ECA executive secretary Claver Gatete: Only a regional approach can deliver fast development

Rwanda’s former minister of finance Claver Gatete takes over as the executive secretary of the UN Economic Commission of Africa at a time of great change for the continent.

eca

Claver Gatete takes over the leadership of the United Nations’ Economic Commission for Africa (ECA) at a pivotal juncture, as we approach the halfway stage of the UN Sustainable Development Goals (SDGs) and as Africa enters the second decade of its development blueprint Agenda 2063.

The long shadow of Covid-19 still hangs over the global economy with countries around the world, but especially in Africa, trying to recover from the supply chain shocks, sky-high inflation and the subsequent interest rate hikes. Adding to the current instability is the war in Ukraine – arguably a symptom of a re-ordering in the 70-year old rules-based, neoliberal order that had, seemingly, been entrenched in the wake of the last major disruption, the Second World War.

Into the mix comes the latest, harrowing manifestation of the long running conflict in the Middle East and its potential to spill over with incalculable consequences for the world. The need for finance Also on the table is the stark fact what while Western countries, especially in America and Europe, have been able to run large deficits and inject large amounts of cash to kick-start growth, those in Africa and the wider developing world continue to be bogged down by a lack of concessional or affordable financing.

To add to their woes they also face existential threats from climate-related events, hence the urgent demand for a greater say in the global economic and political structures that do not serve them fairly. This is the maelstrom that Gatete steps into as executive secretary of the UN agency, which wasspecifically set up to “promote the economic and social development of its member states, foster intraregional integration, and promote international cooperation for Africa’s development”.

In pursuit of this mandate, the Commission offers advice to member states, helps to strengthen macroeconomic policy and supports efforts towards regional and sub-regional integration. Perhaps the best summary of what the ECA has been responsible for was provided by the late Professor Adebayo Adedeji, the celebrated former head of the organisation, in his presentation – History and Prospects for Regional Integration in Africa” in 2002. He said that the ECA had been involved in “the establishment of virtually all the major existing African regional integration arrangements (ARIA) namely, the Economic Community of West African States (ECOWAS, 1975), the Preferential Trade Area for Eastern and Southern Africa (PTA, 1981) which was subsequently transformed into COMESA, the Central African Economic Community (CAEC, 1983) and the African Economic Community (AEC, 1991)”.

When we met Gatete in Victoria Falls, Zimbabwe, he offered a practical assessment of what the ECA’s role should be during this dramatic moment in the history of the continent. Its more routine task is to support macroeconomic management, which he explains includes fiscal management, supporting the real productive sectors and fostering a balance between payments and monetary policy.

“Everything you do has an implication on the monetary side. Whatever decision you take definitely has an implication because if you have to accumulate more debt or more deficit, it has implications. So we help countries to manage their own macroeconomic situation, because that’s what is going to actually stabilise the country,” he says.
Continue reading ECA executive secretary Claver Gatete: Only a regional approach can deliver fast development

Facebooktwitterredditpinterestlinkedinmail

A UAE company has secured African land the size of the UK for controversial carbon offset projects

In late September, Zimbabwe’s environment minister signed away control over a staggering amount of land — almost 20% of his country — to a little-known foreign company. Blue Carbon was a small, new outfit, not even a year old, but its chief was no fledgling entrepreneur: he was an Emirati royal whose family had ruled Dubai for 190 years, flush with oil money.

The Dubai-based Blue Carbon has secured forested land nearly equivalent to the size of the United Kingdom across five African nations to run projects to conserve forests that might otherwise be logged, preventing huge amounts of planet-heating carbon dioxide, or CO2, from entering the atmosphere.

Continue reading A UAE company has secured African land the size of the UK for controversial carbon offset projects

Facebooktwitterredditpinterestlinkedinmail

Algeria hosts key energy summit amidst shifting dynamics

Algeria welcomed envoys from energy-rich nations to a significant summit aimed at addressing pressing challenges and exploring new avenues for collaboration. As leaders from 13 countries convened in the Algerian capital of Algiers for the Gas Exporting Countries Forum (GECF), the spotlight fell on Algeria’s ambition to position itself as a critical natural gas supplier, particularly for European nations seeking to diversify their energy sources and reduce reliance on Russia.

