In a significant move aimed at bolstering intra-African trade and driving the continent’s economic growth, the African Export-Import Bank (Afreximbank) announced its ambitious plan to double its financing of intra-African trade from $20 billion in 2021 to $40 billion by 2026. This announcement, made by Haytham ElMaayergi, the bank’s Executive Vice President, Global Trade Bank, during the African Caucus Meeting of the World Bank Group and the International Monetary Fund (IMF) in Abuja, underscores Afreximbank’s commitment to facilitating trade across the continent and supporting the implementation of the African Continental Free Trade Area (AfCFTA).

Afreximbank’s Commitment to Intra-African Trade

Since its inception in 1993, Afreximbank has been at the forefront of promoting and facilitating intra-African trade. The bank’s mission is deeply rooted in the belief that enhanced trade within the continent is crucial for Africa’s economic development and integration into the global economy. By increasing its financing of intra-African trade, Afreximbank aims to address the continent’s trade financing gap, which has been a significant barrier to the full realization of Africa’s trade potential.

ElMaayergi emphasized that Afreximbank’s decision to double its trade financing is part of a broader strategy to support the implementation of AfCFTA, which is expected to be a game-changer for the continent. The AfCFTA, which officially commenced in January 2021, aims to create a single market for goods and services across 54 African countries, facilitating the free movement of goods, services, and investments. By increasing trade financing, Afreximbank seeks to empower African businesses to take full advantage of the opportunities presented by AfCFTA.

Strategic Initiatives and Collaborations

In his address at the African Caucus Meeting, ElMaayergi highlighted several key initiatives that Afreximbank is spearheading to support intra-African trade. One of the most notable initiatives is the bank’s $1 billion contribution to the AfCFTA Adjustment Fund. This fund is designed to help African countries and businesses adjust to the new trading environment under AfCFTA, providing financial support for capacity building, infrastructure development, and trade facilitation.

In addition to the AfCFTA Adjustment Fund, Afreximbank has committed a $10 million grant to facilitate the establishment and operation of the fund. This grant is intended to ensure that the fund is well-resourced and able to meet the needs of African countries as they transition to the new trading regime.

Afreximbank is also partnering with the AfCFTA Secretariat and the African Union Commission (AUC) on several other key initiatives aimed at enhancing intra-African trade. These include the Pan-African Payments and Settlements System (PAPSS), the African Trade Gateway, and the Afreximbank African Collaborative Transit Guarantee Scheme.

The Role of PAPSS in Facilitating Trade

The Pan-African Payments and Settlements System (PAPSS) is a flagship initiative of Afreximbank that aims to facilitate cross-border payments across Africa, making it easier for businesses to trade with each other. PAPSS is designed to reduce the cost and time associated with cross-border transactions, which have historically been a major impediment to intra-African trade. By enabling real-time payments in local currencies, PAPSS is expected to significantly boost trade within the continent and reduce reliance on foreign currencies.

PAPSS was officially launched in January 2022 and has already gained traction across the continent. The system is expected to play a crucial role in supporting the implementation of AfCFTA by making it easier for businesses to trade across borders and access new markets. Afreximbank’s increased trade financing will further support the adoption and use of PAPSS, providing businesses with the financial resources they need to expand their operations and engage in cross-border trade.

Nigeria’s Strategic Importance to Afreximbank

Nigeria, Africa’s largest economy and a key founding member of Afreximbank, has been a major beneficiary of the bank’s trade financing initiatives. Since its inception, Afreximbank has approved over $40 billion in support of Nigerian public and private sector entities. This support has been instrumental in driving the country’s economic development and positioning Nigeria as a key player in Africa’s trade landscape.

ElMaayergi noted that Afreximbank is currently implementing several of its flagship continental initiatives in Nigeria, including the African Medical Centre of Excellence and the Afreximbank African Trade Centre. These initiatives are expected to further strengthen Nigeria’s position as a hub for trade and investment in Africa.

The Launch of the Alliance of African Multilateral Financial Institutions (AAMFI)

In a bid to enhance the effectiveness of African multilateral financial institutions, Afreximbank, in collaboration with the African Union Commission (AUC), launched the Alliance of African Multilateral Financial Institutions (AAMFI). AAMFI was launched on the margins of the 37th Ordinary Session of the Assembly of the Heads of State and Government of the African Union in Addis Ababa in February 2024.

AAMFI brings together several key African financial institutions, including the Africa Finance Corporation, Trade and Development Bank Group, African Reinsurance Corporation, African Trade and Investment Development Insurance, Shelter Afrique Development Bank, PTA Reinsurance Company, East African Development Bank, and African Solidarity Fund. The alliance aims to strengthen the continental financial framework and advance the African Union’s Agenda 2063, which envisions an integrated, prosperous, and peaceful Africa.

ElMaayergi emphasized the importance of African multilateral financial institutions in addressing the continent’s development challenges. He called on meeting participants to reaffirm their commitment to these institutions and urged the World Bank and the IMF to work with AAMFI to address the continent’s challenges. He also highlighted the need for the special privileges and immunities granted to these institutions, including preferred creditor status, to be respected by all stakeholders.

Afreximbank’s Role in Supporting Africa’s Development Agenda

Afreximbank’s commitment to doubling its trade financing is part of a broader strategy to support Africa’s development agenda. The bank has been a key player in financing critical infrastructure projects across the continent, including ports, airports, and energy projects. These investments are crucial for creating the enabling environment needed to support intra-African trade and drive economic growth.

In recent years, Afreximbank has also increased its focus on supporting small and medium-sized enterprises (SMEs), which are the backbone of Africa’s economy. The bank has launched several initiatives aimed at providing SMEs with access to finance, including the Africa SME Programme and the Afreximbank Trade Finance Facility for SMEs. These initiatives are designed to help SMEs overcome the challenges they face in accessing finance and expanding their operations.

The Importance of Intra-African Trade for Sustainable Development

Intra-African trade is widely recognized as a key driver of sustainable development in Africa. By increasing trade within the continent, African countries can reduce their dependence on external markets and build more resilient economies. Intra-African trade also has the potential to create jobs, increase incomes, and reduce poverty, contributing to the achievement of the United Nations Sustainable Development Goals (SDGs).

The African Continental Free Trade Area (AfCFTA) is expected to be a major catalyst for increasing intra-African trade. By creating a single market for goods and services, AfCFTA has the potential to significantly boost trade within the continent and drive economic growth. However, for AfCFTA to achieve its full potential, significant investments in infrastructure, trade facilitation, and capacity building are needed.

Afreximbank’s commitment to doubling its trade financing is a crucial step in supporting the implementation of AfCFTA and realizing its potential. By providing businesses with the financial resources they need to engage in cross-border trade, Afreximbank is helping to create a more integrated and prosperous Africa.

Conclusion: A Path Forward for Africa

Afreximbank’s decision to double its trade financing to $40 billion by 2026 is a bold and strategic move that underscores the bank’s commitment to driving economic growth and development in Africa. By supporting the implementation of AfCFTA and other key initiatives, Afreximbank is playing a crucial role in facilitating intra-African trade and creating the conditions for sustainable development.

As Africa continues on its path toward economic integration and development, the role of institutions like Afrexim bank will be more critical than ever. Through strategic investments, partnerships, and initiatives, Afrexim bank is helping to lay the foundation for a more prosperous and integrated Africa, where trade within the continent thrives and contributes to the well-being of all its people.

photo source: Google

By: Montel Kamau

Serrari Financial Analyst

12th August, 2024