BusinessDay
NigeriaDecides2023

‘IFC working with governments to power private sector in Africa’

The International Finance Corporation (IFC) has invested more than $2.53 billion in Central Africa and Nigeria as of September 2022, according to Dahlia Khalifa, the first IFC regional director for Central Africa, Liberia, Nigeria, and Sierra Leone.

IFC is the world’s largest private-sector development organisation. It combines finance, experience, and influence to build markets and opportunities in developing countries.

In this interview with Tayo Fagbule, the editor, BusinessDay, she discusses how funding agro-companies to improve food security, building renewable energy infrastructure to meet energy needs, and using FinTech innovations to solve cross-border trading are all ways to solve Africa’s economic challenges.

The IFC has a presence in 11 countries, mostly in West Africa, how important are they?

Very important. The fact that IFC went from a situation where we had one regional director covering all of West and Central Africa to now having two regional directors, one for West Africa and one for Central Africa, plus Nigeria, Sierra Leone, and Liberia. So, I think it’s a very important region in a very important continent for IFC.

This region consists of ten countries that account for approximately 32 percent or 33 percent of IFC’s investments in the region, with Nigeria accounting for 27 percent of that total in Sub-Saharan Africa; I stand to be corrected.

IFC’s total portfolio in Central Africa and Nigeria is more than $2.53 billion, of which Nigeria is about $2.4 billion. Already, it’s 90 percent of my portfolio. The sub-region has been created by IFC, and has based the new regional director, me, in Lagos.”

When I was looking at your background, I saw that you have businesses of your own. How does that come into play with what you are going to do in this region?

My private business life ended in 2004 when I joined the World Bank. Before that, I was an entrepreneur and business owner focused on the Middle East and Africa. When I joined the World Bank, my private business was no longer. I sold my business at that time, so I have been a dedicated World Bank Group professional since 2004.

IFC has invested more than $2.53 billion in Central Africa and Nigeria as of September 30, 2022. What has been the impact of these investments?

$2.53 billion of course has a higher multiplier impact as you well know; when you invest, it creates jobs, it enables innovations, it enables countries to meet the challenges in their region, which are quite diverse, and many.

But at the same time, with these challenges are many positive endowments and we believe that this region has the potential to be quite a dynamic center of growth for the vision of the continent and then for the world. We believe that and we have partners here on the ground to achieve that vision together.

Many of the countries you mentioned as diverse and dynamic are facing severe food crises right now, and yet this is one of the areas where investments are prioritised. What do you think are the barriers to tackling the food crisis?

For quite some time, the world has been experiencing a food crisis. It’s not just because of the Ukraine situation, but climate change and the global economic crisis have been wreaking havoc on the food sector for a long time, not just in Africa, and agriculture is, of course, the backbone of the African economy.

Although Africa is a net importer, it has the capacity to not just feed itself but feed most of the world, and we believe in that. We believe that working together with the right partners can create enough momentum to bring about enough foreign direct investments, improved technologies, and climate-smart technologies that will allow Africa and the Africans in this part of the world to achieve its potential in this part of the world.

We already have a lot of investments we can point to in this space. For example, IFC provided financing of about $35 million dollars to Jubaili Agrotech, another $18 million to Robust International, and the IFC has just put in place a $6 billion food security platform, of which Africa would feature prominently.

Climate change is also getting a lot of attention, however, many of these countries have insisted that the developed infrastructure won’t make it possible for just renewable energy sources. In what way does the IFC support these countries in achieving their climate goal without compromising their development projects?

One of the most effective ways to achieve development is to make progress on climate objectives. Being green, being sustainable, and being profitable are not contrary, they go hand in hand.

The more sustainable, the more climate-friendly an economy becomes, the better its prospect for sustainable growth is and there is no dichotomy or difference between actually trying to achieve those two objectives.

For example, there are 600 million people in Africa who lack access to electricity. Not only that, Africans, despite these constraints, also have the key to resolving them. Africa holds 60 percent of the world’s most attractive solar resources, and I’m reading it just to make sure I get it right. And if Africa were to capture the potential of its wind energy, it could have fulfilled 250 times the continent’s need for energy, just by going wind and going solar.

Of course, you can’t do that immediately, it requires a series of investments to get you to achieve your objectives in that space. But we do believe that it is the future, and we are investing in that future. We also believe that Nigeria can be an engine for growth in that space.

There are 600 million people in Africa who lack access to electricity. Not only that, Africans, despite these constraints, also have the key to resolving them.

You have funded a lot of businesses in Nigeria, many of which are impacted by foreign exchange crisis. What’s your take on how Africa’s largest economy can resolve the crisis?

