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Asia Poised to Play Integral Role in Africa’s Future Growth

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Weaker global outlook and the impact of Brexit have created uncertainty around growth prospects. The impact weighs heavy on world economic outlook with the International Monetary Fund (IMF) predicting advanced economies will grow by only 0.2% from 1.9% to 2.1% and hold steady in 2017. Against this backdrop of lethargic economic performance, some developing economies still show strong growth potential.

Sub-Saharan Africa is expected to post growth of 4.1% in 2017 and 5.2% in 2018, demonstrating resilience in the face of the global economic slowdown and subdued commodity prices. Africa’s structural growth drivers which include its attractive demographics, urbanisation and rise in consumerism remain intact. The rising middle-class with increasing purchasing capacity and growing consumption are attracting investors’ attention in markets like South Africa, Nigeria, and Kenya. The growth of FinTech firms and online lenders in the region is also helping to support the middle-class segment by enabling better access to credit. The power sector is another example of attractive opportunity in the continent – Africa has about 13% of the world’s population, but half of this population does not have access to electricity. In comparison, over 80% of the Indian population has access to electricity.

African economies which are currently performing well include Côte d’Ivoire, Tanzania, Kenya, Senegal and Ethiopia. Senegal, for example, is outperforming with a growth rate of c.6.5%, the highest it has achieved in over a decade. These economies have in many ways benefitted from lower energy and commodity prices while on the other hand, the larger economies of South Africa, Nigeria and Angola have been severely impacted by the slump in commodity prices. Their medium term prospects however remain good.

Given this mixed picture, how will Africa continue to achieve its maximum growth potential?
The West and Western multilaterals have historically played a significant role in Africa’s growth with the EU being its biggest trading partner. But the relationship between Asia and Africa has grown exponentially over the last decade. China has materially invested into Africa. Japan too has shown its interest in ramping up African investments and will be hosting the Tokyo International Conference on African Development for the first time in the African continent, focusing on ways to improve Africa’s health system. Opportunities for other Asian countries to participate in and support Africa’s growth will continue to evolve.

In the wake of European growth uncertainties following the Brexit decision, this trade partnership diversification and closer ties with Asia, could prove to be prudent in the long-term and Africa is likely to look increasingly to the East for investment and expertise. China’s One Belt, One Road initiative is designed to promote the connectivity of the Asian, European and African continents and their seas to enhance trade linkage.

While the long-term investment potential of Africa looks promising, the near-term landscape for Africa-Asia trade presents many challenges. Africa’s diverse markets remain poorly understood: there are 2,000 dialects and 54 countries all with different consumer needs to consider. Africa-Asia trade patterns also reveal the trade imbalance where investment flow is in one direction – from Asia to Africa. In order to achieve sustainable economic benefits there is a need for strategic commitment and key partnerships. There must be new determination to turn around the varying levels of conditions ranging from infrastructure to red-tape challenges that persist for growth to be sustainable.Investing in Africa presents diverse challenges and requires strategic commitment and local insight to ensure success.

– Kaushal is Regional CEO, Africa & Middle East, Standard Chartered Bank

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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China’s State-Owned Lenders Allocate $8 Billion to Revitalize Property Market

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China’s state-owned lenders have committed a substantial $8 billion in loans to rejuvenate the country’s beleaguered property market, aligning with Beijing’s directives to bolster the sector.

Agricultural Bank of China Ltd. disclosed approving over 40 billion yuan of loans for real estate projects on predefined white lists, signaling a proactive approach towards supporting the housing market’s recovery.

China Construction Bank Corp. also joined the effort, extending 3 billion yuan to five property projects, with plans to greenlight over 20 billion yuan in loans soon.

Industrial & Commercial Bank of China Ltd. and Bank of China Ltd. are among the institutions offering financing assistance, although the exact loan amounts remain undisclosed.

This initiative follows Beijing’s recent call for local authorities to enhance financing support for developers and curate lists of eligible projects.

In response, the big four state lenders pledged to meet reasonable financing demands from developers and projects identified under the coordination mechanism.

However, China’s property market faces challenges despite these measures. New home sales plummeted 34.2% year-on-year, underscoring the ongoing slowdown.

While existing home transactions surged during the Spring Festival holiday, new home sales remained subdued, prompting a cautious outlook among buyers.

The infusion of $8 billion aims to instill confidence and stimulate activity in the property sector, potentially heralding a gradual recovery amid persisting market uncertainties.

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BUA Foods Invests $200m in Lafiagi Sugar Estate Expansion

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BUA Foods, a leading Nigerian food conglomerate, has announced an investment of $200 million in its Lafiagi Sugar Estate located in Kwara State.

The Managing Director of BUA Foods, Ayodele Abioye, revealed this during a press briefing held at the company’s headquarters in Lagos.

Abioye said the leading company plans to enhance its integrated sugar estate project to reduce reliance on foreign exchange for raw materials.

The project includes the construction of a sugar refinery, ethanol plant, and supporting infrastructure aimed at bolstering local production.

The Lafiagi Sugar Estate spans approximately 20,000 hectares and integrates various components such as a sugar refinery with a daily capacity of 20,000 metric tonnes, along with an industrial ethanol plant.

Abioye underscored the importance of reducing dependency on forex for sourcing raw materials, citing challenges faced due to Nigeria’s lack of industrial agricultural production of sugarcane.

BUA Foods aims to bolster its local supply chain by engaging with communities and establishing partnerships in agriculture.

Abioye emphasized the need for sustainable practices and community involvement in fostering self-sufficiency.

The company’s investment reflects its dedication to expanding domestic production capabilities and driving economic growth in Nigeria’s agricultural sector.

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Nigeria’s One-Year Treasury Bill Oversubscribed by 300%

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Nigeria’s one-year treasury bill was oversubscribed by 300% during the recent Primary Market Auction conducted by the Central Bank of Nigeria (CBN) on Wednesday.

The auction, aimed at rolling over maturing Nigerian Treasury Bills worth N1 trillion, saw unprecedented demand for the one-year T-bill.

Investors offered a total of N1.87 trillion for the N600 billion on offer, indicating a significant appetite for government securities. Out of the total subscriptions, N908.75 billion was allotted, with stop rates set at 19%.

The auction covered maturities across three different tenors: 91-day, 182-day, and 364-day bills, with varying amounts on offer.

While the 91-day bill received N39.90 billion in offers, all were sold, and the 182-day bill garnered N76.83 billion subscriptions, out of which N51.35 billion was allotted.

Managing Director of Arthur Steven Asset Management, Tunde Amolegbe, attributed the remarkable performance of the one-year bills to investor confidence in the current government and its reform initiatives.

He highlighted investors’ preference for higher rates due to signals from the CBN indicating tightening monetary policies amid accelerating inflation.

Experts view the oversubscription as a testament to investors’ trust in the government’s reforms and management of the country’s debt obligations.

The auction reflects a move by the CBN to address liquidity in the financial system while managing Nigeria’s debt obligations effectively.

The significant oversubscription signals robust investor confidence and highlights the attractiveness of Nigerian government securities despite prevailing economic challenges.

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