AfreximBank reiterates need for knowledge, trade in development

The urgency for focus on the economic benefits of knowledge and the role of trade in the development processes of the continent has again been brought to the fore by the African Export-Import Bank (AfreximBank).

The imperatives of the identified development catalysts formed a major part of the book titled: “Foundations of Structured Trade Finance,” by the President of AfreximBank, Dr. Benedict Oramah.

Oramah told his guests that it was the lack of appreciation of the power of knowledge that led to Africa being left behind in the race for development.

“While South East Asian economies realised back in the 1970s that it was a knowledge economy that could be trade–led and that it was a trade-led economy that could innovate and be competitive, African economies lost focus, consumed by commodity illusion and defensive import substitution strategies,” he lamented.

Consequently, Africa, which was well ahead of developing Asia, including China, in the 1960s and early 1970s in terms of per capita income, size of exports, share of global trade and economic growth rates, was swiftly overtaken in the 1980s.

According to him, it was to address that challenge that the book was written- to share knowledge about the innovative approach that made it possible to lend into areas previously considered risky by splitting the risks in trade transactions and allocating them to parties best able to bear them.

“Through self-liquidating financing arrangements,” Dr. Oramah explained, structured trade finance “converted country risk, a key concern to lending into crisis hit countries, into performance risk and transferred payment risks away from those jurisdictions, enabling international banks to gradually return to such lendings with limited risk of cumulative exposures,” he said.

He said that on inception, Afreximbank had adopted that concept, enabling it to make important contributions to its evolution, including stretching its application from raw commodities to value-added exports and commoditised revenue flows, he said.

Given that the field had evolved from practice and no textbooks existed and does not feature on the curriculum of universities offering finance, economics or business, except for special courses in some universities in Europe, the book would fill that knowledge gap.

However, the Nigeria’s Minister of Industry, Trade and Investments, Dr. Okechukwu Enelamah, said that despite the economic setbacks that had befallen the continent, Africa could be the engine of global growth in the coming years.

Enelamah, represented by his Special Adviser on Investments, DaraOwoyemi, said that Africans now need to trade more with each other in order to spur the eluded growth, with that same commitment going beyond sound bites to concrete actions.

He noted that the government had begun a refocusing process that would enhance trade diversification and exports through a series of actions, including raising knowledge about regulations and export markets, improving quality standards and introducing a single window for exporters.