African Export-Import Bank has rolled out a $3 billion revolving credit line that will enable African and Caribbean buyers to source petrol, diesel, jet fuel and other products from refineries on the continent more easily.
The bank expects the facility to provide $10–14 billion of trade finance over its first three years and address Africa’s persistent reliance on imported refined petroleum products, which accounts for approximately $30 billion annually in petroleum import costs due to inadequate refining capacity.
Both oil export- and import-dependent economies have been whipsawed this year by a sharp fall in crude prices and a jump in freight costs.
Brent crude is down more than 20% since mid-January on supply dynamics and on fears that a global trade war will sap demand.
Meanwhile, insurance costs for ships using the Red Sea have climbed again after renewed Houthi attacks prompted U.S. airstrikes on Yemen in March, adding hundreds of thousands of dollars to a typical fuel cargo.
By shifting purchases to nearby refineries and locking in bank credit up-front, governments can limit the budget shock from such external swings.
The Revolving Intra-African Oil Import Financing Programme is rooted in Afreximbank’s recent push to boost regional processing capacity.
The Cairo-based lender is the largest financier of Nigeria’s 650,000-barrel-per-day Dangote refinery. It has also helped overhaul Nigeria’s Port Harcourt oil complex and is arranging funding for plants in Angola and Ivory Coast too.
These ventures could add around 1.3 million bpd of refining capacity.
Commeting Professor Benedict Oramah, President and Chairman of the Board of Directors, Afreximbank, said that the programme “would galvanise efforts towards making the Gulf of Guinea a key refining hub. Whilst the programme will have a direct impact on the volume of the refined petroleum products produced and consumed in Africa, it will also have a multiplier effect on the downstream petroleum value chain as it will catalyse critical investments in shipping and marine logistics for intra and extra African trade of crude oil and refined products.
The multiplier effect will also be seen in marine cargo insurance and other ancillary businesses within the sector. We want to see an increased proportion of the about 4 mbpd of crude oil produced in the Gulf of Guinea refined in Africa.”
Also commenting on the initiative, His Excellency Dr. Lazarus Chakwera, President of the Republic of Malawi, said: “This programme is a clear demonstration of Africa’s resolve to take charge of its own energy future. We commend Afreximbank for this timely intervention, which stands to benefit African countries like Malawi by reducing import dependency, strengthening regional supply chains, and keeping more value within the continent. Most importantly, it will deliver real impact to our citizens by ensuring more stable and affordable access to refined petroleum products, which are essential to Malawians’ daily life and economic productivity.”
Source:https://energynewsafrica.com
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