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Supporting Public Private Partnerships in Africa: African Development Bank Ready to Scale up

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The African Development Bank Estimates Africa’s Infrastructure Financing Needs at up to $170bn a year by 2025

Representatives of the African Development Bank, governments, Development Finance Institutions, the private sector and professional associations joined a September 8 workshop to discuss how the Bank can strengthen support for Public Private Partnerships and channel greater investment toward economic and social infrastructure. The event, titled Designing the African Development Bank’s PPP Framework, was hosted virtually by the Bank.

The workshop took place against the backdrop of the ongoing COVID-19 pandemic and the ensuing economic slowdown, which has sharpened an already urgent need for investment. Five African countries accounted for more than 50% of all successful PPP activity from 2008 to 2018: South Africa, Morocco, Nigeria, Egypt and Ghana. Several other countries have multiple PPPs in the pipeline– Burkina Faso has 20, and Botswana, 8.

“Before the COVID-19 pandemic, African infrastructure was already struggling to structure projects tailored for the private sector and at the same time achieving value for money for the public sector including affordability for users. It is therefore imperative that hybrid solutions such as PPPs must be seen and promoted as a way of building back better, stronger, greener, by clawing back private capital to infrastructure while creating much needed fiscal room for governments to address multiple other demands including building health systems’ resiliency.” Bank Vice President Solomon Quaynor said in his opening remarks.

The African Development Bank estimates Africa’s infrastructure financing needs at up to $170 billion a year by 2025, with an estimated financing gap of up to of $68 to $108 billion a year. PPPs are seen as a key element in narrowing this gap by crowding in private sector investment in infrastructure and African Development Bank is playing a critical role in scaling up that effort.

Amadou Oumarou, Director for the Bank’s Infrastructure and Urban Development department presented several rationales for the Bank’s effort to develop a PPP framework, including its Ten-Year Strategy (2013-2022) and a recommendation from the Bank’s Independent (IDEV) evaluation unit to scale up PPP interventions.

Webinar participants expressed a desire for the Bank to play an expanded role in supporting PPP development in Africa by strengthening policy and regulatory frameworks, building government capacity; project structuring and advisory services; and the provision of financing instruments such de-risking, guarantees, credit enhancements and local currency financing.

“Countries need to learn from each other’s achievements and mistakes, they need to have standard documents and checklists that will guide institutions in these countries through the PPP lifecycle,” said Shoubhik Ganguly of Rebel Group International, which is partnering with the Bank to develop the framework.

Mike Salawou, Division Manager; Infrastructure Partnerships, said “Policy dialogue is something the Bank places a lot of premium on, and that has proven to be very efficient in informing decision making.”

“One of the challenges RMCs are faced with is selecting the right project for implementation, therefore support should start from there, then going through to actual project preparation makes it a lot easier,” said Michael Opagi, Division Manager for Sub-Saharan Africa, IFC.

Private sector representatives praised DFIs as indispensable in securing financing for PPP projects in Africa. One example of a successful PPP project cited during the workshop is the Kigali Bulk Water project, which received significant backing from the African Development Bank, the World Bank, as well as private sector players.

According to Phillipe Valahu, CEO, PIDG the Kigali Water project is a perfect example of having an integrated support to a PPP project by using the three pillars proposed in the Bank’s PPP Framework. The project benefited from debt funding from PIDG alongside the African Development Bank which each provided $19 million of senior debt on commercial terms.

“The African Development Bank has unparalleled trust relationships with African governments, and we need to take advantage of that to speed up implementation of PPPS,” Quaynor said in closing.

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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Economy

Nigeria’s Plan to Review Oil Companies’ Gas Flaring Strategies

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Oil

Nigeria is ramping up its efforts to address environmental concerns in the oil and gas sector with a comprehensive plan to review gas flaring strategies of international and indigenous oil companies.

The Minister of State for Environment, Dr. Iziaq Salako, announced this initiative during a national stakeholders engagement meeting on methane mitigation and reduction held in Abuja, Investors King reports.

Gas flaring, a common practice in the oil industry, releases methane—a potent greenhouse gas—into the atmosphere, contributing to climate change and posing health risks to communities near oil facilities.

