As Nigeria’s Akinwunmi Adesina prepares to resume duty in a fortnight as the president of African Development Bank (AfDB), experts posit that the bank needs a thorough rejig to meet the developmental challenges facing the continent, writes SAM NWOKORO.
Nigeria’s former Minister of Agriculture, Dr. Akinwunmi Adesina, would resume work in the next two weeks as the president of African Development Bank (ADB). He would be taking over from South African Dr. Donald Kaberuka who has been in the chair for the past 10 years.
The ADB was founded by the Organisation of African Unity (OAU), now African Union (AU), as a continental finance house where member countries could access development finance. The bank was founded more than 30 years ago.
Nigeria and South Africa so far remain the largest investors into the bank. As late as 2008, former Central Bank of Nigeria (CBN) governor, Professor Chukwuma Soludo, committed Nigeria into substantial investment in the bank through the African Finance Corporation (AFC) as vehicle to position the Nigerian economy in the continent as dominant player.
The fund supervised by the CBN has been a veritable source of influence Nigeria has over the activities of the bank. In Africa as a whole, the AfDB has made minimal impact, a clear statement about the fragility of African economies. The influence of international organisations such as International Finance Corporation (IFC), the World Bank, the International Monetary Fund (IMF) and other supranational development agencies in the economy of African states has been a clear testimony that the continent has not been able to cater for its own developmental needs. Thus there is the general perception that the incoming president should seek ways of expanding the bank’s capital flows, so that African countries can access badly-needed developmental funds.
Why ADB was development-deficient
Researches have shown that the AfDB as a continental finance house has, for long, been underfunded. Most of the contributing nations were poor and most could not meet their funding requirements for many years, having been distracted by wars, political instability, refugee problems, and dictatorial governments that knew little or nothing about the dynamics of development. Others are paucity of foreign investments, which are catalysts for economic expansion and growth, and the influence of the cold war in the 1970s and 1980s between the west and former Soviet Union during which most African countries toed opposing ideological lines, a development that scared western capital into African economies.
According to an online research journal, Development Today, Africa had faced and still faces challenges such as regional conflicts due to the fact that the colonialists that ruled them took no cognisance of the cultural and tribal differences of the communities they colonised. So when the colonialists were departing, old hatred resurfaced and the ensuing communal strife led to wars and faulty political structures, with attendant political instability which retarded governance and management of resources.
According to the research journal, desertification, wars, weak institutions and corruption in African countries had hindered African countries from building a formidable financial institution capable of driving development in the region, hence poor capitalisation of AfDB.
Tasks before Adeshina
AfDB reportedly has a low capital base that is no longer capable of meeting the funding requirements of development in Africa, according to experts. The bank is poorly capitalised as at today. With a meagre $100 billion capitalisation, the bank is only able to lend an average of $80 billion yearly, having a balance sheet of roughly N20 billion. One way of filling the bank’s vault, according to Brookings Institute, a global finance advisory firm, is to nudge states to increase their stakes in the bank.
Another challenge facing the bank is rampant default by borrowers in repaying loans. Most African countries are highly indebted to the bank, and repayment is slowed by sudden changes in government, most times violently through coup d’etat as recently happened in Senegal.
“The effect of sudden change of leadership in Africa is that international obligations are brushed aside by the succeeding government, especially by military dictators who are not known to honour obligations entered into by their predecessors,” noted Development Today.
The research paper also disclosed that lack of effective monitoring of how loans granted by the bank are utilised for compliance has not only suffered development in the continent, but has also resulted in misuse of funds by borrowing governments, with the result that the bank’s loans are seen more as welfare packages than for development purposes. It was the view of the research paper that the bank should devise effective method of ensuring that grants to undemocratic governments be stopped.
MDG
Another area where the incoming president of AfDB would have to focus is in the area of helping rural women and youth access to development funds through the empowerment of small businesses. A pilot project in this regard is the well-known, globally-rated poverty eradication model developed by Boma LEAP Africa project. The project has been endorsed by the United Nations Millennium Development Goal (MDG) committee as an effective rural empowerment model aimed at ending extreme poverty in most parts of Africa.
