Africa is two to three weeks away from height of Coronavirus storm
Africa is two to three weeks away from the worst of the coronavirus storm and needs an emergency economic stimulus of $100 billion to bolster preventative measures and support its fragile healthcare systems, according to the United Nations Economic Commission for Africa.
Almost half of the funds could come from waiving interest payments to multilateral institutions.
That would give countries the fiscal space needed to impose social-distancing measures, widen social safety nets and equip hospitals to treat the sick ahead of an expected surge in infections, UNECA Executive Secretary Vera Songwe said by phone from Washington.
“If we want to have a fighting chance, we need it immediately,” she said. “In the next two to three weeks, if we act really decisively, we may be able to flatten the curve and then when the storm comes it will be not be as brutal as we see in Europe.”
One measure that can provide some immediate relief is the creation of the special purpose vehicle requested by African finance ministers through which interest payments on sovereign bonds could be sequestered and provide all countries on the continent, regardless of income level, with support, she said.
A lack of resources and staff means authorities must work fast to limit the spread of the disease on a continent where hospitals have an average of just 1.8 beds per 1,000 people, UNECA data show. While Africa accounts for 1% of global health expenditure, it carries 23% of the disease burden, including hundreds of thousands of deaths each year from malaria, HIV/Aids and tuberculosis.
“Our hospital systems are so weak and so stressed already that another stress on them is going to break them,” Songwe said.
There are more than 4,000 Covid-19 infections in 46 countries across the continent, according to the Addis Ababa-based Africa Centres for Disease Control and Prevention.
FID on 4 oil fields threatened on low break-even price
Four major oil and gas projects with a combined capacity of 1.4 billion barrels of oil equivalent (boe) scattered around Nigeria, Africa’s biggest oil-producing country, may suffer delay in Final Investment Decision (FID) as a result of lower break-even oil price and the impact of the deadly coronavirus pandemic.
The critical oil and gas development projects include Bonga SouthWest Aparo with 630 million boe operated by Shell, Etan-Zabazaba with a capacity of 510 million boe operated by Italian ENI, Preowei field with a capacity of 145 million boe operated by French major Total, and HA gas project with a capacity of 210 million boe operated by Shell Petroleum Development Company of Nigeria Limited (SPDC).
Norway-based independent energy research and business intelligence institution, Rystad Energy, said these projects are at a risk of being delayed which will lead to a decline in liquids production for most of this decade.
These big-ticket projects are expected to create thousands of new jobs, spur domestic gas demand, generate electricity, and create an opportunity to diversify Nigerian government revenue, strengthen the country’s revenue base and turn the country into a dominant geopolitical player in Africa, using its gas resources, just like Australia, Russia or Qatar.
“There is no economic sense in taking FIDs on Bonga SouthWest Aparo, Etan-Zabazaba, and Preowei oil field now because of the current economic challenges,” Charles Akinbobola, an energy analyst at Sofidam Capital, said.
While the oil price is currently hovering well below $30 per barrel, Rystad Energy said upcoming final investment decisions (FIDs) in Africa have a breakeven crude price of over $45 per barrel, with some even close to $60 per barrel.
“The investments for major planned oil and gas projects will now see a timeline shift or even spending cut altogether, which will ultimately impact production levels in this region,” said Siva Prasad, senior upstream analyst at Rystad Energy.
Rystad Energy noted that the economies of the hydrocarbon-producing African nations are heavily reliant on their respective oil and gas output to meet both domestic energy needs and exports. For example, Nigeria based its 2020 capital budget on plans to produce 2.1 million barrels per day of oil this year at a crude price of $57 per barrel.
“An extended period of the current price scenario could, therefore, prove detrimental to the health of these economies,” Prasad said.
AfDB launches biggest ever social bond to combat COVID-19
The African Development Bank (AfDB) has raised $3 billion in a three-year bond to help alleviate the economic and social impact of the Covid-19 pandemic will on Africa’s economies.
The Fight Covid-19 Social bond, with a three-year maturity, was oversubscribed with bids from central banks and official institutions, bank treasuries, and asset managers including Socially Responsible Investors, exceeding $4.6 billion.
This was the largest Social Bond ever launched in international capital markets to date, and the largest US Dollar benchmark ever issued by the Bank. It will pay an interest rate of 0.75 per cent.
According to a statement, the AfDB is moving to provide flexible responses aimed at lessening the severe economic and social impact of this pandemic on its regional member countries and Africa’s private sector.
“These are critical times for Africa as it addresses the challenges resulting from the Coronavirus. The African Development Bank is taking bold measures to support African countries. This $3 billion Covid-19 bond issuance is the first part of our comprehensive response that will soon be announced.
“This is indeed the largest social bond transaction to date in capital markets. We are here for Africa, and we will provide significant rapid support for countries,” AfDB President Akinwumi Adesina said.
The order book for this record-breaking bond highlights the scale of investor support, which the African Development Bank enjoys, said the arrangers.
“As the Covid-19 outbreak is dangerously threatening Africa, the African Development Bank lives up to its huge responsibilities and deploys funds to assist and prepare the African population, through the financing of access to health and to all other essential goods, services and infrastructure,” said Tanguy Claquin, Head of Sustainable Banking, Crédit Agricole CIB.
Nigeria imposes offshore oil worker restrictions in coronavirus battle
Nigeria’s petroleum regulator has ordered oil and gas companies to reduce their offshore workforce and move to 28-day staff rotations as part of measures to curb the spread of the coronavirus, according to a circular seen by Reuters.
Health experts fear a widespread outbreak in Africa’s most populous country, which has about 200 million inhabitants, and the country is keen to protect oil production, which provides 90% of much-needed foreign exchange.
A coronavirus case on an offshore rig could spread quickly among workers and have a potentially devastating impact on production.
Sarki Auwalu, director of the Department of Petroleum Resources, said that only staff on essential duties would be allowed to travel to offshore or remote locations.
“Non-essential staff currently at offshore/remote locations should be withdrawn with immediate effect,” he said in a statement.
Nigeria, which has 111 confirmed coronavirus cases, has shut international airports, closed all land borders and imposed curbs on cargo vessels allowed to dock at its ports in an effort to contain the outbreak.
This time, Banks won’t book as much FX gains from currency devaluation
Lenders in Africa’s largest economy won’t make money from foreign exchange revaluation gains this time around even as central bank (CBN) weakened the currency to protect the external reserve from the vagaries of global macroeconomic uncertainties.
Banks make money from foreign exchange either by using the capital to buy and sell foreign exchange in the inter-bank market or by helping their customers buy foreign exchange from the CBN.
A foreign exchange revaluation gain, which is part of other income in the profit and loss account, is an exceptional item that adds impetus to profitability.
But lenders no longer have dollar-denominated assets in their balance sheet like they used to a few years ago, and the regulator has said that assets must match liabilities.
The 10 largest banks by market capitalisation made a foreign exchange loss of N4.23 billion in December 2019 from a gain of N176.94 billion the previous year.
The loss in 2019 was majorly driven by N83.37 billion negative figure incurred by Access Bank.
Foreign exchange gains reached an all-time high of N269.33 billion in 2016, when the central bank resorted to defending the local currency by trying to meet all demand for dollars as foreign investors were exiting the country due to uncertainties brought by the precipitous drop in crude oil price of mid-2014.
