AfDB, IFC agree to enter into African currency swap transactions

The International Finance Corporation (IFC) and the African Development Bank (AfDB) on June 1, 2012 signed an agreement to enter into cross-currency swap transactions to facilitate local currency lending and bond issuance in Africa.

“The agreement will enable the IFC and the AfDB to collaborate and benefit from each other’s local currency bond issues, enhancing their local currency funding capacity to support their clients’ development projects,” said a joint statement issued by the two institutions.

AfDB’s Vice President for Finance, Charles Boamah stated that “This agreement supports our African Financial Markets Initiative, which aims to further the development of domestic African capital markets, enlarge the investor base, and reduce African countries’ dependence on foreign currency denominated debt.”

Also commenting on the agreement, IFC’s Vice President and Treasurer, Jingdong Hua, said “Helping to establish and strengthen such markets allows us to work with regulators and local institutions to ensure that capital market regulations are effective and entrepreneurs are able to grow and create jobs.”

Both the IFC and the AfDB has issued local currency bonds in Africa.

The IFC has issued local currency bonds in Morocco, the Western CFA zone, and the Central CFA zone, and has obtained approvals to issue local currency bonds in Kenya and Nigeria. Under its Pan-African Domestic Medium-Term Note Programme, it is working with authorities in Botswana, Ghana, Kenya, South Africa, Uganda, and Zambia to obtain consent to issue local currency bonds.

Since 2007, the IFC has committed more than $650 million in 17 different local African currencies through a combination of swaps, bonds, and structured finance products.

The AfDB, since 2005, has issued bonds denominated in or linked to the Botswana pula, Ghanaian cedi, Kenyan shilling, Nigerian naira, Tanzanian shilling, Ugandan shilling, and Zambian kwacha.

By Ekow Quandzie