The foreign exchange crisis is not just a Nigeria problem; it’s a problem that many countries are facing. It is acute in Nigeria, and it has a lot to do with the international economic situation and the domestic economic situation; domestic policies have a role to play in either helping overcome this crisis or making it even worse.

Policies that try to limit or direct who can get what kind of foreign exchange, according to the IMF or World Bank, actually have a dampening effect on the economy’s ability to create or bring about enough foreign exchange.

Nigeria has one of the fastest-growing FinTech industries in all of Africa and has the potential to be a real powerhouse in bringing about these FinTech and digital financial services solutions

Policies such as imposing foreign currency restrictions and, of course, bringing down your level of imports would also impact your level of importing raw materials, which then has the ability to impact your manufacturing, agriculture, and real sectors. As a result, it has a negative spiral effect. It also has an impact on foreign direct investments.

If foreign direct investors see the foreign exchange issue, they are less likely to come to any country to invest; I’m not just talking about Nigeria; this is true of any country. If foreign direct investors see the foreign exchange issue, they are less likely to come to any country to invest; I’m not just talking about Nigeria; this is true of any country.

As the World Bank and IMF have been saying, it is best to let the market work in a more free way where foreign exchange is not artificially limited or steered. This is true not just in Nigeria but in most countries that have been putting these kinds of restrictions in place. This then in turn brings back more investor confidence, increases the likelihood of foreign direct investment, and allows manufacturers and other producers in the real sector to import the raw materials they need, slowly easing the foreign exchange crunch in the country.

West Africa has made progress in its payment system; however, businesses within the bloc can not trade easily among themselves because of cross-border payment. You did a report in 2020 about the potential of the region to act as a market base for Nigeria or for trading, but there is this problem of the inability to have a single payment. What recommendations do you have for tackling this issue?

Africa as a continent has tremendous potential to grow both its international trade and inter-regional trade and I think that facts have shown that digital financial services can play an important role in growing trade.

It makes it possible to connect in ways that haven’t been possible before through digital financial platforms. And in fact, Nigeria has one of the fastest-growing FinTech industries in all of Africa. So, Nigeria has the potential to be a real powerhouse in bringing about these FinTech and digital financial services solutions.

We had an event recently in Nigeria that focused on supply chain finance, which is one key way of bringing about more trade by supporting the value chain, whether it is the agriculture value chain or the manufacturing value chain, to be able to avoid backward financial leakages through the supply chain.

Having the right fintech and venture capital firms operating is part of having the right rules in place for safe transactions. All of these ecosystems can make it easier for operators to trade with each other across regions and across the world.

Of course, infrastructure is key to that; having the right roads, rails, ports, and infrastructural capacity is critical, and we see that kind of investment. IFC is keen to invest, partner, and bring about more of these kinds of investments in the region.

As you said, the report identifies opportunities through traditional instruments but also, as we have been discussing, through supply chain finance and digitalization.

This is just a bit of how we can help and support and we will continue to do that.

There are lots of opportunities in Nigeria and in the region, and we are looking to see how we can bring them about through things like financial institutions and specialized tools to expand digitalization, technology solutions that facilitate adoptions of new instruments such as supply chain mapping, blockchain light transaction tracking, and digital financing and of course banks that have the sophistication to provide credit risk assessment systems and trade finance which is critical to enabling more trade inter-regionally and globally.

Read also: African fintechs’ revenues to reach $30bn by 2025 – McKinsey

Which area of development are you focusing on in the region?

It’s not a matter of where we are focusing, it’s a matter of where we have identified the greatest potentials and opportunities for development. At IFC, we have been stepping up our work to power the private sector to work jointly with government and development partners to deliver greener, more inclusive, sustainable growth, and we believe that things like digitalization, climate change actions, urbanization, and regional integration offer new opportunities to do things differently.

Human capital development is key. I mean, look at the youths that you have in Nigeria; this is like the biggest powerhouse that Nigeria needs to embrace. I come from the Middle East, where half the population is under the age of 25, and it’s no different here.

You can see this as a challenge, but a smart country sees this as an opportunity, and I think that Nigeria definitely sees its youth bulge as an opportunity.

IFC sees human capital development and youth as a great opportunity whether it is through looking at ways to provide skills enhancement, looking to support entrepreneurship, or looking to support creative industries in Nigeria, which of course, it’s a great capacity that you have here.

Diversifying the economy is key, the manufacturing sector, agricultural sector, digital economy that we spoke about, and financial inclusion, are the pillars with which I think Nigeria and the region can grow, expand, and develop. And there’s so much we can achieve.