Nigeria’s banks and economy set to get relief from ATI

The Government of Nigeria and private sector investors will soon receive important support that will help boost key industries such as the banking sector as well as providing access to competitively priced credit and loan facilities for institutions in Nigeria. Relief is expected once Nigeria finalises its membership into ATI, which is nearing completion. ATI is Africa’s only multilateral credit and investment insurer, similar to the World Bank’s MIGA but with a focus purely on Africa. In order for a country to access ATI’s full slate of investment solutions, it must be a full member and shareholder.

ATI held a Forum on De-risking Nigeria’s Investments and Trade in Abuja to inform the private and public sectors about the benefits that await Nigerian companies, the government and its institutions once membership in ATI is finalised.

Specifically, ATI will help improve Nigeria’s economic outlook in the following ways:

For the overall economy, ATI’s presence will help to reassure investors, particularly in the current election cycle – an environment that often leads to investors delaying their planned projects in any African country undergoing elections. This risk may already be reflected in Nigeria’s foreign direct investment flows which totalled US$1.2 billion in the first half of the year down from US$1.7 billion a year earlier. ATI provides investors with political risk and investment insurance to protect their investments against any unilateral government-related action (including non-payment) that might negatively impact their investments or projects.

Also Read: AFDB approves US$14.12m to support Nigeria’s membership in African Trade Insurance Agency

ATI will also help the government in its plans to diversify the economy through its support to banks and across a broad spectrum of economic sectors. ATI provides credit insurance solutions which can act as a form of collateral, therefore freeing up banks’ capital allowing them to lend at greater volumes. With local banks now focusing on decreasing their non-performing loan rates, some are hesitant to lend to the manufacturing and agricultural sectors, where the development of both is a major government objective. From a bank’s perspective, these are risky sectors with high credit risk. With ATI’s credit insurance solutions, this risk can be mitigated, thus opening up more loans to these priority sectors.

Speaking at a press briefing following the forum in Abuja, ATI’s Chief Executive Officer, George Otieno commented “There are numerous benefits to Nigeria becoming a member of ATI. First, investors and international lenders will look favourably on this action and the second the time couldn’t be better for our solutions. We can support the government to diversify the economy, boost banks liquidity, and even help the government to borrow internationally at more competitive rates. This year ATI’s products will stand behind around 5% of all new FDI into Africa so joining ATI literally boosts growth. Lastly, ATI is now paying dividends to shareholder making membership a near budget neutral decision for governments.”

African countries that are members of ATI are able to capitalize on ATI’s unique financial solutions. For example, Nigeria’s neighbour and ATI’s first West African shareholder, The Republic of Benin, recently utilized ATI’s investment insurance to attract EUR 610 million for infrastructure and debt refinancing supported by ATI’s network of global lenders and insurance partners.

Also Read: AFDB approves US$14.12m to support Nigeria’s membership in African Trade Insurance Agency

ATI currently has 14 member countries including some of Africa’s strongest economic performers including Côte d’Ivoire, Ethiopia, Kenya and Rwanda, and nine institutional members including the African Development Bank. ATI continues in its push to increase West African membership with Ghana also expected to finalise its membership in ATI in early 2019.

AFDB approves US$14.12m to support Nigeria’s membership in African Trade Insurance Agency

………Once membership formalities in ATI are finalized, Nigeria could benefit from gross political and commercial risk insurance cover on total investments and trade amounting to over US$ 5 billion by 2020

The African Development Bank Group (www.AfDB.org), through its Trade Finance operations, has approved a US$14.12 million facility to support the Federal Republic of Nigeria’s membership in the African Trade Insurance Agency (ATI). This is a critical and mandatory step to enable ATI commence its operations in Nigeria. Nigeria, as Africa’s largest economy, joins 14 other African countries that have already signed up to ATI membership.

Once membership formalities in ATI are finalized, Nigeria could benefit from gross political and commercial risk insurance cover on total investments and trade amounting to over US$ 5 billion by 2020. The catalytic effect of using limited financial resources in this way is undoubtedly massive.

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The approved facility complements ongoing and planned interventions geared at building institutional capacity and improving the resilience of the Nigerian economy. Joining ATI will enable Nigeria to leverage its position to mobilize additional resources to finance trade, especially importation of essential goods such as medicines and communications equipment, to rehabilitate basic infrastructure and strengthen the country’s productive sector.

ATI’s mandate is to provide medium to long term credit and political risk insurance, as well as other risk mitigation products to its member countries and related public and private sector actors.

These products directly encourage and facilitate foreign direct investment as well as local private sector investment in regional member countries and intra- and extra-African trade. ATI catalyzes private sector investments in infrastructure projects, thereby promoting economic integration of participating countries into regional markets.

This financing aligns with four of the Bank’s High 5 priorities, namely: Light Up and Power Africa, Industrialize Africa, Feed Africa and Integrate Africa. As a trade finance facilitation initiative, this financing will support operations that are crosscutting and multi-sectoral in nature and will have an impact on agribusiness, infrastructure development, electricity generation, telecommunications and manufacturing.

According to the Director of the Financial Sector Department, Stefan Nalletamby, “The Bank seeks to achieve its ambitious development mandate by working with and through other strategic partners, and where possible, by supporting the development of strong and viable African institutions such as ATI. This financing scales up the work of ATI by supporting the beneficiary RMCs to become members.”