Afreximbank and AFDB must become engines of Africa's single market
Africa has spent decades talking about economic integration which is why the African Continental Free Trade Area (AfCFTA) offers perhaps the most consequential opportunity to turn that aspiration into an economic reality. But signing a trade agreement is not the same thing as creating a functioning continental market.
The African Continental Free Trade Area (AFCFTA) aims to create an integrated market for goods and services across 55 African nations, home to approximately 1.3 billion people with a combined GDP of about $3.4 trillion. To ensure that this economic vision becomes a reality, two key financial institutions - the African Export-Import Bank (Afreximbank) and the African Development Bank (AfDB) - must work together as the financial backbone of the AFCFTA.
Afreximbank, with its mandate to finance trade, plays a crucial role in overcoming the barriers that African businesses, particularly small and medium-sized enterprises, face when trading across borders. These barriers include high borrowing costs, limited access to trade finance, currency risks, and insufficient market knowledge.
Afreximbank has already introduced tools like its Pan-African Payment and Settlement System (PAPSS) to facilitate cross-border transactions in African currencies. The bank should expand its trade finance offerings, including trade credit, guarantees, and letters of credit, while developing products tailored to African value chains.
On the other hand, AfDB's broader development mandate includes infrastructure projects that are vital to the AFCFTA's success. The bank has invested over $8 billion in 109 cross-border economic corridors and infrastructure projects since 2014. To maximize its impact, AfDB should focus on building continental trade infrastructure, such as multimodal transport corridors, logistics hubs, ports, airports, and digital infrastructure.
By viewing infrastructure development as a means to connect African economies, the bank can contribute significantly to reducing trade costs and time, ultimately promoting regional integration and the emergence of a powerful continental market.
Written by urgent.news from Africa Business's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
