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Afreximbank Unveils Programme to Unlock Over $100b Intra-African Investments

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  • Afreximbank Unveils Programme to Unlock Over $100b Intra-African Investments

By creating and modifying trade finance instruments, the African Export-Import Bank (Afreximbank), has stated that it hopes to unlock about $100billion worth of investments within the continent, hitherto not mobilised via informal trade and Diaspora funds, through its newly launched Guarantee Programme (AFGAP).

Although the bank said efforts to mobilise untapped investments had started last year with a target of $10billion, it realised that there are more funds to be harnessed considering the success it recorded within the period its mobilisation efforts commenced.

According to the bank, the programme, which has several initiatives, seeks to de-risk intra-African trade by mobilising available resources within the continent rather than struggling to attract foreign direct investment from international agencies and developed countries.

Besides, the bank also reinforced the need to de-commoditise the continent by developing strategies and adapting to changes in the global community, especially as the world switches to data economy.

President of Afreximbank, Dr Benedict Oramah, explained that the move for inclusiveness in the area of trade became important in the light of difficulty in accessing FDIs by many African countries and the need to help the fragmented continent to reap benefits of integration.He spoke at the opening ceremony of the advanced structured trade finance seminar on the Island of Sal in Cape Verde, yesterday.

He added that the trade solutions being unveiled are needed to boost intra-African trade, especially as there are emerging trends in technology, mobile payments and changing data environment. “Resource mobilisation from African sources helps to reduce dependence on foreign liabilities when there is over $1trillion worth of funds within the continent waiting to be harnessed. We need to help ourselves first rather than financing other economies through bonds issuance

“Intra-African trade can only expand if Africa produces more diversified products and if risks associated with the financing of the trade can be adequately mitigated. Industrialisation and export manufacturing have become critical components of the efforts to expand intra-African trade. The role of financing in all of these cannot be overemphasized. Creating the export manufacturing capacities the continent will require billions of dollars in financing the enabling infrastructure as well as the acquisition of the equipment the factories will need.”

Afreximbank also estimates that an amount of about $25billion exists as intra-African trade financing gap annually even today Due to novelty of regional markets, there is the need to create instruments that will mitigate payment risks, including country risks, for traders. Historically, distinguished ladies and gentlemen, international banks had not supported intra-African trade for various reasons: these banks had traditionally favoured commodity financing, which lent itself to the use of classical structured trade financing techniques to mitigate perceived risks in the continent.

Under such structures, the international banks usually assumed the performance risks of African commodity exporters, while transferring the payment risks to Organisation for Economic Cooperation and Development (OECD) countries. This approach contributed in entrenching commodity dependence in Africa as items other than commodities could not be financed. It also contributed to the low levels of intra-African trade given that African buyers rarely qualified as acceptable off-takers under such arrangements.

While these problems persist today, others are emerging. For instance, rising costs of compliance is beginning to constrain access of many African economies to import financing. A cocktail of enhanced regulatory compliance requirements and the emerging Basel IV and IFRS 9 are likely to further worsen the situation. What all these mean is that bankers doing business in Africa have to be adaptive and responsive to the needs of the continent and the evolving operating environment. It is no longer possible to operate as if things are not changing. While Africa pioneered FINTECH, the speed of its evolution is creating challenges and opportunities for trade finance banks around the globe.

“With new payment platforms emerging daily as well as gradual acceptance of digital currencies, letters of credit may not be relevant in the near future. This seminar will give participants the capacity to structure bankable trade finance deals of varying levels of complexity and will also give them the opportunity to network and exchange ideas,” he said.

On his part, the Minister of Finance, Cape Verde, Olavo Correia, hinged the growth of the continent’s economy on trade facilitation and development of free markets that aid the transition of several informal trades to the formal platform.

“A unified market is key and Afreximbank as an institution is crucial to achieving that. We need to look at several sectors that can drive inclusiveness. We are doing our best as a country to connect several sectors and islands,” he added.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Crude Oil

Oil Dips Below $62 in New York Though Banks Say Rally Can Extend

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Oil Dips Below $62 in New York Though Banks Say Rally Can Extend

Oil retreated from an earlier rally with investment banks and traders predicting the market can go significantly higher in the months to come.

Futures in New York pared much of an earlier increase to $63 a barrel as the dollar climbed and equities slipped. Bank of America said prices could reach $70 at some point this year, while Socar Trading SA sees global benchmark Brent hitting $80 a barrel before the end of the year as the glut of inventories built up during the Covid-19 pandemic is drained by the summer.

