AfDB can offer Ghana better rates than Eurobonds
Dr Akinwumi Adesin (AA), has taken office as the eighth President of the African Development Bank (AfDB). The 55-year-old Nigerian is hoping to use the bank to lead a transformation of the continent through five pillars: light and power up Africa, feed Africa, industrialise Africa, integrate Africa and improve the quality of lives of Africans.
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He was in Accra last week and our reporter, Maxwell Akalaare Adombila (GB), caught up with him, where he talked about his new role, his vision for the bank and Africa. Below are the excerpts of the interview.
GB: What would you say made you win over the other seven candidates?
AA: I think people looked at what I have done in my career. I have close to 30 years of development experience, I have worked in 15 African countries, I know issues on the ground and when I was the Minister of Agriculture in Nigeria, I think people appreciated the fact that we tried solving the challenges facing Nigeria's agricultural sector and we succeeded in making huge transformation in the sector.
Many Heads of States that I met told me that they wanted that kind of transformation across Africa.
GB: How do you feel being President of the AfDB?
AA: I think its a great privilege to have been asked to lead the AfDB. The challenges facing Africa are quite immerse and required that we focused on the most important issues, we develop partnerships around them and we become more impact-oriented.
That is why when I took office as president, I announced that we will focus on five key areas: light and power Africa, feed Africa, industrialise Africa, integrate Africa and improve the quality of lives of Africans.
I am a ‘roll up my sleeves’ kind of person and I don't think that the challenge facing Africa is acceptable and I don't think it’s acceptable that Africa does not have electricity.
GB: Ghana recently raised some US$1 billion through a Eurobond at a rate that was seen to be too high and therefore costly for the economy, going forward. Don't you think the country would have been better off borrowing that amount through AfDB's lending windows?
AA: You could have. We provide, as a bank, two types of supports to our countries. We have the Africa Development Fund (ADF), which is the concessionary arm of the bank. We also have the Africa Development Bank (ADB) which is the commercial side of the bank.
Obviously, if you look at the rate at which we lend, its about London Interbank Offered Rate (LIBOR) plus basis point of 60, which is much lower than what you (Ghana) have been able to raise (through the Eurobond).
However, Ghana is just at the preparatory stage of being certified to be able to borrow from the ADB window.
So, its a timing issue but going forward, once the criteria for qualification is met, Ghana would be able to borrow from that facility and at much more lower rates than the current situation.
But you know, if you have a patient and you have to first prevent a cardiac arrest, even if it is going to stabilise the situation, then you can expect these.
That not said, I think the right things are being done to solve the issue and I'm sure Ghana will come out of it.
GB: On the certification issue, when is the bank likely to finish certifying Ghana to qualify for borrowing from the ADB?
AA: I think Ghana is one of three countries that will very likely meet those set of criteria.
They are three issues that we are working with the government on and I expect that in the next few months, all that should be straightened up and Ghana should be in the position to borrow from that.
But generally, AfDB is very supportive of Ghana. I think the economy is very well run, the prospects are very bright, the investments made in Ghana will pay off and those made in infrastructure are already reducing the cost of doing business.
What has happened quite simply is that Ghana got hit by the declining prices of oil. Its not easy but I think we will support Ghana to go forward.
If you look at foreign direct investments (FDIs) registered in Ghana, you realise that it continues to rise and that tells you that Ghana's economic prospects are very bright.
GB: What are the two issues that Ghana needs to clear before it can be certified to borrow from the ADB?
AA: Those are being worked out but they essentially have to do with the general macroeconomic situation such as debt sustainability issues and things like that.
GB: Ghana and Nigeria share a lot of things in common and with your experience in Nigeria, you should be able to comment on Ghana's situation. What would be your advice to Ghana in its current state of economic challenges, especially with regards to the energy issues?
AA: I think there are a number of things that need to be focused on.
First, is the issue of energy and I am happy that the President is focusing a lot on that.
All the investments made in the energy sector should allow Ghana to have about 4,000 megawatts (MW) of power in the next few years. With that Ghana would have more than it needs, given its average consumption of about 2,000 MW. That means there will be an average of 2,000 MW that can be sold.
So, the AfDB is going to be helping with others to create what we can from the West Africa Power Exchange so that Ghana's excess can be sold to neighbours.
The second thing is for the government to continue to strengthen the macroeconomic environment and also have fiscal consolidation and I am very pleased with what the Minister of Finance is doing in that direction.
