By Ayuure Kapini Atafori, Editor, TBE website
Nigeria has become a full member of the African Trade Insurance Agency (ATI) ahead of other countries which are fast-tracking their membership in the light of the trade and investment insurance challenges during the COVID-19 pandemic, and recognizing the potential post-coronavirus opportunities.
This was contained in a press release issued by ATI in Niarobi, the Kenyan capital, on 12th August. Nigeria contributed US$14.1 million to ATI’s capital in 2019 with African Development Bank’s (AfDB) financial support. The West African economic giant completed its membership process through the ratification of the ATI Treaty.
Nigerian President Muhammadu Buhari has signed the instrument of ratification to ATI’s treaty. This finalises Nigeria’s membership of ATI in a process that began a few years ago. Membership allows Nigeria to attract additional insurance capacity in order to help entice foreign investors. It also increases ATI’s capacity to support sovereign and commercial transactions in the country. ECOWAS economic powerhouse will benefit from being an ATI member because effective risk mitigation is vital to increasing investments and trade flows.
“As one of the largest economies in Africa with a vibrant private sector, ATI looks forward to working with the Ministry of Finance, the Central Bank, local financial institutions and corporate traders to support Nigeria’s economic diversification plans and its post-COVID recovery,” Benjamin Mugisha, ATI’s Chief Underwriting Officer, said.
Nigeria’s oil and gas sector
ATI has provided significant support to Nigeria’s oil and gas sector covering oil traders and the financial sector. Nigeria’s membership of ATI comes at a critical time for the economy as a sharp drop in oil prices due to a COVID-19-related one-third decrease in demand has impacted the country’s spending plans. The International Monetary Fund (IMF) has predicted that falling oil prices would halve Nigeria’s export earnings to US$26 billion, which traditionally accounts for 90% of the government’s budget.
Membership of ATI provides African countries additional trade and investment insurance capacity, which will help cushion members against the negative economic impacts of COVID-19. ATI expects an estimated US$138 million in additional capital from prospective new shareholders in the coming months.
ATI is well positioned to support African countries go through the pandemic successfully. In the last three years, ATI has helped crowd in nearly US$3 billion of investments to several African countries. With ATI’s sovereign and sub-sovereign credit wrap solutions, governments and state-owned enterprises have been able to obtain competitively priced and longer-term financing.
As an important strategic partner, AfDB has played a significant role in funding the membership participation of several African countries. Between 2010 and 2020, AfDB provided US$70 million to fund the shareholding of seven African governments, namely Benin, Côte d’Ivoire, Ethiopia, Mali, Nigeria, South Sudan and Zimbabwe.
Increased capital contribution
In the coming months, five countries are expected to become fully-fledged members while an existing member state indicated its intention to increase its capital contribution. These countries will cumulatively benefit from US$91 million in financial support from AfDB and the European Investment Bank, which is ATI’s other strategic partner.
Furthermore, the recently held General Meeting approved three new membership applications worth US$47 million, demonstrating ATI’s ability to mobilize international support to implement its development mandate and support African countries’ economic recovery from the global pandemic.
ATI was founded in 2001 by African states to cover the trade and investment risks of companies doing business in on the continent. ATI predominantly provides political risk, credit insurance and surety insurance. In 2019, ATI closed the year with exposures of US$6.4 billion and continued to post record results for eight consecutive years, with 132% growth on the net profit over 2018 owing to strong demand for ATI’s insurance solutions from the international financial sector and from African governments.
Since its inception, ATI has supported US$62 billion worth of investments and trade in Africa. For over a decade, ATI has maintained an ‘A/Stable’ rating for financial strength and counterparty credit by Standard & Poor’s. In 2019, ATI obtained an A3/Stable rating from Moody’s.
