The urgent need for Africa to focus on the economic returns of knowledge and the role of trade in the development process were highlighted yesterday as the book, Foundations of Structured Trade Finance, written by Dr. Benedict Oramah, was launched in Lagos, Nigeria.
Dr. Oramah, also President of the African Export-Import Bank (Afreximbank), told guests that it was the lack of appreciation of the power of knowledge that led to Africa being left behind in the race for development.
“While South East Asian economies realized back in the 1970s that it was a knowledge economy that could be trade–led and that it was a trade-led economy that could innovate and be competitive, African economies lost focus, consumed by commodity illusion and defensive import substitution strategies,” he lamented.
Consequently, Africa, which was well ahead of developing Asia, including China, in the 1960s and early 1970s in terms of per capita income, size of exports, share of global trade and economic growth rates, was swiftly overtaken by Asia in the 1980s, he pointed out.
It was to address that challenge that he had written the book, to share knowledge about the innovative approach that made it possible to lend into areas previously considered risky by splitting the risks in trade transactions and allocating them to parties best able to bear them.
“Through self-liquidating financing arrangements,” Dr. Oramah explained, structured trade finance “converted country risk, a key concern to lending into crisis hit countries, into performance risk and transferred payment risks away from those jurisdictions, enabling international banks to gradually return to such lendings with limited risk of cumulative exposures.”
On inception, Afreximbank had adopted that concept, enabling it to make important contributions to its evolution, including stretching its application from raw commodities to value-added exports and commoditised revenue flows, he said.
Given that the field had evolved from practice and no textbooks existed and that it does not feature on the curriculum of universities offering finance, economics or business, except for special courses in some universities in Europe, the book would fill that knowledge gap.
Also speaking, Dr. Okechukwu Enelamah, Minister of Industry, Trade and Investments of Nigeria, said that despite the economic setbacks that had been suffered by the continent, Africa could be the engine of global growth in the coming years.
Dr. Enelamah, who was represented by Dara Owoyemi, his Special Adviser on Investments, said that Africans needed to trade more with each other in order to spur growth, with that commitment going beyond sound bites to concrete actions.
He announced that the Nigerian government had begun a refocusing process that would enhance trade diversification and exports through a series of actions including raising knowledge about regulations and export markets, improving quality standards and introducing a single window for exporters.