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Lagos, Nigeria | ISAAC KHISA | The Nairobi-based African Trade Insurance Agency (ATI) has urged the African countries to focus on de-risking their economies to drive future investment growth.
This was revealed during the Afreximbank’s 2018 Annual Meetings and 25th anniversary celebrations in Abuja, Nigeria.
ATI’s Chief Executive Officer, George Otieno and Chief Underwriting Officer John Lentaigne filled a noticeable gap which emerged from discussions on Day One in which panellists speaking on financing and regulatory considerations around AfCFTA such as Ade Ayeyemi, Ecobank’s Group CEO, who warned that investors would run away from Africa unless adequate risk measures were put in place to address actual and perceived risks.
“The shortage of Investment insurance capacity is particularly acute in certain African countries like Angola, Ghana, Kenya, Nigeria and Zambia. This is because most investment insurers cap exposures in any given country and these caps are normally based around the sovereign’s rating rather than the size of their economies,” John Lentaigne, said.
Nigeria, for example, is rated B/B+ with a GDP of US$ 376 billion, has an economy that is approximately 10 times larger than that of its regional peers but it faces acute constraints on available investment insurance, the agency noted.
The problem is compounded because most of the capacity is taken up by high-levels of foreign currency sovereign borrowing, which will generally be de-risked with investment insurance.
The end result, the agency said, is sovereign borrowing that tends to crowd-out appetite for private sector risks in the very countries in which it is most needed.
ATI currently insures about 1% of the annual GDP of its member countries. In West Africa, ATI is currently helping to raise Euros 350 million with 10-year tenure at a competitive borrowing rate for one sovereign.
“With our presence in any given market, we are able to crowd-in a new class of investors who might otherwise have turned their back on opportunities in the region. We are looking forward to Nigeria finalising its membership in order for the country to completely benefit from ATI’s ability to help the country attract more investments,” Otieno said.
ATI and Afreximbank are both multilateral and pan-African organisations founded with a common mandate to provide a solution to financing and trade challenges on the continent.
While Afreximbank focuses on financing and promoting intra- and extra-African trade, ATI’s core objective is to provide the insurance capacity to underpin private investment flows / FDI into the continent in addition to increasing traders’ access to credit facilities.
ATI was founded in 2001 by African States to cover the trade and investment risks of companies doing business in Africa. It provides Political Risk, Surety Bonds, Credit Insurance and Political Violence and Terrorism & Sabotage cover .As of YE 2017, ATI has supported US$35 billion in trade and investments across Africa in sectors such as agribusiness, energy, exports, housing, infrastructure manufacturing, mining and telecommunications.
