Tue Apr 12, 2016/Reuters

By Felix Onuah

China has offered Nigeria a loan worth $6 billion to fund infrastructure projects, the Nigerian foreign minister said on Tuesday.

The announcement came as both countries signed a currency swap deal to boost trade. Nigeria has been in talks with China on an infrastructure loan for months.

Nigeria is Africa’s largest economy and its top oil producer. But its public finances have suffered as the price of crude oil dropped around the world.

Although President Muhammadu Buhari wants to triple capital spending in 2016, he also needs to plug a projected deficit of $11.1 billion.

“It is a credit that is on the table as soon as we identify the projects,” Nigerian Foreign Minister Geoffrey Onyeama told reporters after Buhari met Chinese President Xi Jinping. “It won’t need an agreement to be signed. It is just to identify the projects and we access it.”

There was no immediate comment from China.

Lin Songtian, director general of the Chinese foreign ministry’s African affairs department, had earlier said Nigeria would be able to benefit from a $55 billion package for Africa, which mostly consists of concessional grants or export lines.

The Industrial and Commercial Bank of China Ltd (ICBC) , the world’s biggest lender, and Nigeria’s central bank also signed a deal on yuan transactions.

“It means that the renminbi (yuan) is free to flow among different banks in Nigeria, and the renminbi has been included in the foreign exchange reserves of Nigeria,” Lin said.

Nigeria had said it was looking at panda bonds – yuan-denominated bonds sold by overseas entities on the mainland – to fund the deficit, saying they that would be cheaper than Eurobonds.

TRADE

Nigeria’s central bank has said it plans to diversify its foreign exchange reserves away from the dollar by switching some into yuan. It converted up to a tenth of its reserves into yuan five years ago.

Lin said a framework on currency swaps has been agreed with Nigeria, making it easier to settle trade deals in yuan. China has signed similar swap agreements with countries ranging from Kazakhstan to Argentina to promote wider use of its yuan.

Beijing also signed agreements to develop infrastructure in Nigeria, part of a drive to deepen its ties with Africa.

ICBC agreed a $2 billion loan to Dangote, the company owned by Africa’s richest man, Aliko Dangote, to fund two cement plants it plans, he told Reuters.

China’s Xi told Buhari there was huge potential for economic cooperation in areas like oil refining and mining, according to Xinhua, China’s official news agency.

In a speech to business leaders, Buhari said both countries wanted to work together in agriculture, fishing and the manufacturing of cars, construction materials and textiles.

(Reporting by Ben Blanchard and Chijioke Ohuocha, editing by Larry King; Writing by Ulf Laessing; Editing by Hugh Lawson)

The post Nigeria says China offered $6 billion loan for infrastructure appeared first on Investadvocate.

March 22, 2016/AfDB

“It seems we are all agreed that the solutions lie within Africa,” said Charles Boamah, Acting First Vice-President and COO of the African Development Bank, and moderator of a panel debating the power and potential of African local capital markets on Day 2 of the Africa CEO Forum in Abidjan. The panelists were unanimous that Africa has the means to finance its own development needs, and the discussion focused largely on the methods. With necessity the mother of invention, Africa has been reinventing itself to fund its own needs, said Boamah, but more needs to be done and it has to be done faster. The task at hand for the panel therefore was to unpack and unpick how best the continent should continue along this track.

Luc Rigouzzo, Managing Partner of Amethis Finance, had set the scene. “Is Africa really so dependent on the rest of the world for its economic fortunes?” No, he said, the evidence suggests otherwise, and in particular the resilience of non-resource-rich African countries in the face of the recent global commodity downturn and economic headwinds has shown us that. As to whether Africa has reached the necessary maturity in terms of its own financing, he answered “Yes”. African financial flows are already significantly African, and total external financial flows in fact amount to less than 8.4% of Africa’s estimated annual US $2.5-trillion economy. The external flows which are Eurobonds (0.6%), portfolio investments (0.7%), remittances (2.6%), overseas development assistance (2.2%) and foreign direct investments (2.2%) account for less than 10% of total annual financial flows. Meanwhile domestic credit to the private sector accounts for at least 36%, and endogenous tax revenues at least 22%.

