Unlocking African Value Chain

Unlocking African Value Chain

At the just concluded Africa Investment Forum organised by African Development Bank Group, a fresh $34.8 billion in investment interests was secured for the continent. Ugo Aliogo, who attended the event, reports

African economies witnessed a real Gross Domestic Product (GDP) growth of 3.8 per cent in 2022, higher than the world average of 3.5 per cent.

Five of the six pre-pandemic top performing African countries are projected to be back in the league of the world’s 10 fastest-growing economies for 2023–2024.

Africa’s population will reach 2.5 billion by 2050, and will account for 25 per cent of the global population. The New York Times recently affirmed in a headline, “What we know, that the world is becoming more African.” With a youth population of 477 million people between the ages of 15 and 25, Africa will be vital in supplying the global labour force.

The size of the food and agriculture market in Africa will be worth $1 trillion by 2030, in less than 7 years from now.

The African Continental Free Trade Area (AFCTA) presents a consolidated market size of $3.4 trillion. The future of electric vehicles in the world depends on Africa.

The size of the electric vehicles value chain is estimated to increase from the current $7 trillion to $57 trillion by 2050, and that future depends on Africa. That is because Africa accounts for the largest source of the green metals for the development of electric vehicles, including platinum (70 percent), cobalt (52 percent), manganese (46percent), bauxite (25 percent), and graphite (21 percent).

An assessment by Bloomberg NEF show that the cost of manufacturing of lithium-ion precursor batteries in Africa is 3 times less than in the U.S., China, and Poland.

Africa has the largest sources of renewable energy sources in the world, including hydro and solar. In Morocco, the Noor Ouarzazate, is the largest concentrated solar zone in the world.

At the just concluded the Africa Investment Forum (AIF) organised by African Development Bank Group, a fresh $34.8 billion in investment interest was secured for the continent. The amount, which is an outcome of a three-day AIF Market Days held in Marrakesh, Morocco, brings the total value of investment commitment secured by the forum since 2018 when it started to close to $178 billion. At the close of last year’s edition held in Côte d’Ivoire, about $143 billion was mobilised.

The investment interests cut across health, creative industry, renewable energy, agriculture, infrastructure and other critical sectors of the economy.

Speaking at the event, the President of African Development Bank Group, Dr Akinwumi Adesina, said the African Development Bank and its partners are developing the $20 billion Desert-to-Power project across 11 countries that share the Sahel zone, which when completed would be the largest solar zone in the world.

He said whether it is in oil and gas, minerals and metals, renewable energy, agriculture, or the labour force that would drive the global growth, Africa is where to be.

He noted that Moody’s Analytics did an analysis of default rates on infrastructure financing globally over the past 14 years, adding that their discovery showed that Africa’s default rate is the lowest in the world: 2.1 percent compared to Eastern Europe: well over 10 percent; and Asia with over 8 percent.

He averred that the Abidjan-Lagos highway corridor was able to secure $15.5 billion of investment interest in 2022, adding that this corridor would transform the entire West African region and speed up regional integration and trade.

Adesina hinted that the African Continental Free Trade Area presents a consolidated market size of $3.4 trillion.

The AFDB President further explained that in January 2023, the bank, and the Government of Senegal, in partnership with the African Union, organized the Feed Africa Summit.

“The Summit, attended by 34 Heads of State and Government, took the decision to decisively feed Africa, adding that they have collectively mobilized $72 billion towards implementing food and agriculture delivery compacts from the summit.

“Africa must end the export of raw agricultural commodities, stating that governments of countries must recognize that the fastest way to poverty is through the export of raw commodities, while the highway to wealth is from export of value-added products,” he said.

Attracting FDIs to Lagos

As the economic nerve centre of West Africa, Lagos State is well positioned not just to attract investments, but to catalyse economic growth for Nigeria under the administration of President Bola Tinubu. At the state level, the administration of Governor Babajide Sanwo-Olu is not leaving any stone unturned in putting in place key infrastructural projects that would attract foreign investors to Lagos. The administration is not just showing commitment in words only, but in action especially with projects such as the Lekki Deep Seaport, the construction of the Lekki Airport, the construction of the Lagos Film City, the construction of Fourth Mainland bridge and others. Due to the potential of the state as the fertile ground for prosperity, it has also been able to attract the Dangote Single Train Oil refinery and Fertiliser plant. Experts have described these projects as economic cash cow capable of transforming the fortunes of the state and Nigeria.

The refinery is worth $20 billion and aims to produce up to 53 million liters of gasoline per day, as well as 4 million liters of diesel and 2 million liters of aviation jet fuel daily. While the Fertilizer plant is capable of producing 2.8 million metric tons of urea a year, it sits on more than 6,700 acres of land along the coastal line of southern Nigeria and has been valued at $5 billion.

Speaking during a panel session at the African Investment Forum, Sanwo-Olu revealed that the state government is looking at adopting a strategy where the investments coming that would be domiciled in the state are in local currency to de-risk forex, and interest rates challenges.

Sanwo-Olu said: “Such strategy will deepen our own local currency and also help us de-risk foreign currency interest rates and other issues. So, indeed, it is a lot of money. So, if you want me to put some numbers to it. It could be a billion dollars in local currency or trillion Naira. That is the kind of thing that we are going to pick on.”

