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The President and Chairman of the Board of Directors of the African Export-Import Bank, Prof. Benedict Oramah has anticipated an increase in intra-African trade, predicting that the current trade share of 15 to 17 percent could double in the next ten years.
This growth is expected to be driven primarily by the rollout of the African Continental Free Trade Area.
He shared this information at the launch of his book, Foundations and Evolutions of Structured Trade Finance, in Abuja on Wednesday, which coincided with the 32nd Annual Meetings of the Afreximbank. Oramah stated, "Another critical factor in these emerging trends is the rising emphasis on intra-African trade.
Presently, the average stands around 15–17 percent, but it is projected to double within a decade as the Free Trade Agreement is implemented in full."
He elaborated that global trade dynamics have considerably changed over the last decade, with South–South trade becoming increasingly central to Africa's external commerce.
"Trade between Africa and other developing nations surged from about 23 percent of Africa’s overall trade in 1995 to an estimated 68 percent by 2024," he added. Conversely, trade with developed nations has fallen below 50 percent.
He remarked that previous financing frameworks were designed based on North–South trading patterns, where trade with OECD nations was predominant.
This shaped the initial models of structured trade finance that were essential for managing country risk.
In his comments, he noted, "Structured Trade Finance offered a means to transfer the unacceptable risks of African countries to the more favorable risks associated with OECD countries, where commodity purchasers are based."
However, with the growth of intra-African trade and South–South connections, the validity of these traditional frameworks is being questioned.
Oramah raised concerns regarding the applicability of conventional Structured Trade Finance approaches for financing trade among developing nations, particularly regarding how lenders can mitigate payment risks linked to such trade.
Besides the shifting trade patterns, he highlighted other significant developments on the continent affecting finance, such as the rising discovery of oil, gas, and various natural resources by new African producers, which he believes has heightened the importance of Reserve-Based lending.
He also pointed out Africa's ongoing recovery from de-industrialization, which he considers crucial for trade financing. "Existing trade finance frameworks, which heavily emphasize commodity financing, will need to be reevaluated.
As manufacturing powerhouses emerge in Africa, new opportunities for domestic and regional value chains, along with the growth of small and medium enterprises, are surfacing," he remarked.
The latest edition of Oramah's book, published by Globe Law and Business in London, discusses these trends and examines how innovative financing models can assist Africa in maintaining and enhancing its access to international trade finance.
The Afreximbank President described this latest edition as a culmination of 33 years of expertise in trade finance, stating, "The first edition and this new version of the book represent my endeavor to share the extensive knowledge I've acquired during my 33 years of experience in trade finance, primarily at Afreximbank."
