ABUJA, Nigeria – President Akufo-Addo has called on his colleague African leaders to join forces to fight off the “risk premium tag” that has been placed on African countries by investors and global capital markets when it comes to access to capital.
The risk premium identifier on African countries according to President Akufo-Addo, amounts to a structural constraint imposed on low-income countries by players in the global capital market space.
Speaking as part of a panel discussion at a forum organised by the Africa Finance Corporation (AFC) to celebrate its 15–year anniversary in Abuja, Nigeria, on 12 May 2022, President Akufo-Addo, says it is time for the continent to address and ward off the perception that African countries are riskier for investors compared to their peers in other parts of the world.
“We need to address the structural constraints in the global capital market. The most significant is this so-called Africa risk premium”.
“You have a situation where we [Africa] go to the market for money and we pay much more than our equivalents elsewhere. You want to ask yourself the question, why?”
“It is because we are perceived as being riskier for investors. How is that defined, President Akufo-Addo asked while contributing to the panel discussion.
Unfair playing field
President Akufo-Addo, who was in conversation with BBC Anchor, Nancy Kacungira, stated: “Argentina, [a South American country] in recent times has defaulted nine separate occasions on its debt”.
“Yet, five or six years ago, I believe it was in 2017 when Argentina went to the market to raise a 100-year bond, it ended up paying a coupon rate of 6.5% to 7%.”
“Angola [an African country] which has not defaulted since the end of the civil war on any of its debt obligations, went to the market at the same time and tried to raise a bond and was asked to pay two percentage points more than Argentina.”
“So you ask yourself, what is it, what is going on. These are the matters that the leaders of the continent need to find a solution for and address” President Akufo-Addo said.
Leadership action
To address this discrimination, President Akufo-Addo indicated that there is the need for immediate discussions “with the credit agencies that are responsible” for these decisions because they are “the gatekeepers for the international capital market”.
“There is the need for us to engage them very much more, so that, we can get a more even playing field. That in itself will unlock significant amounts of capital that are available for our (Africa’s) development” President Akufo-Addo said.
The AFC
Africa Finance Corporation (AFC) is a multilateral financial institution, created by African sovereign states to provide pragmatic solutions to Africa’s infrastructure deficit and challenging operating environment.
AFC actively pursue these solutions by developing and financing infrastructure, natural resources and industrial assets for the enhanced productivity and economic growth of African states.
The vision of AFC is to become Africa’s leading infrastructure solutions provider and its mission is to foster the economic growth and industrial development of African countries while delivering a competitive return on investment to its shareholders.
