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Russia strikes Ukraine in war of neighbours. Why Africa should be concerned

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Russia’s invasion of Ukraine on February 24 is casting a long shadow across Africa – a devastating effect on some African states, threatening their economies and could also benefit the continent in some ways.


As devastating as it is, some African countries may benefit from a shift in global markets away from Russia due to the crisis. The short-term potential impacts on economic livelihoods are worrying while the implications for pan-African solidarity and adherence to multilateralism are increasingly uncertain.


There are important ties between Ukraine and Africa, including more than 8,000 Moroccans and 4,000 Nigerians studying in Ukraine and over $4 billion in exports from Ukraine to Africa.


Though, African leaders have come under diplomatic pressure to take sides in the escalating feud between Russia and Western powers, African Union (AU) has called on Russia to respect international law and Ukraine’s sovereignty.


In a statement on Feb. 24, AU chair Macky Sall and AU Commission chair Moussa Faki called on Russia and Ukraine to establish a ceasefire and open political negotiations “to preserve the world from the consequences of planetary conflict.”
Kenya, Gabon, and Ghana spoke out against the escalating conflict at an emergency meeting for the United Nations Security Council on Feb. 21, but most African countries have remained quiet.

South Africa, on Feb. 23 asked Russia to withdraw its troops from Ukraine and called for a peaceful resolution of the conflict.


How will the ongoing conflict affect Africans?

Russia is one of the world’s biggest fossil fuel producers. The sanctions on Russia, especially by the United States of America, would linger inflation, high prices of gas in the countries which is a giant headache for American President, Joe Biden.


With this, few countries are sensing long-term growth opportunities from the crisis specifically, Africa’s natural gas could reduce Europe’s dependence on Russian energy.


The budgets of oil-producing countries like Nigeria and Angola might get a boost from the rising prices, but the cost of transport is likely to rise for people across the continent. This will have a knock-on effect on the prices of nearly all other products.


“It becomes a double whammy of potentially higher food prices globally and higher energy prices pushing up inflation. And when central banks respond by hiking interest rates, it becomes a triple whammy,” said Charlie Robertson, global chief economist at Renaissance Capital.


But the editor of the UK-based Africa Confidential publication, Patrick Smith, said the war offered massive opportunities for oil- and gas-producing countries.


“Europe has to rapidly find alternatives to Russian gas, and the most reliable alternatives are in Africa. It’s a great opportunity for African states to move in, and get new deals done quickly,” he added.


Besides natural gas, further sanctions on Russia might benefit other natural resource exporters in the region. For instance, South Africa is, after Russia, the world’s second-biggest producer of palladium—a critical input into automobiles and electronics—and therefore could experience growing demand as a result of international sanctions placed on Russia. Similarly, as a major exporter of gold, the South African rand has been strengthening as a result of rising global prices for precious metals.


Several other countries could similarly benefit from Europe’s energy diversification, including Senegal, where 40 trillion cubic feet of natural gas were discovered between 2014 and 2017 and where production is expected to start later this year. Nigeria, already a supplier of liquified natural gas (LNG) to several European countries, is also embarking with Niger and Algeria on the Trans-Saharan Gas Pipeline to increase exports of natural gas to European markets. On February 16, the three countries signed an agreement to develop the pipeline, estimated to cost $13 billion. Europe is likely to be a key financer, bolstered by the EU’s controversial decision in early February to label investments in natural gas as “green” energy.

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Private sector concerned as Nigeria’s central bank raises interest rate to 26.25% 

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The decision of Nigeria’s central bank’s Monetary Policy Committee to raise the country’s benchmark interest rate has alarmed members of the organized private sector and economists alike, some of whom believe it will severely impair the ability of business operators to repay their debts.

The decision of the committee was declared by Olayemi Cardoso, the governor of the Central Bank of Nigeria and chairman of the MPC, after the latter’s 295th meeting on Tuesday.

The interest rate was increased by 150 basis points by the MPC, from 24.74% to 26.25%. The benchmark interest rate increased for the third time this year on Tuesday with the MPR boost.

The policymakers raised the MPR by 750 basis points since the MPC reconvened in February. In February, the MPR jumped from 18.55% to 22.75%, a 400 basis point rise. In March, it was raised by 200 basis points to 24.75%.

