50 days to Christmas and about 400 days to the next elections, embattled Nigerians are confronted with a fragile economic recovery and an erosion of purchasing power even if official inflation figures say otherwise. The good news is that the MTN group plans to sell down $242mn or 14% of its holding to the Nigerian public. This is cheery news for a market that has gained just 4.33% YTD. Some of the challenges listed above are not Nigeria-specific. The whole of Africa is sweltering under the pressure of mounting external debt.
Africa’s growing Debt Overhang
External borrowing by African countries, currently estimated at $768bn, will exceed $1trn by 2022 as economic support packages, subdued tax revenue and balance-of-payments issues are raising the need for new lines of credit. While Zambia has already found itself in a debt debacle, having defaulted on its Eurobond in 2020, towards the end of 2020, the IMF has also reported that six African countries were in external debt distress and another 15 ran a high risk of joining them. The impact of an increase in interest rates in Europe could be quite devastating. Leading creditors remain skeptical of blanket debt write-offs and are more likely to be country-specific approach to negotiations that aligns with their strategic interests.
The Gulf of Guinea – A Hot bed at sea
The International Maritime Bureau (IMB) released figures for the first nine months of 2021 that revealed a significant decline in the number of pirate attacks against ships in the Gulf of Guinea, including a fall in crew kidnappings. This has been largely attributed to coordinated effort by regional and European Navies who have stepped up their activity in the region. However, the fear is that the pirates may just be biding their time and playing the waiting game only to resurface again more viciously when the Navy alliance grow weary.
Tech & Telcos to the Rescue
Africa’s Telco industry didn’t just survive the COVID pandemic, it thrived. Remote working drove the demand for broadband services across the continent and the sector hasn’t looked back since. According to the IFC, improved broadband access has the capacity to expand the continent’s GDP by $180bn over the next four years. MTN Nigeria raise $481.93mn to further expand its capacity. Tech giants including Facebook and Google have also indicated interest in supporting the increase in mobile broadband access across the region through multiple ongoing fibre cable projects. This will act as a catalyst to more robust economic recovery in the coming years.
In this edition of the FDC Monthly publication, the FDC Think-Tank analyzes these issues and their implications on businesses and the economy at large.
Enjoy your read!