Africa Economic Outlook - Ayo Teriba


Thursday, May 30, 2019   /  11:48PM  /  By Ayo Teriba    / Header Image Credit: YouTube


Being a presentation by Dr. Ayo Teriba, CEO Economic Associates at the 2019 Royal Institution of Chartered Surveyors (RICS) Summit Africa held at the Maslow Hotel in Sandton Central today. Theme of the conference was “Investing with Impact - Collaboration and Innovation”.


A Basic Question: Investment Opportunities: Where in Africa?


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Stylized Facts Liquidity, Growth and Stability in Africa and Elsewhere


(1) In the last half decade, Africa has struggled with growth because of domestic illiquidity, and struggled with exchange rate stability because of external illiquidity.


Africa must ensure adequate internal and external liquidity to restore growth and stability, and the sequencing is very important:

o   External liquidity is required for Stability;

o   Stability is required for Domestic Liquidity,

o   Domestic Liquidity is required for Growth.

Africa must reorder economic policy priorities to EL-ER-DL-GR


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Clue: Unlock Liquidity to Restore Growth and Stability



(2) Over the years, Africa’s peers have learnt to grow the economy, deepen domestic liquidity, stabilize exchange rate, and deepen external liquidity, with external liquidity as the silver bullet, or the magic button


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Clue: Africa must learn from others



Perspectives Evolution of Capital Flows to Africa and Elsewhere


The Global Liquidity Race

Financial globalization has changed the trends of foreign resource inflows into developing countries since the mid-1990s.

Up to the early 1990s, Official Development Assistance (ODA) or Foreign Aid was by far the largest inflow, being twice as large as any other inflow. Until then, developing countries either relied on export revenue or foreign aid. From the mid-1990s, Foreign Direct Investment (FDI), Remittances and Foreign Portfolio Investment (FPI) caught up with and overtook ODA one after the other, as the countries embraced Financial Globalization.

FDI overtook overtook ODA by 1994 and remained the largest type of inflow until 2016

Remittances overtook ODA in 1996 and remained the second largest and the most stable type of inflow into developing countries until 2016 when it caught up with FDI and is now projected to become the largest inflow into developing countries from 2017 onwards.

FPI has has proved the most volatile of all inflows often surging past ODA at different points since 1996 but perennially falling below it before surging past it again.


Sadly, Nigeria and other leading African economies are now in the FDI and Remittances relegation zones’ as we had much bigger shares of both FDI and Remittances in the past than we do now.


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Clue: Strategize to Grow FDI and Remittances


Develop a National Plan to Join the Global Liquidity Race and Regain/Grow FDI and Remittances Market Shares with KPIs for Central Banks and Finance Ministries, the African Commission


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Leading emerging markets have recognized the role of the Diaspora as catalysts of financial globalization, with governments issuing diaspora bonds to attract record levels of private to government remittances from non-resident citizens Nigeria has been left out of this wave as remittances have remained a private to private affair China and India each attracted only US 7 billion more than Nigeria in 2006 but each now attracts US 50 billion more than Nigeria.


The Nigerian Government seemingly heeded calls to join this race by issuing its first ever diaspora bonds in early 2018 But it issued a paltry US 300 million, in a country that has recorded US 20 billion private to private remittances annually for the past decade


Nigeria must join the race for massive private to government remittances from her non-resident citizens and narrow the gaps between her and China and India.


Move up the Remittances League Table!!!

Securitize! Issue Asset Based or Asset Backed Diaspora Bonds Asset-backed securities or asset-backed sukuks are equity like, in that they can be held throughout the expected useful lives of the assets, while asset-based securities or asset-based sukuks are debt like, in that they have maturity dates that are shorter than the expected useful lives of the assets.


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Many Emerging Market Economies (EMEs) recognize the benefits of financial globalization and have implemented reforms to attract record inflows of Greenfield and Brownfield Foreign Direct Investment (FDI) typically by liberalizing infrastructure, and privatizing a growing share of government ownership in infrastructure assets With its Liberalization, Privatization, and Globalization (LPG)  policies since 1992 India exemplates this, but Saudi Arabia, with its National Transformation Plan (NIP) announced in 2016 and the 16 sector privatization programme announced in 2017 is fast becoming another exemplar.


Africa has been left out of this race as the Governments maintain 100 percent ownership of key infrastructure, including rail transport, pipelines, power transmission, stadiums, government owned universities and tertiary hospitals across the continent For example, in the 1990 s, Nigeria and South Africa each had larger stocks of FDI than India, Saudi Arabia or the United Arab Emirates, but they have since overtaken Nigeria and South Africa, with India now having more than triple/double, and Saudi Arabia having more than double, Nigeria/South Africa’s FDI stocks Leading African markets must join the liquidity race and regain their place among peers.


Move back to the top of the FDI League table!!!


·         Privatize

Convert Corporate Assets to Financial Assets by partially privatizing majority owned or wholly owned Government Enterprises to Unlock Brownfield FDI Attracting Brownfield FDI is about proactively offering to sell part of state owned assets corporate assets to foreign investors, like Saudi Arabia is currently doing.

·         Liberalize

Open new spaces for foreign investors to Unlock Greenfield FDI, like India is currently doing.



