(Ecofin Agency) - • Afreximbank successfully raised 2.2 billion yuan (around $303 million) with a bond issuance on the Chinese market, showcasing African institutions' growing ability to diversify funding sources.
• The ECOWAS Bank for Investment and Development (EBID) approved €230 million and $10 million to fund infrastructure projects and support the private sector in West Africa, with a focus on Nigeria, Benin, and Niger.
• Despite global challenges, the digital finance sector in Africa continues to grow, with mobile money transactions in 2024 increasing by 15%, reaching $1.1 trillion.

In these uncertain times, Africa’s financial landscape remains surprisingly dynamic. Despite global economic volatility, African financial institutions are not only surviving but finding ways to innovate and diversify. Afreximbank’s recent success in issuing a bond in China, raising 2.2 billion yuan (about $303 million) at an annual interest rate of 2.99%, is a testament to the increasing global financial reach of African banks. This bond issuance underscores the growing ability of African institutions to tap into non-Western markets for funding, breaking away from traditional Western financing channels.

The West African regional development bank, EBID, has approved €230 million and $10 million to support infrastructure projects and the private sector in West Africa, specifically in Nigeria, Benin, and Niger. This initiative shows that intraregional investments are continuing, even amid global economic tensions, further highlighting the resilience and ongoing growth within the African continent.

The digital finance sector is another area seeing remarkable growth. A recent report by GSMA revealed that mobile money transactions in Africa grew by 15% in 2024, reaching $1.105 trillion. This surge far exceeds global averages and points to the continent’s strong financial innovation, particularly in terms of financial inclusion and the expansion of digital financial services.

Other positive signs include a $7.5 million guarantee agreement between the AfDB and Bank of Africa Tanzania to boost trade financing, as well as a $28.3 million investment from Swedfund in the Financial Inclusion Vehicle (FIVE) fund, managed by AfricInvest, to improve access to financial services.

However, Africa’s financial sector must remain cautious and learn from historical economic crises. Whether originating from financial or commercial sources, global crises often hit African economies in predictable patterns. The first stage usually starts with a drop in trade. For countries like South Africa, now facing a 30% tariff, or Côte d’Ivoire at 21%, the hit to exports headed for the U.S. could be immediate. Fewer exports mean less foreign currency coming in, which puts pressure on the balance of payments.

Next comes a wave of uncertainty that tends to push foreign investors and capital flows away from markets seen as risky. This shift, known as a “flight to quality,” can dry up external financing—something many African development projects still rely on.

The third stage is often marked by falling commodity prices, a direct result of slower global economic activity. For economies that depend heavily on commodity exports, this can take a big toll on public revenues and growth.

Finally, there is usually a tightening of international credit. It becomes harder and more expensive for both governments and companies to borrow. This can trigger liquidity crises and threaten the stability of local financial systems.

In the face of these challenges, the African Continental Free Trade Area (AfCFTA) emerges as a strategic opportunity for Africa’s financial sector. Since its gradual implementation in 2021, AfCFTA has aimed to create a unified market of 1.3 billion consumers with a combined GDP of over $3.5 trillion.

For the financial sector, this presents substantial growth opportunities. The integration of regional markets will require efficient cross-border financial services, including payment systems, trade financing, and risk management. African banks and financial institutions are now poised to create new products tailored to the growing continental market.

Increased intraregional trade, currently accounting for about 15% of total African trade compared to 60% in Europe, will stimulate demand for local currency financial services, reducing reliance on foreign currencies. This shift could serve as a powerful resilience factor against global market turmoil. Beyond that, AfCFTA is pushing for regulatory harmonization across the continent. This will facilitate cross-border operations for African financial institutions and potentially foster deeper, more liquid regional capital markets. Stock exchanges like the BRVM in West Africa could play a more significant role in mobilizing local savings to fund development.

By encouraging the free movement of talent and skills, the agreement will also contribute to strengthening Africa’s financial sector. Collaboration between financial institutions from different countries will lead to innovative solutions that address the continent’s unique challenges.

However, to truly capitalize on the opportunities provided by AfCFTA and bolster resilience against external shocks, Africa’s financial sector must accelerate its transformation. Financial institutions must invest more in digital technologies to cut operational costs and expand their reach beyond urban centers. Developing pan-African payment systems, such as the Pan-African Payment and Settlement System (PAPSS) initiated by Afreximbank, is a priority. These systems will help reduce reliance on foreign currencies and streamline cross-border transactions, making trade more efficient.

Financing small and medium-sized enterprises (SMEs), which account for over 90% of African businesses but face significant barriers to credit, remains a critical challenge. New risk assessment models, leveraging digital technologies and tailored to African realities, must be developed to address the financing gap, which is estimated at over $300 billion annually.

Finally, strengthening the risk management capabilities of African financial institutions is crucial in an increasingly volatile world. Proactive strategies to anticipate external shocks and effective hedging mechanisms will help mitigate the impact of global crises on African economies.

While the new U.S. tariffs present a clear challenge for African economies, they can also be a catalyst for positive transformation in the continent’s financial sector. History shows that crises often drive change and innovation. By enhancing regional financial integration, developing localized financial solutions, and leveraging AfCFTA’s potential, Africa’s financial sector can not only weather the current storm but also lay the foundation for a more resilient and self-sufficient system.

Initiatives by organizations like Afreximbank and EBID demonstrate the growing capacity of African institutions to mobilize resources and drive development despite external disruptions. By continuing and expanding these efforts, Africa can gradually turn its historical vulnerability to external shocks into sustainable resilience.

This article was originally written in French by Idriss Linge

Then edited in English by Firmine AIZAN