NIGERIA has become a full member of the African Trade Insurance Agency (ATI). The country’s membership comes at an opportune time as it joins ahead of others that are fast-tracking membership given the trade and investment insurance challenges during the Covid-19 pandemic and also recognising the potential post-pandemic opportunities.
Nigeria contributed $14.1 million to ATI’s capital in 2019 with African Development Bank’s (AfDB) financial support and fully completed its membership process through the ratification of the ATI’s Treaty.
Membership in ATI provides African countries with additional trade and investment insurance capacity, which helps cushion against the negative economic impacts of Covid-19.
ATI expects an estimated $138 million in additional capital from prospective new shareholders in the coming months.
President Buhari’s signing of the instrument of ratification to the ATI’s treaty finalises Nigeria’s membership in a process that began some years ago. Membership in ATI allows Nigeria to attract additional insurance capacity to help attract investments and it also increases ATI’s capacity to support sovereign and commercial transactions in the country. Ultimately, Nigeria benefits because effective risk mitigation is vital to increasing investments and trade flows.
Nigeria’s membership comes at a critical time for the economy as a sharp drop in oil prices due to a Covid-related one-third decrease in demand has impacted the country’s spending plans. The IMF predicts that falling oil prices will halve Nigeria’s export earnings to $26bn, which traditionally accounts for 90 percent of the government’s budget.
ATI is well-positioned to support African countries through the pandemic. In the last three years, ATI has helped crowd-in nearly $3bn 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.
In Nigeria, ATI has already provided significant support in the country’s oil and gas sector covering oil traders as well as in the financial sector insuring financial institutions.
‘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 recover.’ noted Benjamin Mugisha, ATI’s Chief Underwriting Officer.
As an important strategic partner, the African Development Bank (AfDB) has played a significant role in funding the membership participation of several African countries. Between 2010 and 2020, AfDB has provided $70 million to fund the shareholding of seven African governments – Benin, Côte d’Ivoire, Ethiopia, Mali, Nigeria, South Sudan and Zimbabwe.
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 $91 million in financial support from the African Development Bank and the European Investment Bank, which is ATI’s other strategic partner.
Furthermore, the recently held General Meeting approved three new membership applications worth $47 million, demonstrating ATI’s ability to mobilise international support to implement its development mandate and support African countries’ economic recovery from the Covid-19 global pandemic.