…African trade amounts to $1,077 bn
…Survey done by Afreximbank, UN-ECA, AfDB, MFW4A
…185 banks across Africa representing 58% surveyed
Ben Eguzozie, with wire copy
A new report which looked at the COVID-19 impact on African trade finance shows that the continent experienced massive capital outflows exceeding $5bn by the first quarter of 2020 (Q1 2020).
The report was undertaken by the African Export-Import Bank (Afreximbank), in collaboration with the United Nations Economic Commission for Africa (ECA), the African Development Bank (AfDB) and Making Finance Work for Africa Partnership (MFW4A) released on 15 April 2021 is called the “African Trade Finance Survey,” which provides a better understanding of the trade finance landscape across Africa, and how it has evolved during the COVID-19 pandemic.
The report is the first of its kind, surveying 185 banks from across Africa, representing more than 58% of total assets held by African banks.
Benedict Oramah, president of Afreximbank, highlighted how the tightening global financial conditions triggered massive capital outflows from Africa, exceeding $5 billion in the first quarter of 2020. “These massive capital outflows strained African banks, many of which recorded sharp drops in their net foreign assets. This further exacerbated liquidity constraints and undermined the capacity of banks to finance African trade,” he said.
As a result of the pandemic and inherent tightening financing conditions, heightening balance of payment pressures and liquidity constraints, the supply of trade finance was affected between January and April 2020, the period covered by the survey.
According to the report, the number of correspondent banking relationships fell across the region, and the rejection of letters of credit (L/C) requests increased, with about 38 per cent of local/privately-owned banks and 30 per cent of foreign banks, reporting an increase in rejection rates, respectively.
