With an estimated $4 trillion domestic capital base, Africa has the resources to finance its own $280 billion annual infrastructure gap. However, nations on the continent finance their development through expensive foreign borrowing. African central banks and institutional investors hold roughly $1.2 trillion offshore—including $530 billion in central bank reserves—primarily in low-yield US Treasuries earning 3.5%. Western institutions then reinvest this same capital back into Africa via Eurobonds at exorbitant interest rates ranging from 9% to 15%. Redirecting even a fraction of these funds parked abroad to continental institutions could make a world of difference and help the continent bridge its infrastructure gap. The Afreximbank’s Central Bank Deposit Programme, which has mobilized over $44 billion at returns of 6% to 6.5%, proves such initiatives are feasible. In other developments, the African Union and leaders from Ghana, Kenya, and Zambia are advocating for regulatory reforms to ensure Africa’s money works for Africa, deepens its local markets, and cements its financial sovereignty.
The Conversation
