Oil producing countries such as Nigeria have a chance to use the current slump in commodity prices to diversify their economies and boost growth, according to business and government leaders who gathered for the World Economic Forum (WEF) for Africa, holding in Kigali, Rwanda.
“It is like a glass is half full scenario,” said Tony Elumelu, Chairman, Heirs Holding, Nigeria and co-chair of the conference.
“Our investment appetite is strong. The private sector has a key role to play in growing Africa and creating jobs.”
Africa growth which had been rapid over the past 15 years, driven by high commodity prices, plummeted in 2015, due to external shocks from the collapse in the price of oil and other commodities.
Sub Sahara Africa’s growth will average 3 percent in 2016, less than the global average, the first time this will occur in 20 years, according to International Monetary Fund (IMF), data.
“Africa growth has not ended,” said Uhuru Kenyatta, President of Kenya.
“The story is that Africa needs to diversify. The present challenges provide an opportunity to explore new growth areas such as Agriculture, Financial Services, manufacturing and Intra Africa trade,” Kenyatta said.
Nigeria’s growth slowed to the lowest level since the return to democracy in 2015.
The IMF forecasts growth will average 2.8 percent in 2016, which is less than the estimated rate of population growth.
For Nigeria, the opportunity lies in the manufacturing, industrial and Agriculture value chain, business leaders say.
“We need to invest in processing to take advantage of the whole value chain. That is the only way to create inclusive growth on the continent,” Elumelu said.
Africa’s growth slowdown in 2015 was largely due to the Ebola crises, oil price decline and severe drought that affected agriculture output in some regions.
Countries where export earnings have slumped as a result of oil price collapse, such as Nigeria, need to prioritise spending among other actions, according to David Lipton, First Deputy Managing Director of the International Monetary Fund.
“They need to make budget decisions and prioritise infrastructure spending,” Lipton said.
“There is also a need for flexibility in exchange rates to ease macro pressures.”
Meanwhile, Nigeria’s United Bank for Africa (UBA) and the Export-Import Bank of the United States (EXIM Bank) signed a memorandum of understanding (MOU) on the sidelines of the World Economic Forum (WEF) Africa to promote the availability of EXIM financing of up to $100 million in the region.
EXIM Bank and UBA will work together to share information and develop export-financing opportunities in key sectors including commodities, agriculture and food products, spare parts, and large and small equipment purchases.
“This memorandum signals to American exporters and African businesses alike, that there are many more promising opportunities to work together, and EXIM stands ready to provide the financing needed to turn more of those opportunities into realities,” said Fred P. Hochberg, Chairman and President of the Exim Bank.
Under the MOU, EXIM Bank and UBA will explore options for offering a range of financing solutions for American exporters and African buyers, including short and medium-term financing programmes that allow for flexible repayment terms and competitive insurance policies guaranteed by EXIM.
Since 2009, EXIM has provided more than $6 billion in financing for transactions across sub-Saharan Africa. For the fiscal year ending in 2014, the bank supported $2.05 billion in transactions in more than 20 sub-Saharan African countries.
PATRICK ATUANYA, Kigali
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