Afreximbank: LSF to ensure repo market for Africa

To enable African countries to manage liquidity shocks, the African Export-Import Bank (Afreximbank), working with the UN Economic Commission of  Africa (UNECA), has designed the Liquidity and Sustainability Facility to bring the benefits of a well-developed repo market to the African continent.

A repurchase agreement (repo) is a form of short-term borrowing for dealers in government securities. In the case of repo, a dealer sells government securities to investors, usually on an overnight basis, and buys them back the following day at a slightly higher price.

That small difference in price is the implicit overnight interest rate. Repos are typically used to raise short-term capital and are also a common tool of central bank open market operations.

During the media launch of the 30th Afreximbank Annual Meeting (AAM2023) in Accra, Prof. Benedict Oramah, President and Chairman of the Board of Directors, said that African countries lack repos because their bonds do not provide liquidity.

Referring to Ghana’s debt crisis, he pointed out that the country is not insolvent; rather, the country was impacted by liquidity problems which prompted the government to request a bailout from the International Monetary Fund (IMF).

“What the fund does is that it produces a repo for African debt instruments. We believe what the Fund will do is shrink the yield on African-issued bonds, improve their pricing, and make it easier for African countries to raise money and avoid tight liquidity situations which reciprocate economic crisis,” Prof. Oramah said.

Disbursements

Touching on the disbursements it had made so far, the Afreximbank President said that over the past 30 years, it had disbursed almost $90 billion. He added that in Ghana alone, “over $7billion interventions have been done while the current exposure to Ghana is in excess of $1.7billion with pipeline transactions almost $2billion.”

“Ghana was the first recipient of the Afrieximbank facility on September 1,1993 when we did the Ghana Cocoa Board transaction. Since then, we have supported Ghana in many ways and many sectors including aviation, agriculture, processing, financial institutions, energy, and hospitality,” he added.

On investments made in the continent, he explained that, among other things, during the commodity crisis of 2015-2016, while many international banks left the continent, Afrieximbank made sure that banks especially did not go into trade payment default and disbursed about $10billion to many countries which help avert the situation with default.

During the COVID-19 pandemic, Afrieximbank worked with the African Union (AU) to establish the African Medical Supply Platform, through that, the Pandemic Trade Impact Facility was designed and about $16billion was disbursed over the two years for many African countries to buy test kits, pay for a backlog of debt, PPEs among others.

Again the vaccines came and Africa was left behind. Afreximbank was mandated by the AU to work with envoys and using the African Medical Supply Platform, it provided a $2billion guarantee that covered the 30% purchase which was the gap Africa had at that time.

Pan-African destination

He expressed gratitude to the Ghanaian government for accepting to host the AAM2023 saying it reaffirms the enduring strength of the partnership between Ghana and Afreximbank and the immense value it places on the bank and other pan-African institutions. “Ghana has established itself as a key destination for pan-African events,” he said.

According to him, the event will be the first gathering of global Africa with new participating states from the Caribbean joining the over 3000 participants expected to attend.

“In addition to shareholders of the Bank, we expect African leaders and senior government officials from within and outside Africa, including Ministers, Central Bank Governors, CEOs of major banks, non-bank private/public sector institutions, and NGOs,” he said.

AAM2023 will take place at the Accra International Conference Centre from 18 to 21 June 2023 under the theme  “Delivering the Vision. Building Prosperity for Africans”.

“The choice of the overarching theme is informed by the critical role that Afreximbank has played over the last three decades in the promotion of economic integration in Africa
through support for intra-African trade and investment; and diversification of sources of growth and exports for inclusive growth and shared prosperity,” Prof. Oramah added.

Accelerating AfCFTA

Taking his turn, the Minister of State at the Finance Ministry, Dr. Mohammed Amin Adam, hoped that hosting the event would help generate greater commitment and accelerate the effective implementation of the African Continental Free Trade Area (AfCFTA) agreement to fully benefit the continent and achieve the “Africa We Want” under the Agenda 2063.

He found it worrying Africa’s share of global trade is a paltry three percent and intra-African trade only 16% due to the lack of finance and access to trade and market information among other things.

To this end, he urged all Africans to be supportive of Afreximbank saying  “in the Afreximbank, we have an institution with convening power and a network of resources to significantly contribute towards finding robust solutions to these challenges. This is an institution that has grown its assets from an initial $5billion to $27.7 billion as of September 2022 and has a net loans portfolio of $20 billion –$23 billion.”

He believes the AAM is significant as it offers Africa an opportunity to renew its dedication to the vision of its forebears.

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