Cardoso said, “The key focus of the MPC at this meeting remained to achieve price stability by effectively using tools available to the monetary authority to rein in inflation. Members observed that while year-on-year headline inflation in April 2024 rose moderately, the month-on-month measures of headline, food and core all declined significantly. This follows a decline (month-on-month) of headline and food measures in March 2024, suggesting that the recent tight monetary policy stance of the Bank is beginning to yield the desired outcomes.”

Cardoso added, “For the first time since October, we have seen a relatively significant moderation in the rate of increase and that is working. I believe very strongly that the tool that the central bank is using is working. I have said it before, there is no magic wand, these are things that need to take their own time. I’m confident and the figures show that we are beginning to get some relief and I believe in a couple of more months, we will see some positive reports on the effects of what the CBN is doing.”

Cardoso defended the decision to raise the MPR once more during a press conference on Tuesday following the MPC meeting. In the face of an uncertain economic environment, the MPC has remained hawkish in its approach to combating inflation.

Nigeria’s inflation rate increased to 33.69% in April. As compared to the headline inflation rate for March 2024, the National Bureau of Statistics reports that the headline inflation rate for April 2024 increased by 0.49 percentage points.

According to the NBS, the headline inflation rate increased by 11.47 percentage points year over year from the 22.22% rate reported in April 2023. In April 2024, food inflation was 40.53%. Cardoso stated that the MPC has connected the ongoing naira volatility to the principles of the free market.

“Members further observed the recent volatility in the foreign exchange market attributing this to seasonal demand, a reflection of the interplay between demand and supply of a freely functioning market system. The committee also noticed the marginal increase in the foreign reserve between March and April 2024,” he said.

Segun Kuti-George, National Vice Chairman of the Nigerian Association of Small-Scale Industrialists, denounced the Interest Rate Increase by MPC. At a time when many firms were depending on loans to operate, Kuti-George argued it was callous to keep rising interest rates.

He said, “That is the only thing they know. The only thing they know is to increase the interest rate. As long as the industrial sector cannot access cheap funds, we are joking. We cannot be talking about economic development.”

In addition, Gabriel Idahosa, the president of the Lagos Chamber of Commerce and Industry, who disagreed with the rate hike, charged that the CBN was employing the incorrect measure to combat inflation.

Idahosa said, “The CBN is like a farmer that does not have any other tool. So, they are stuck with one tool. We just came out of a consultation session and this was the issue. The CBN is driving a metric that is not related to the problem.

“The problem is the cost of production. It has nothing to do with interest rates. It is not advisable to keep raising the interest rates, but they have run out of ideas and they don’t want to be seen to do nothing.”

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Under govt pressure, Zimbabwean lithium miners present their refinery plans

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A Zimbabwean government official announced on Monday that four lithium mining businesses had submitted plans to produce battery-grade lithium in the country to strengthen its economy.

Zimbabwe, the continent’s leading supplier of lithium, which is used in batteries for electric cars and to store renewable energy, is encouraging miners to refine the mineral domestically. At the moment, Chinese lithium miners, who control the majority of the industry in Zimbabwe, only generate concentrates, which they export to China for additional processing.

Zimbabwe’s finance minister, Mthuli Ncube, stated in November of last year that miners had until March 2024 to submit their proposals for domestic refining.

Deputy Minister of Mines Polite Kambamura told Reuters that the government has decided to extend the deadline by two months at the request of certain miners.

“They are coming forward with plans but these are long-term plans which we are receiving. We have four large-scale producers who have come forward,” Kambamura said.

He noted that the government has not yet given the plans any thought, but he declined to identify the companies that had submitted blueprints.

Over $1 billion in investments have been made by Chinese miners, such as Zhejiang Huayou Cobalt, Sinomine Resource Group, Chengxin Lithium Group, Yahua Group, Canmax Technologies, and the Tsingshan Group, in response to Zimbabwe’s some of the largest hard-rock lithium reserves in the world.

According to Huayou, it will investigate producing battery-grade lithium in Zimbabwe “only when the economic and construction conditions are right”.

According to the business, Zimbabwe lacks the natural gas, sulfuric acid, and dependable renewable energy sources required to generate lithium suitable for batteries. Nonetheless, Zimbabwe has pushed for domestic refining to profit from the anticipated rise in lithium demand as the globe moves toward greener energy sources.

“We are not going to end on concentrates, we want batteries to be manufactured here,” Kambamura said.

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