I think the president should be supported because it is very important to deepen these ongoing reforms. The third area is to diversify the economy,
and in that the country requires two major things; diversify into agriculture via agro and allied industrial development and establish industries.
I think trade, technology, logistics and finance are areas that this economy can be very well placed in. With that I was very delighted when the president told me that he wanted to set up Ghana to be the Rotterdam of Africa, where when it comes to the issue of the distribution of fuel, people can use Ghana’s ports to transport their products across.
So, agriculture and services, If you get these right, everything will fall in place.
GB: Are you able to tell how much the AfDB would be investing in Africa’s energy sector in the next two to five years, given the sector's importance to the continent's progress?
AA: Solving the energy challenge in Africa will require US$55 billion every year. That is much more than what the AfDB can do and that's why we are forming this transformative partnership on energy.
The private and public sectors would have to play significant roles. Of course, the AfDB would also have to play a big role. But I am not bothered at all at the cost it takes to solve that problem because I know the money is there.
Two things would have to work; the first is, the countries would have to increase investments. If you take the amount of revenues that Africa generates every year, it’s about US$540 billion every year. If Africa devotes 10 per cent of that to energy, the problem would be solved completely.
Secondly, most people who want to invest in the energy sector are private people and they are asking the question: how do I get a bankable project?
That's why the AfDB created the Africa50 Project, a new platform to deliver on infrastructure for Africa. That one has a Project Development Company (PDC) and Project Finance Company (PFC).
The PFC is going to help countries and the private sector to develop bankable projects that can be finance by the private sector. So, once that is done, I think a lot of it can be fixed.
Going forward, the AfDB is going to open up its own balance sheet within the next 10 years, work with other partners and harness private sector finance into this space.
GB: While thinking of contesting the presidency of the AfDB, I am sure you were closely monitoring the operations of the bank. Based on that which structures and procedures of the bank would you look at changing immediately to help you to achieve your objectives?
AA: We will improve our systems and processes to make them faster and more efficient.
People tell us that we are slow as a bank and I can't tolerate that. I think you will see a lot of changes in terms of responsiveness and you can be confident that we are going to have an 'A plus' team to help us deliver on these things.
Pull quote
Obviously, if you look at the rate at which we lend, its about LIBOR plus basis point of 60, which is much lower than what you (Ghana) have been able to raise.
and in that the country requires two major things; diversify into agriculture via agro and allied industrial development and establish industries.
I think trade, technology, logistics and finance are areas that this economy can be very well placed in.
With that I was very delighted when the president told me that he wanted to set up Ghana to be the Rotterdam of Africa, where when it comes to the issue of the distribution of fuel, people can use Ghana’s ports to transport their products across.
So, agriculture and services, If you get these right, everything will fall in place.
GB: Are you able to tell how much the AfDB would be investing in Africa’s energy sector in the next two to five years, given the sector's importance to the continent's progress?
AA: Solving the energy challenge in Africa will require US$55 billion every year. That is much more than what the AfDB can do and that's why we are forming this transformative partnership on energy.
The private and public sectors would have to play significant roles. Of course, the AfDB would also have to play a big role. But I am not bothered at all at the cost it takes to solve that problem because I know the money is there.
Two things would have to work; the first is, the countries would have to increase investments. If you take the amount of revenues that Africa generates every year, it’s about US$540 billion every year. If Africa devotes 10 per cent of that to energy, the problem would be solved completely.
Secondly, most people who want to invest in the energy sector are private people and they are asking the question: how do I get a bankable project?
That's why the AfDB created the Africa50 Project, a new platform to deliver on infrastructure for Africa. That one has a Project Development Company (PDC) and Project Finance Company (PFC).
The PFC is going to help countries and the private sector to develop bankable projects that can be finance by the private sector.So, once that is done, I think a lot of it can be fixed.
Going forward, the AfDB is going to open up its own balance sheet within the next 10 years, work with other partners and harness private sector finance into this space.
GB: While thinking of contesting the presidency of the AfDB, I am sure you were closely monitoring the operations of the bank. Based on that which structures and procedures of the bank would you look at changing immediately to help you to achieve your objectives?
AA: We will improve our systems and processes to make them faster and more efficient.
People tell us that we are slow as a bank and I can't tolerate that. I think you will see a lot of changes in terms of responsiveness and you can be confident that we are going to have an 'A plus' team to help us deliver on these things.