While Nigeria guesses, Rwanda, others move to establish Africa’s first export development fund

Nigeria, still basking in the euphoria of a Q2 GDP growth of 5.01 percent year-on-year, is perhaps unaware that it can seize the opportunity of this positive to further notch up its economy, direly in need of growth, by boosting its export trade sector using the yet un-accessed Fund for Export Development in Africa (FEDA).

But Rwanda, a country which has been steadily posting Africa’s rapid growth example, has latched onto the FEDA, a development impact-oriented subsidiary of the African Export-Import Bank (Afreximbank), becoming the first country on the continent to ratify the agreement for the establishment of FEDA.

Togo and the young, war-harried Republic of South Sudan, have also acceded to the FEDA agreement, joining Mauritania and Guinea to become signatories to the establishment agreement of FEDA in their territories.

The FEDA is a subsidiary of Afreximbank, which provides equity financing to African-owned companies operating on the continent in key industries and sectors. FEDA was founded by Afreximbank specifically with the motive to drive African industrialisation for export trade on the African continent.

FEDA’s activities are designed to support the expansion of industrial infrastructure and the promotion of intra-African trade, which is still pretty low at 14.4 percent (or $147.8 billion) as at 2019, clearly in sharp contrast with intra-continental trade in Europe of 73 percent, and 52 percent in Asia.

Africa accounts for only 2.8 percent of global trade as at 2019; with Nigeria’s share in world trade only 0.33 percent. Nigeria’s share in Africa’s trade is 19 percent, and currently ranks 103 out of 167 countries in terms of logistics.

FEDA aims to provide equity finance to companies operating in key industries and sectors in order to significantly increase the delivery of Afreximbank’s development priorities, thereby meeting the pan-African multilateral trade bank’s strategic goals under the main pillars of its intra-African trade strategy (IATS) and its industrialisation and export development strategy (IEDS).

Paul Kagame, President of Rwanda, signed the FEDA establishment agreement into law giving FEDA an international recognition and the ability to fully operate and deliver its trade mandate in the country.

According to development analysts, the ratification by Rwanda constitutes a major milestone in the process of fulfilling the legal requirements for the establishment of FEDA as an international organisation.

Benedict Oramah, president of Afreximbank and board chairman of FEDA, noted that the signings by the early five countries constituted another milestone in Afreximbank’s efforts to mobilize its member states to sign and ratify the FEDA establishment agreement; and demonstrated the growing support for FEDA to complete its legal establishment.

“The recent accessions to the FEDA Establishment Agreement by the Republic of Togo and the Republic of South Sudan, and the ratification by the Republic of Rwanda is a demonstration of the growing momentum and support for FEDA as a new multilateral development platform, which will play a critical role in promoting industrialization, export development and intra-African trade. Afreximbank is pleased with the shared vision amongst its member states to establish a trade-focused development-oriented entity aimed at providing critical equity funding that SMEs lack on the African continent,” Oramah said.