Nigeria aims to end routine gas flaring by 2030, aligning with global climate goals and commitments.

Dr. Salako explained the importance of reducing methane emissions and highlighted the detrimental effects on public health, food security, and economic development.

He outlined practical steps being taken to tackle methane emissions, including the development of methane guidelines and the engagement of government institutions.

The ministry, through the National Oil Spill Detection and Response Agency, will conduct periodic reviews of oil companies’ plans to ensure compliance with the gas flaring deadline.

Deloitte management consultants will assist in conducting comprehensive forensic audits to scrutinize the legitimacy of forward-contracted transactions.

President Bola Tinubu’s commitment to environmental sustainability underscores the government’s dedication to addressing climate change and fulfilling its multilateral environmental agreements.

The engagement event served as a platform for stakeholders to discuss methane mitigation strategies, existing policies, and implementation challenges.

Collaboration and dialogue among diverse sectors are crucial in charting a unified course towards sustainable methane reduction in Nigeria’s oil and gas industry.

As the country navigates its environmental agenda, ensuring accountability and transparency in gas flaring practices remains paramount for achieving a greener and healthier future.

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Economy

Interest Rate Jumps to 24.75% as CBN Takes Aggressive Stance Against Inflation

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Dr. Olayemi Michael Cardoso

The Central Bank of Nigeria (CBN) has announced a significant increase in the monetary policy rate, known as the interest rate, to 24.75%.

This move disclosed by CBN Governor Olayemi Cardoso during the 294th Meeting of the Monetary Policy Committee press briefing in Abuja, represents a bold step by the apex bank to address the mounting inflationary pressures faced by the country.

With inflation soaring to 31.70% in February, the CBN aims to moderate this upward trend by tightening its monetary policy stance.

This decision follows the previous hike in the interest rate to 22.75% in February, showcasing the CBN’s commitment to combatting inflationary forces.

While the bank opted to maintain the Cash Reserve Ratio at 45%, the significant increase in the interest rate underscores the urgency of the situation and the need for decisive action.

Governor Cardoso emphasized that these measures are essential to stabilize the economy and safeguard the purchasing power of the Nigerian currency.

The 294th MPC marks the second meeting under Governor Cardoso’s leadership, indicating a proactive approach to addressing economic challenges.

The next MPC meeting is scheduled for May 20th and 21st, 2024, highlighting the ongoing commitment of the CBN to navigate Nigeria’s economic landscape amidst inflationary pressures.

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Economy

Nigeria Braces for 10th Consecutive Interest Rate Hike by Central Bank

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Central Bank of Nigeria (CBN)

As Nigeria grapples with persistently high inflation, the Central Bank of Nigeria (CBN) is gearing up to implement its tenth consecutive interest rate hike in a bid to curb the soaring prices and attract investment.

Analysts surveyed by Bloomberg are anticipating a substantial 125 basis-point increase in the key rate to 24%, marking one of the most significant adjustments in the current tightening cycle.

The decision, expected to be announced by Governor Olayemi Cardoso on Tuesday at 2 p.m. in Abuja, comes on the heels of inflation accelerating to 31.7% in February, far surpassing the central bank’s target range of 9%.

This surge has been primarily attributed to the sharp depreciation of the naira, prompting authorities to devalue the currency twice since June to narrow the gap with the unofficial market rate and encourage investor confidence.

While these measures have seen the naira strengthen in recent days and bolstered investment inflows, including a fourfold increase in overseas remittances and significant foreign investor portfolio asset purchases, there remains a palpable need for more decisive action.

Giulia Pellegrini, a senior portfolio manager at Allianz Global Investors, emphasized the necessity for the CBN to intensify its tightening efforts to regain foreign investors’ confidence in the local bond market.

While acknowledging the positive strides made by the central bank, Pellegrini stressed the importance of a more assertive approach to prevent the diversion of investor attention to other frontier markets.

As the Nigerian economy navigates through these challenging times, the impending interest rate hike signals the CBN’s determination to address inflation head-on and foster a more stable economic environment.

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