Report: Worsening Insecurity Will Harm Nigeria, Others’ Economic Outlook

*Says Afreximbank disbursed $8bn as COVID-19 response
Dike Onwuamaeze

The African Export Import Bank (Afreximbank) has warned that the worsening security situation in Nigeria and some other countries in Africa would weigh negatively on the continent’s growth outlook in 2022.
The warning was contained in the bank’s report titled: “Africa’s 2022 Growth Prospects: Poise under Post-Pandemic and Heightening Geopolitical Pressures,” released yesterday, which was written by the Chief Economist and Director of Research at Afreximbank, Dr. Hippolyte Fofack. The bank also disclosed that it disbursed $8 billion as part of its COVID-19 response efforts to help African economies adjust to the virus-induced macroeconomic fallout.

It said: “If the security environment continues to decay, it will weigh heavily on Africa’s growth outlook by deterring private capital and diverting scarce resources away from productive investments, including infrastructure.

“Sustaining the growth of these investments is critical if we are to capitalise on the competitiveness and productivity gains associated with the AfCFTA. As governments across the region draw on a wide range of instruments and policies — including external and internal adjustments, as well as support from multilateral and development finance institutions — to navigate myriad short term risks, they must not lose sight of the long-term benefits of security and structural reforms. Such measures are essential if countries are to put themselves on the path of robust, inclusive growth and fiscal and debt sustainability.”

The Afreximank also said in the report that African economies exhibited remarkable resilience for growing by 6.9 per cent in 2021 from 1.7per cent contraction recorded at the peak of COVID-19 in 2020.

According to the bank, Africa’s Gross Domestic Product (GDP) was projected to expand by around 3.9 per cent in 2022, adding that growth forecasts showed that the economic expansion of 16 countries (representing around 30 per cent of all African nations) would exceed 5.0 per cent in 2022,
But the report also charged central banks in Africa to effectively pursue the price stability objective without derailing the incipient global recovery, which has been caught in the crossfire in Ukraine.
The report added: “The latest example is the Afreximbank’s Pandemic Trade Impact Mitigation Facility (PATIMFA), which enabled the bank to disburse more than $8 billion as part of its COVID-19 response efforts to help its worst-affected members adjust to the virus-induced macroeconomic fallout.

“These counter cyclical financing facilities have also enabled Afreximbank to leverage more resources from other development partners and institutions to fast-track the process of economic recovery and sustain the region on a long-run growth trajectory.”
The report also stated that the African Continental Free Trade Area (AfCFTA) would be a game changer for African industrialisation.

“Realising the AfCFTA, which entered into force last year, was an important milestone on the path towards the diversification of sources of growth and trade in Africa for enhanced macroeconomic stability. The convergence of countries across the region towards the harmonised rules of origin later this year will help cement the agreement as a game[1]changer for African industrialisation.

“Ultimately, it will enable the region to capitalise on the accelerated reordering of global supply chains for greater resilience, building back better post-pandemic,” the report said.
The Afreximbank further stated, “in the immediate short term, the most important challenge — as systemically important central banks pivot towards inflation-fighting mode — is to effectively pursue the price stability objective without derailing the incipient global recovery, which has been caught in the crossfire in Ukraine.

“At this critical juncture of heightening global volatility and geopolitical tensions, that balancing act is crucially important for all, and perhaps even more for developing countries where the post-containment growth rebound has been constrained by the smaller size of government support and access to vaccines.”

The report also said that, “heightening geopolitical tensions inflamed by the Ukraine crisis and disruption of trade routes have raised commodity prices, led to food shortages and created the conditions for a perfect storm, raising the risk of stagflation and social tensions in the most vulnerable countries where higher inflation will exacerbate the risk of food insecurity. These include the majority of African countries, where food stuffs comprise around 40 per cent of the region’s consumption basket.”