With only 10 per cent of all trade in Africa being intra-African, so much more needs to be done to increase this opportunity which could transform the continent’s economy.
The African economy has the potential to grow to billions and to achieve this, countries have to build greater economic partnerships.
To tap into this potential, the African Export-Import Bank (Afreximbank), has disbursed a total of US$ 3.55 billion to the Egyptian Banking sector under its Pandemic Trade Impact Mitigation Facility (PATIMFA) since the outbreak of the pandemic in March this year.
In its bid to strengthen long-term economic prosperity in the region the Bank has also provided US$ 300 million to the National Bank of Egypt to support activities aimed at expanding intra-African trade.
The funding has been provided to the Central Bank of Egypt and other Egyptian banks.
PATIMFA is designed to assist Afreximbank member countries to manage the adverse impact of financial, economic and health shocks caused by epidemics or pandemics, in the nature of covid-19.
“By doing so, it helps preserve and promote economic stability through the period of global uncertainty. The funds ensure trade debt payments that fall due are honoured and supports the stabilization of foreign exchange resources in order to preserve the flow of critical imports. They will bolster the liquidity of the Central Bank and Local Egyptian lenders during the crisis while ensuring vital trade in items such as food and medical supplies continues,” notes a statement from Afreximbank.
Afreximbank President, Prof. Benedict Oramah, said: “Faced with a sharp change in the economic outlook, banks in most countries, including Egypt, need to brace themselves for widespread economic disruption and a recession. The support we are providing to the banking system in Egypt will ensure trade continues and defaults are averted, bolstering the economic foundations needed to preserve public health and promote a strong recovery.”
He added, “As we rightly focus on stability in the present, we must also look to build a more prosperous and resilient future. Egypt has been a regional banking powerhouse for more than a century and will play a vital role in expanding intra-Africa trade as the continent recovers from the pandemic and reaps the benefits of the African Continental Free Trade Area. The National Bank of Egypt’s balance sheet is among the top three strongest in Africa and we are confident its expansion will prove an effective multiplier for trade across the continent.”
Last year, Africa became the largest trade zone in the world with the ratification of the Africa Continental Free Trade Agreement (AfCFTA).
The AfCFTA is expected to increase intra-African trade by 52 per cent by the year 2022 and remove tariffs on 90 per cent of goods.
However, the covid-19 pandemic has put a damper on this ambitious plan which targets Africa’s 1.2 billion people.
The trade agreement aspires to create a tariff-free continent to grow local businesses, boost intra-African trade, spur industrialization and create more jobs.
Despite the World Economic Forum (WEF) acknowledging that “a united African continent working towards common goals would be a major force on the global economic stage, the continent’s economic powerhouse is yet to ratify the agreement.
Nigeria is Africa’s largest economy but it has abstained from the AfCFTA as have Benin and Eritrea whose economies are estimated at less than US$30 billion each.
Interestingly, Nigeria’s economic nominal value is estimated at US$400 billion.
Nigeria’s lack of commitment may be due to the fierce opposition from labour unions and the fact that the country hosts the largest concentration of people living in extreme poverty in the world.
Also, only 10 per cent of Nigeria’s annual trade activity is with other African countries. This is a surprise given the country’s dominant economic standing and location.
The United Nations Conference on Trade and Development (UNCTAD) has also acknowledged that opening borders between African countries could help spur growth on the continent.
UNCTAD notes that growth and development in Africa are pegged on boosting internal migration within the continent.