Popularised by the Boma Project, as it is labelled in Africa, the model aims at isolated rural dwellers in African countries and empower them, especially women and the girl child, with soft loans. The project reportedly has established 2,651 enterprises as at May 2015 since it came into being in 2009 and has reduced extreme poverty in Kenya, where the poverty eradication model was first applied on pilot basis.
Dr. Adesina also did allude to this fact during his interview in Washington for the AfDB job.
“AfDB needs to focus on promoting investments by business,” he said.
Thus experts believe that one of the approaches he would need in making AfDB deepen development is to incentivise the small businesses. It is being suggested he does that by cutting off state bureaucracies in advancing loans and grants, in collaboration with AfDB’s development partners to small-scale business operators and promoters.
Promoting agriculture
Africa is plagued by hunger. Available information shows that the food shortage in the continent may up in the coming years as prices of the continent’s exportable commodities suffer poor prices.
According to Bloomberg, “The next president of AfDB would be taking over an institution entering a much tougher economic environment than the one outgoing Donald Kaberuka inherited when he won the job a decade ago. His successor (Adesina), elected on May 28, faces a slowdown in Africa’s biggest economy (Nigeria) after a fall in oil prices and rising political risks.
“While Africa has grown faster than other regions in the world, IMF lowered its economic growth forecast by 1.25 per cent point to 4.5 per cent. Prices of oil in Nigeria and Angola, coupled with declining copper price in Zambia, will affect their earnings and constitute more strains on the bank’s lean reserves.”
However, the bank estimates a 4.5 per cent expansion in Africa in 2015 and five per cent in 2016. Thus it is the view of most of the contenders who vied alongside Adesina for the AfDB top job in May that “the bank must endeavour to increase efforts to keep wealth on the continent and share it more equally to citizens of member countries, if it wants to stay relevant and meet the aim of reducing poverty”.
How these lofty objectives can quickly be accomplished by Adesina’s tenure is sure the kernel of the task, considering the litany of distracting domestic conditions of most African member states, especially in the political sphere. In the past five years, there has been political unrest in more than three-quarters of AfDB’s 54-member countries. The problem of rising fundamentalist campaigns, especially in the Maghreb regions and lately most parts in West Africa continue to put strain on their fiscal calculations of most African countries. Most times, some dip fingers into borrowed AfDB facilities to prosecute ethnic genocide.
This concerns have led observers of Africa’s development trajectories to suggest that the bank should adopt a new strategy of dealing more with reputable private sector organisations and development promoters than with statutory authorities, except where the bank has sufficient leverage in enforcing its codes on such authorities. Counties or local government areas and state or regional district authorities seem more suited to use AfDB facilities prudently, it has been argued, than by larger sovereign bureaucracies.
Adesina’s pedigree as an incentive
The former Nigeria’s agriculture minister comes to the job with both local and global endorsement on account of the strides he made in repositioning Nigeria’s agriculture sector and has attracted serious entrepreneurs into the sector. The sector has helped Nigeria save a lot of foreign exchange, triggering value chain development along with well-structured state incentives. It is expected that Adesina will bring the same zeal in attracting investment in the AfDB’s portfolio.
An octopus with one leg up
The AfDB, to most followers of development trends in Africa, needs radical operational transformation, if it must remain relevant as a continent’s development institution, posit many western pundits. To them, the bank has failed for a long time to reform in line with global development methods. It still looks towards members’ contribution to build its vault, while investments in the private sector have been minuscule, thereby not helping the many start-up enterprises and even newly-formed transnationals in Africa from benefitting from its loans and grants; rather than putting development funds into the hands of risky, corrupt and rascally heads of African governments. To many, considering the level of foreign capital from western loans and aids in Africa’s economy presently, there is nothing much to cheer about the AfDB.
The western world gets wearied day after day by development aids being poured into Africa, which has hardly translated into improved standard of living for the citizens. Little problems such as refuse disposal, feeding refugees and routing rag-tag insurgents still have to be done for Africa by countries of other continents.
AfDB made up of 54 countries still has some 26 non-African nations, including China, Japan, and the United Kingdom. China said recently in Ethiopia through President Li Keqiang that it would increase credit lines to Africa by $10 billion on top of the $20 billion already offered. China gives loans to African countries through its $5 billion China-Africa Development Fund. This unwholesome dependence by African nations on foreign assistance in the face of AfDB is something worth worrying about.