During the three-day summit, which includes prominent participants such as Russia, Iran, Qatar, and Venezuela, discussions revolved around the evolving dynamics of the energy market. With renewable energy sources gaining traction and demand for oil and gas experiencing fluctuations, the forum provided a platform for coordination on investments, enhancing ties with consumer countries, and bolstering production capacity.

Ahmed Dkhinissa, an analyst and professor at the University of Algiers, emphasized the significance of the GECF in fostering global cooperation. He stressed the need for consensus among member nations, highlighting the importance of addressing various issues ranging from climate concerns to geopolitical tensions.

Meanwhile, Noureddine Legheliel, a financial analyst, offered insights into the ongoing debate surrounding renewable energies. While acknowledging their potential, Legheliel emphasized that fossil fuels, including natural gas, would continue to play a significant role in the energy mix for decades to come.

Algeria’s aspirations to become a leading gas supplier to Europe have garnered attention against the backdrop of efforts by European countries to reduce dependency on Russian energy. As the continent’s second-largest pipeline supplier of gas, Algeria has positioned itself as a reliable partner for countries like Spain and Italy. Premier Giorgia Meloni’s visit to Algeria last year underscored the strengthening ties between the two nations.

Highlighting Algeria’s growing prominence as an energy supplier, officials at the summit showcased the country’s commitment to providing secure and dependable energy resources. Recent agreements, including a deal with Germany’s VNG by Algeria’s state-owned energy company Sonatrach, underscore Algeria’s strategic significance in the global energy market.

However, challenges persist for Algeria’s energy sector. Despite ambitious plans to expand production, the country faces hurdles in meeting its commitments to European consumers. Infrastructure constraints, sluggish demand, and intensified competition from other gas-producing nations pose significant obstacles to Algeria’s aspirations.

Source: AfricaNews, 1st March 2024

Facebooktwitterredditpinterestlinkedinmail

Nigeria set for two aggressive interest rate hikes in Q1 – Reuters poll

By Vuyani Ndaba
February 23, 20245:37 PM GMT+1Updated 20 hours ago

interest

JOHANNESBURG, Feb 23 (Reuters) – Nigeria is set for two aggressive interest rate hikes within a little over a month to subdue inflation and boost the naira after a couple of missed monetary policy meetings, a Reuters poll found on Friday.
A survey taken in the past week suggests that Nigeria’s monetary policy rate will be hiked 225 basis points to 21.00% on Feb. 27, in Governor Olayemi Cardoso’s first monetary policy meeting since he took office a couple of months ago.

There was no clear majority in the sample of 15 analysts, with one expecting a 50 bps hike to 19.25% and one a 1,000 bps increase to 28.75%.
That sets the stage for Cardoso to possibly act aggressively, though some doubt authorities have the appetite.
“We expect significant policy tightening and the announcement of de facto system-wide tightening measures,” wrote Razia Khan at Standard Chartered.
“We think both steps are needed to attract greater foreign portfolio investment and anchor inflation expectations,” she added.

A 175 bps jump to 22.75% is expected in March.
Consumer inflation in Africa’s biggest economy quickened for the 13th straight month in January to 29.90%, raising the cost of living to unbearable levels for many in the continent’s most populous nation.
The Central Bank of Nigeria (CBN) has not had a policy meeting since July, putting it out of kilter with the rest of the continent’s key central banks that hold meetings almost every second month.

“Reassuringly, the CBN has announced that it will hold its first two MPC meetings of the year in quick succession, on February 27 and March 26,” wrote analysts at Barclays.
“This suggests to us that it is aware it is well behind the policy curve, and will need to deliver at least two strong doses of policy tightening.”
The naira fell to its weakest level at 1,680.5 per dollar on Wednesday in the official spot market amidst a chronic shortage of the U.S. currency.

David Omojomolo, Africa economist at Capital Economics, wrote that the latest devaluation may be enough to put the balance of payments on a stable footing, though as things stand the currency has continued to weaken on the parallel market.
A poll last month suggested economic growth in Nigeria would be 3.0% this year and 3.7% next.
“Nigeria needs to take a leaf out of Kenya or Zambia’s book – and ‘tighten’ monetary policy with rate hikes,” said Charlie Robertson, head of macro strategy at FIM Partners.
Stabilising the naira is probably the most pro-growth move the CBN could make, so interest rate hikes would benefit Nigeria more than harm it, he added.

