Nigeria’s infrastructure company (Infra-Co), which is expected to grow to N15trn ($37bn) in assets and capital in the next few years, will ... go a long way in helping to raise capital from private investors and transforming the power sector, says Kola Adesina, group managing director at Sahara Power Group, an energy and infrastructure company.
“People get into trouble most times if they are not transparent with their regulator. We were transparent with the regulator,” Ecobank’s Ayeyemi tells The Africa Report. “The guys gave them all the information on a timely basis”.
Kenyan banks have to comply with regulations that requires them to match their foreign currency assets with their liabilities, ensuring that any mismatch does not exceed 10% of core capital.
“In investigating Ecobank’s trading practices and a specific transaction that it had concluded, it is evident that Ecobank did not have sufficiently robust risk controls to prevent breaches on its foreign exchange exposure limits, or the inaccurate reporting of its position”, said the Kenyan apex bank in a statement that suspended Ecobank Kenya from the forex market for a week starting 29 March. “Ecobank’s acknowledgement of its obligations as an authorised foreign exchange dealer and its commitment to address the underlying issues is noted”.
‘It was a pure error of somebody…’
“What is important is for you to be open, transparent with the regulator about what happened, describing the steps that you’ve taken to ensure it doesn’t happen again”, says Ayeyemi.
“Make sure that they understand that there is no malicious intent in this. It was a pure error of somebody not recording what they needed to record. Regulators understand that errors can be made. The sanction is the sanction because that’s the way the rules are written. But there is nothing lingering beyond that. And we’ve called the regulator, we have spoken to them, we are in good shape with the regulator. So we don’t expect anything more. It’s disappointing. It’s regrettable, but it can it shouldn’t be read into more than that.”
What we need to focus on as a business is to continue to encourage our customers that are exporting to export so that they can generate more foreign currency for their countries.
Since the coronavirus pandemic in 2020, many African currencies have depreciated. Kenya’s shilling is no exception, weakening in March against the dollar for the 10th month consecutive month according to Bloomberg, and Kenya’s central bank has been hawkish in regulating the forex market.
In a results presentation last week, Ecobank CFO Ayo Adepoju said the lender would see slower growth as a result of devaluation of local currencies.
“We are not predicting that our numbers will reduce. The bottom line is when you get into an inflation cycle, you need to acknowledge that the inflation in Africa will be much higher than inflation in the rest of the world. And when you factor that into what the currency pricing is going to look like, therefore the currencies will devalue relative to the rest of the world. And when you present the results in US dollar terms, therefore you will see a reduction as a result of that devaluation”, says Ayeyemi.
“What we need to focus on as a business is to continue to encourage our customers that are exporting to export so that they can generate more foreign currency for their countries.”
Africa’s raw materials as added value
He believes that the adding of value to Africa’s raw materials will solve the pressure on African currencies. “The world value of the confectionary that comes from cocoa is more than $100bn. The total value that comes to Africa, that produces more than 70% of that cocoa, is less than $10bn.”
He suggests the continent needs to lean into intra-African trade to keep more value inside Africa. “If you look at Ghana, people are adding value to cocoa, but they are buying sugar from Brazil. The more we are able to link them with companies in southern Africa that are producing sugar it means that we are beginning to add more value on the continent. Those are measures that we are taking with our customers to be able to reduce the strain of foreign currency.”
Understand Africa's tomorrow... today
We believe that Africa is poorly represented, and badly under-estimated. Beyond the vast opportunity manifest in African markets, we highlight people who make a difference; leaders turning the tide, youth driving change, and an indefatigable business community. That is what we believe will change the continent, and that is what we report on. With hard-hitting investigations, innovative analysis and deep dives into countries and sectors, The Africa Report delivers the insight you need.View subscription options