expect to learn valuable lessons from the implementation of this programme, as we prepare to deal with future market disruptions.”
He noted that the programme gave Afreximbank additional flexibility in its lending through fast disbursement facilities which would help in making its interventions more effective in minimizing the risk of country trade payment defaults.
The pan-African trade financing institution expects the positive impact of the programme in the eligible countries to include: continued supply of raw materials; capital goods and essential goods into the markets; restored confidence of the international market and commodity suppliers in the countries’ banking systems; stabilisation of inflation rates and local currency exchange rates against foreign currencies, and access to finance from the international market under favourable terms.
With the approval, the Bank expects to process requests totalling about $2 billion within the next few weeks as a result of requests received from a number of Africa’s central and commercial banks.
BEN EGUZOZIE with wire copy
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