Speaking on the need to sweat out public assets more in order to generate revenue and cash, the governor explained that the state government is discussion with the Federal Ministry of Finance Incorporated (MOFI), adding that there are a lot of assets that are also in Lagos, which they want to determine the real ownership and what percentage everybody owns, and be able to free up dead assets that are locked down in some of those sectors, and you take them back into a new investable instruments.

He expressed confidence that the state government is working on the timelines, adding that with MOFI, they have started, and Lagosians should begin to see some of progress being made in the next couple of months. 

Desert-to-Power Project

AFDB and partners are implementing the $20 billion Desert-to-Power initiative to develop 10 Gigawatts of solar power across Nigeria and 10 countries of the Sahel zone, including the Sahel regional transmission lines.

Another major infrastructure project the bank is investing on is the Lagos-Abidjan highway, which connects Nigeria, Benin, Togo, and Cote d’Ivoire, secured investment interest of $15.2 billion at the Africa Investment Forum last year, from multiple financiers and investors.

Adesina revealed that the Bank has provided over $44 billion for the development of infrastructure, adding that the bank has also devoted $2.5 billion for the development of regional infrastructure. He noted that the bank is financing the development of regional electricity corridors, to assure reliable and competitively priced electricity, adding that the Bank’s support for regional integration focuses on catalyzing public and private investment in transport and electricity connections.

He remarked that as of 2022, the bank had financed 25 transport corridors, constructed over 18,000 kilometers of roads, 27 border posts and 16 bridges, for a total amount of $13.5 billion.

The AFDB President expressed delight that the bank and Africa Finance Corporation (AFC) have joined the United States, the European Union, together with the governments of Angola, Zambia and the Democratic Republic of Congo to develop the strategic Lobito Corridor, which he said the strategic corridor would connect Angola, Zambia, and Democratic Republic of Congo, opening linkages to the mines and connecting them to the port in Angola.

According to him, “The African Development Bank will commit $500 million to this $1.6 billion investment opportunity. The Lobito corridor also brings together the power of two global initiatives, the U.S-led Partnership for Global Infrastructure and the European Union’s Global Gateway. To fully optimize the benefits of the development of regional corridors across Africa, we should focus on five priority areas.

“First, dedicate pooled financing facilities to support the preparation and development of corridor projects. Second, special industrial zones should be developed around the corridors to optimize on the existing infrastructure in these corridors.

“Third, we need to put in place a systematic approach and platform to identify and syndicate around the development of strategic regional corridors. To achieve this, the Africa Investment Forum will dedicate a special board room annually for regional corridors. This will foster greater collaboration, co-financing and faster development of strategic corridors.”

NLNG Position

On his part, the Chief Executive of Nigeria Liquified Natural Gas, (NLNG) Limited, Dr. Philip Mshelbila, disclosed that federal government’s import tax, Value Added Tax (VAT) and the chronic shortage of foreign exchange facing importers as key variables behind rising cost of cooking gas in Nigeria.

He has therefore urged the federal government to take a second look at those factors which he said impact about 60 percent of the product component if it wants Nigerians to enjoy lower prices of cooking gas. 

The NLNG boss said in terms of pricing, he could not speak about the backend of the market, noted that it is obvious that “our supply makes only 40 percent of supply for the local market, the remaining 60 percent has to be imported and many of the marketers are struggling to source forex.”

He also noted that LPG is also subject to import duty and VAT and that is one of areas that the federal government has to look into if the country wants to lower the price of the product. 

The NLNG CEO averred that two years ago, they took a decision that NLNG’s butane and propane would be sold to the local market as cooking gas, and they have kept to that decision.

“We have struggled with propane because our local market cannot take all our production. We have just a few customers that can take our propane which includes Indorama a private company. But they could not take all our propane and so from time to time, we export some of the products, not because we want to export, but because our local market cannot take all of our production,” he said. 

Mshelbila further explained that Nigeria needs more investments in that area so that more development and investments need to take place, adding that Propane can be used for transportation, power generation, and cell phone tower. 

He remarked that there is a huge investment opportunity in propane, noting that the product is available, but it is an issue of balancing supply and demand to create opportunity for more investment inflows to come into the country.

According to him, “I can’t speak much about German discussion with the federal government of Nigeria because that is between them. But I can tell you that the decade of gas aspiration we are talking about is one that focuses on both domestic and export market. It is focused on allowing Nigeria to develop all its gas resources, some can go into export market, but the domestic market to ensure we have enough gas to power industry, transportation, petrochemical and others. It is basically about unlocking our gas resources. NLNG today as earlier stated exports its Liquified natural gas. 

“I believe Nigeria can benefit from investments, not only from the natural gas industry, but also in the renewable energy and across the energy value chain. But we cannot get other benefits, if people don’t hear our story, we need people to hear our story. There are opportunities for investors as have been said by different speakers and African Development Bank Group (AFDB). Investors need to make returns and that return needs to be sustainable overtime, which include having things such as corporate governance. NLNG is a good demonstration of Foreign Direct Investment (FDI) in Nigeria where billions of US have been invested. But there are still opportunities for small investments across the oil and gas value chain that need to embraced. There should be a systematic approach can be used. In the North, sun is available in the body of the Sahara. There are some areas in Nigeria where wind is strong and it requires looking at the whole system to make policies that drive investments.”

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