Nigeria is among countries that will benefit from the $40 billion support to be disbursed by the African Export-Import Bank (Afreximbank) to support intra-African trade over the next five years.
This follows the country’s interest in contributing to intra-African trade opportunities.
Afreximbank president, Benedict Oramah, disclosed this on at the opening session of the 2021 Intra-African Trade Fair (IATF) in Durban, South Africa.
He said the bank’s commitment is to support Africa’s determination to build its institutions as well as implementing the African Continental Free Trade Agreement (ACFTA).
Oramah explained that trade agreements have worked in more mature markets because they have institutional mechanisms that support their implementation and that Africa is beginning to build its own institutions. “Afreximbank is one of them. That is why the Bank is unrelenting in its support for the AfCFTA.”
“For instance, we have committed to disbursing 40 billion US dollars to support intra-African trade over the next five years, building on the 20 billion US dollars disbursed in the past five years,” he added.
He also said the bank is providing letters of credit confirmation lines to African commercial banks to support cross-border trade.
“It is our aim to onboard 500 banks with aggregate lines of over $8 billion. The Bank has so far onboarded nearly 480 and is today the Bank with the widest messaging links with African Banks,” Oramah added.
Working with the African Union (AU) and the AfCFTA secretariat, he said the bank has created a pan-African payment and settlement system (PAPSS) to facilitate cross-border payments in national currencies.
According to Oramah, PAPSS, which is currently piloting in the West African Monetary Zone (WAMZ), will strengthen national currencies, integrate Africa’s payment infrastructure, and save the continent about $5 billion in transfer charges.
Above all, he said, it would return to Africa, large volumes of trade diverted away from the continent due to currency issues.
Oramah further said the Afreximbank is supporting the pilot in an amount of $500 million and expects to expand this to $3 billion when fully adopted across Africa.
He said Afreximbank is also piloting an African collaborative transit guarantee scheme that will facilitate an uninterrupted flow of goods across multiple borders with a single transit bond, operating on a risk-sharing platform with country-specific issuers and would commit $1 billion to the scheme.
“We envisage that this scheme will save the continent over $300 million in transit cost annually. And with it, goods can move from Cape to Cairo seamlessly, saving time and costs,” Oramah said.
“We are working with the AfCFTA secretariat to create an 8 billion US dollar AfCFTA adjustment facility that will cushion African countries from fiscal revenue losses from the tariff removals associated with the AfCFTA and to help the private sector to retool their operations as they reorient their operations towards the continental market.”
AfCFTA is a trade agreement between AU member states with the goal of creating a single market followed by free movement and a single-currency union.
The free-trade zone is expected to be the largest in the world since the creation of the World Trade Organisation in 1995.