Fact Box: Saudi Arabia’s Privatization Plans

DUBAI (Reuters), May 16, 2017


Saudi Arabia has said it aims to raise around $200billion in the next several years through privatization programs in 16 sectors ranging from oil to healthcare, education, airports and grain milling. Following is a list of major privatization plans currently underway.

i.       Saudi Aramco. The government has said it plans to sell close to 5 percent of the national oil giant next year through an initial public offer, with the shares to be listed in Riyadh and at least one foreign exchange. Officials have said the sale will value Aramco at $2 trillion or more, though some private analysts have suggested a lower range, perhaps $1-1.5 trillion.

 ii.     Saudi Postal Corp. In February, Riyadh invited banks to pitch for an advisory role in the sale of the government-owned postal service, sources said.

iii.  Saudi Grains Organization. State-owned Saudi Grains Organisation, which handles the kingdom's grains purchases, is preparing to sell off its milling operations by placing them in four specially formed corporate entities while retaining other functions. A partnership of U.S. agribusiness giant Archer Daniels Midland Co and Saudi foods group Almarai 2280.SE is among potential bidders, sources said in March.

 iv.    Soccer Clubs. Saudi Arabian investment bank Jadwa Investment was appointed to advise on the privatization of as many as five soccer clubs in the Saudi Professional League, sources told Reuters in February.

v.    Saudi Arabian Airlines. State-owned Saudi Arabian Airlines has started the sale of its medical services business in Jeddah, valued at around $500 million, sources said this month.

vi.  Healthcare. Among the first assets to be privatized will be one of Saudi Arabia's top hospitals, King Faisal Specialist Hospitaland Research Centre in Riyadh, an official said. The process is in a "very advanced stage", Vice Minister for Economy and Planning Mohammed al-Tuwaijritold Reuters last month. Also, the Ministry of Health has received at least six bids to act as financial adviser for the privatization of 55 primary healthcare centersin Riyadh, sources said.

vii. Education. Saudi Arabia hired HSBC as financial adviser to privatize construction and management of school buildings, the chief executive of Tatweer Buildings Co, a state firm affiliated with the Ministry of Education, said in January.

viii. Saudi Electricity Co. Riyadh plans to split state-controlled utility Saudi Electricity Co 5110.SEinto separate companies that would be offered either to local citizens through IPOs or to local or international corporate partners. Riyadh-based ACWA Power chief executive Paddy Padmanathan told Reuters in March he expects the first of four power generation companies owned by Saudi Electricity will be offered by year-end.

ix.   Saline Water Conversion Corp. Officials last year outlined plans to privatize Saline Water Conversion Corp, which desalinates water and produces electricity. It would be transformed into a joint-stock holding company served by local production units; investment partners for the units would then be sought, followed by an IPO for the holding company.

x.   Sadara Chemical. Saudi Aramco plans to cut its stake in SadaraChemical Co IPO-SACH.SE, a joint venture with Dow Chemical, to 35 percent from 65 percent via an IPO, Sadara Chief executive Ziad al-Labbansaid this month, without giving a timeline.


Compiled by Gulf team; Editing by Andrew Torchiaand Anna Willard



India liberalization Drive


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Insights: Why Liquidity Thresholds Matter for Growth and Stability


1.       Liquidity Thresholds Matter!!!!!!!!

o    For Government Revenue

o    For Access to Finance

o    For Access to Foreign Exchange


2.      Very clearly, ‘Money answereth all things’

o   Get the Money First. Hatch eggs first, then count the chickens

o   Means vs. Ends: Secure the means, the ends become attainable


3.      Bullionism is back

o    Bullionism, the idea that the only true measure of a country’s wealth and success was the amount of gold that it had. If onecountry had more gold than another, it was necessarily better off.’ –The Economist, Aug 23 2013.

o    If one country has more external liquidity than another, it will have a more stable exchange rate, more domestic liquidity, moreeconomic growth, more employment and less poverty, than the other.


4.      Stimulating Enough Foreign Capital Inflows is Key for:

o    Stability

o    Doing Business-Completing Passes vs. Goal Attempts

o    Infrastructure

o    Growth

o    Diversification

o    Employment/Jobs

o    Wellbeing



Conclusion: Why Africa Urgently Needs to Join the Global Liquidity Race


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Commodity Glut and Shortfalls

A global commodity supply glut since mid 2014 has depressed global commodity prices and eroded Africa’s export earnings The slump in export revenues inflicted a shortage of foreign exchange liquidity that meant businesses could not get enough foreign exchange to fund vital imports This triggered a recession and precipitated a devaluation which in turn created inflationary pressures Dim commodity price outlook implies continued pressures on foreign exchange liquidity with concomitant growth and stability challenges for Africa.


Liquidity Glut and Liquidity Race

The global liquidity glut resulting from large liquidity injections (“Quantitative Easing”) by

leading central banks however still provides opportunities for African economies to attract foreign investment inflows to compensate for lost export revenues To mitigate low revenue and inadequate foreign exchange we must immediately find ways of attracting large enough non export foreign exchange inflows like foreign direct investment and medium term diaspora funds, to make up for lower export incomes With reduced resources from foreign trade we must seek large enough foreign investment inflows to restore and sustain growth and stability ‘……money answereth all things’ Ecclesiastes 10:19b


Putting It All in Perspective

·         Facts: Windfalls gone, shortfalls here : new liquidity sources needed.

·         Hindsight: Delays mean fragility - recession, devaluation, inflation.

·         Insight: Unlocking liquidity will restore growth and stability.

·         Foresight: How can we ensure adequate liquidity now and in the future.

·         Action: Get Liquidity to End Fragility and Build Resilience




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About The Author

Ayo Teriba is the Chief Executive Officer of Economic Associates. He can be reached at His Author page:


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