The loss of oil output after the big freeze in the U.S. should help the market firm as much of the world emerges from lockdowns, according to Trafigura Group. Inventory data due later Tuesday from the American Petroleum Institute and more from the Energy Department on Wednesday will shed more light on how the Texas freeze disrupted U.S. oil supply last week.

Oil has surged this year after Saudi Arabia pledged to unilaterally cut 1 million barrels a day in February and March, with Goldman Sachs Group Inc. predicting the rally will accelerate as demand outpaces global supply. Russia and Riyadh, however, will next week once again head into an OPEC+ meeting with differing opinions about adding more crude to the market.

“The freeze in the U.S. has proved supportive as production was cut,” said Hans van Cleef, senior energy economist at ABN Amro. “We still expect that Russia will push for a significant rise in production,” which could soon weigh on prices, he said.

PRICES

  • West Texas Intermediate for April fell 27 cents to $61.43 a barrel at 9:20 a.m. New York time
  • Brent for April settlement fell 8 cents to $65.16

Brent’s prompt timespread firmed in a bullish backwardation structure to the widest in more than a year. The gap rose above $1 a barrel on Tuesday before easing to 87 cents. That compares with 25 cents at the start of the month.

JPMorgan Chase & Co. and oil trader Vitol Group shot down talk of a new oil supercycle, though they said a lack of supply response will keep prices for crude prices firm in the short term.

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Crude Oil

Oil Prices Rise With Storm-hit U.S. Output Set for Slow Return

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Oil Prices Rise With Storm-hit U.S. Output Set for Slow Return

Oil prices rose on Monday as the slow return of U.S. crude output cut by frigid conditions served as a reminder of the tight supply situation, just as demand recovers from the depths of the COVID-19 pandemic.

Brent crude was up $1.38, or 2.2%, at $64.29 per barrel. West Texas Intermediate gained $1.38, or 2.33%, to trade at $60.62 per barrel.

Abnormally cold weather in Texas and the Plains states forced the shutdown of up to 4 million barrels per day (bpd) of crude production along with 21 billion cubic feet of natural gas output, analysts estimated.

Shale oil producers in the region could take at least two weeks to restart the more than 2 million barrels per day (bpd) of crude output affected, sources said, as frozen pipes and power supply interruptions slow their recovery.

“With three-quarters of fracking crews standing down, the likelihood of a fast resumption is low,” ANZ Research said in a note.

For the first time since November, U.S. drilling companies cut the number of oil rigs operating due to the cold and snow enveloping Texas, New Mexico and other energy-producing centres.

OPEC+ oil producers are set to meet on March 4, with sources saying the group is likely to ease curbs on supply after April given a recovery in prices, although any increase in output will likely be modest given lingering uncertainty over the pandemic.

“Saudi Arabia is eager to pursue yet higher prices in order to cover its social break-even expenses at around $80 a barrel while Russia is strongly focused on unwinding current cuts and getting back to normal production,” said SEB chief commodity analyst Bjarne Schieldrop.

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Crude Oil

Crude Oil Rose Above $65 Per Barrel as US Production Drop Due to Texas Weather

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Crude Oil Rose Above $65 Per Barrel as US Production Drop Due to Texas Weather

Oil prices rose to $65.47 per barrel on Thursday as crude oil production dropped in the US due to frigid Texas weather.

The unusual weather has left millions in the dark and forced oil producers to shut down production. According to reports, at least the winter blast has claimed 24 lives.

Brent crude oil gained $2 to $65.47 on Thursday morning before pulling back to $64.62 per barrel around 11:00 am Nigerian time.

U.S. West Texas Intermediate (WTI) crude rose 2.3 percent to settle at $61.74 per barrel.

“This has just sent us to the next level,” said Bob Yawger, director of energy futures at Mizuho in New York. “Crude oil WTI will probably max out somewhere pretty close to $65.65, refinery utilization rate will probably slide to somewhere around 76%,” Yawger said.

However, the report that Saudi Arabia plans to increase production in the coming months weighed on crude oil as it can be seen in the chart below.

Prince Abdulaziz bin Salman, Saudi Arabian Energy Minister, warned that it was too early to declare victory against the COVID-19 virus and that oil producers must remain “extremely cautious”.

“We are in a much better place than we were a year ago, but I must warn, once again, against complacency. The uncertainty is very high, and we have to be extremely cautious,” he told an energy industry event.

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