Ngozi Okonjo-Iweala, former Nigerian Finance Minister and World Bank Vice-President and now a senior adviser at Lazards, said that Africa’s and the world’s development financing needs are indeed huge, and that raising current African tax revenues of approximately one fifth of GDP to the OECD rate of a third of annual GDP will be transformative, as will be the effective channeling of the estimated $380 billion of African pension fund resources into infrastructure and productive investments. However, sound macroeconomic policies, she said, remain the foundation for consolidating gains and spurring growth.

The Vice-President and Treasurer of the International Finance Corporation, Jingdong Hua, drew lessons from the Asian financial crisis of 1997 where policy-makers from across a number of South East Asian countries made the firm decision never again to rely on flows from foreign capital markets, but rather to concentrate on developing local capital markets. The results today, he said, speak volumes. One form of local finance to be mobilized, said Jean Kacou Diagou, President of the Federation of West African Employers Associations, NSIA, is insurance. “It’s not part of our African mentality,” he said, “and it needs to be. With the right regulatory environment, Africans will begin to take out insurance and save for the long term.”

Ade Ayeyemi, Group Chief Executive Officer of Ecobank, alighted on the issue of inbred ideas. “Saving and sourcing locally is grounded in our culture,” he said. “With the right conditions, we must encourage saving for the long term, and with the confidence of investors knowing they will get a decent return and that the value of their savings will not be eroded by inflation. We need confidence, confidence, confidence for our investors …. and that means discipline, discipline, discipline, from our governments.” Henri-Claude Oyima of BFGI Bank, crowned African Banker of the Year by the Africa CEO Forum the night before, reinforced the theme. “It is strong banks and strong institutions that generate credit.”

In one word, asked Boamah, what will ensure the success of African capital markets? Freedom, to invest … and the state trusting the private sector to do so, said Oyima. Confidence, generated by both government and people, said Ayeyemi. Encouragement, for local savings and local companies, said Diagou. Localisation, said Hua: concentrating on local capital markets, and borrowing and using local currency. Discipline, said Okonjo-Iweala: sticking to the macroeconomic disciplines that have served Africa so well for a decade, and going further to reduce the perception of risk that still dogs African growth. Jingdong Hua was succinct: “It is a necessity, not a luxury, to develop local capital markets.”

The fourth edition of the Africa CEO Forum, the foremost international meeting for African CEOs, bankers and investors, is taking place March 21 and 22, 2016, in Abidjan, Côte d’Ivoire.

The post ‘There’s no cooking like home cooking’: Harnessing the power of local capital to finance Africa appeared first on Investadvocate.

By Peter OBIORA InvestAdvocate

Lagos (INVESTADVOCATE)-Nigeria has approached the African Development Bank (AFDB) for Budget Support Loan of $1 billion, the Africa lender said on Tuesday.

“During the High-Level Mission conducted by the Bank to Nigeria last week to strengthen the policy dialogue on how best the Bank can provide assistance to support the priorities set by the Government, the delegation held discussions with the Government authorities on the proposed policy-based loan,” AFdB added.

The Africa Bank said it was considering the loan and envisaged that an appraisal mission will be in Abuja soon to work with the authorities and major stakeholders on this operation.

“The loan, when approved, will provide a good platform for policy dialogue to support the implementation of critical macroeconomic and sectoral reforms, which have been initiated by the Government,” the AFDB said.

This is coming on the heels of reports by Reuters quoting Kemi Adeosun, finance minister that Nigeria has held exploratory talks with the World Bank to borrow in order to help fund a record budget in 2016.

The report added that Nigeria is planning to borrow as much as $5 billion to help fund a budget deficit due to a slump in vital oil revenues, of which $4 billion might come from international institutions and the rest from Eurobonds, Adeosun said earlier in January.

“We have held exploratory talks with the World Bank. We have not applied for emergency loans,” the Nigeria’s finance minister was quoted by Reuters as saying.

The post Nigeria Approaches African Development Bank for $1 Billion Budget Support Loan appeared first on Investadvocate.