Reporting by Vuyani Ndaba; Editing by Jan Harvey

Source: Reuters, 23rd February 2024

Facebooktwitterredditpinterestlinkedinmail

Africa’s largest economy is battling a currency crisis and a crumbling economy

PUBLISHED: Wed, 21 Feb 2024 08:13:09 GMT
Elliot Smith
CNBC

With inflation nearing 30% and its currency hitting an all-time low, Nigeria is facing one of its worst economic crises in years.
The latest data from the National Bureau of Statistics on Thursday showed that the headline consumer price index (CPI) rose to 29.9% year-on-year in January, its highest level since 1996.
The surging cost of living and economic hardship sparked protests across the country over the weekend.

With annual inflation nearing 30% and a currency in freefall, Nigeria is facing one of its worst economic crises in years, provoking nationwide outrage and protests.

The Nigerian naira hit a new all-time low against the U.S. dollar on both the official and parallel foreign exchange markets on Monday, sliding to almost 1,600 against the greenback on the official market from around 900 at the start of the year.

President Bola Tinubu announced Tuesday that the federal government plans to raise at least $10 billion to boost foreign exchange liquidity and stabilize the naira, according to multiple local media reports.

The currency is down around 70% since May 2023 when Tinubu took office, inheriting a struggling economy and promising a raft of reforms aimed at steadying the ship.

In a bid to fix the beleaguered economy and attract international investment, Tinubu unified Nigeria’s multiple exchange rates and enabled market forces to set the exchange rate, sending the currency plunging. In January, the market regulator also changed how it calculates the currency’s closing rate, resulting in another de facto devaluation.

Years of foreign exchange controls have also generated enormous pent-up demand for U.S. dollars at a time when overseas investment and crude oil exports have declined.

“The weakened exchange rate should increase imported inflation, which will exacerbate price pressures in Nigeria,” Pieter Scribante, senior political economist at Oxford Economics, said in a note Friday.

The country is Africa’s largest economy and has a population of more than 210 million people, but relies heavily on imports to meet the needs of its rapidly growing population.

“Shrinking disposable incomes and worsening cost-of-living pressures should remain concerns throughout 2024, further stifling consumer spending and private sector growth,” Scribante added.

Inflation, meanwhile, continues to soar, with the headline consumer price index hitting 29.9% year-on-year in January, its highest level since 1996. The increase is being driven by a persistent rise in food prices which jumped by 35.4% last month compared to the year before.

The surging cost of living and economic hardship prompted protests across the country over the weekend. The plummeting currency has added to the negative impact of government reforms such as the removal of gas subsidies, which tripled gas prices.

President Tinubu said in late July that the government had already saved more than 1 trillion naira ($666.4 million) from removing the subsidies, which it will redirect into infrastructure investment.

Alongside soaring inflation and a plunging currency, Nigeria is also battling record levels of government debt, high unemployment, power shortages and declining oil production — its main export. These economic pressures are compounded by violence and insecurity in many rural areas.

“Excess market liquidity, exchange rate pressures, and food and fuel shortages threaten price stability, while inflation risks rising out of the government’s control,” Oxford Economics’ Scribante added.

“Robust import demand could force the Central Bank of Nigeria (CBN) to reimpose import bans and FX restrictions to lessen the burden on the balance of payments. This could exacerbate domestic product shortages and increase inflation further.”

Inflation is expected to peak at nearly 33% year-on-year in the second quarter of 2024, according to Oxford Economics, and could stay higher for longer given the plethora of economic risks ahead.

“Furthermore, rising inflation and increased hawkishness by the CBN indicate that the policy rate could be raised this quarter,” Scribante said. The policy rate currently sits at 18.75%.

“We expect a combined 200 bps in rate hikes at the next two MPC meetings, scheduled for end-February and end-March this year; however, we think that more hikes are needed to stem rising inflation,” Scribante added.

Jason Tuvey, deputy chief emerging markets economist at Capital Economics, sees the CBN opting for a bigger interest rate bazooka when policymakers meet on Feb. 26 and 27.

“The meeting will be a key test of whether the policy shift under President Tinubu is truly regaining some momentum,” Tuvey said in a note Thursday.

“We expect that the MPC will try to restore some of its inflation-fighting credibility by delivering a large interest rate of 400bp, to 22.75%.”

Facebooktwitterredditpinterestlinkedinmail

Investments in Africa