In the face of low commodity prices and concerns about China’s economic health, Kenya and Nigeria are turning to their own citizens — both home and abroad — as an alternative source of financing.
In Nigeria, President Buhari is moving forward with his predecessor’s plan to issue a bond aimed at the country’s diaspora. Late last month, President Buhari sought approval from the Nigerian legislature to increase the amount proposed to be raised from $100 million to a maximum of $300 million due to the “‘huge amount of capital’ required to bridge the infrastructure gap in the country.” With inflows in 2014 estimated to be around $21 billion, Nigeria already is Africa’s top recipient of foreign remittance. However, foreign remittances traditionally are sent to relatives in order to address their household needs or, more recently, to start new businesses or support existing ones in climates where “capital constraints are severe.” In order to persuade the diaspora to send remittances into government coffers as well, the Nigerian government must instill confidence that it is a deserved recipient and that received funds will be used responsibly.
Both countries are regarded as trendsetters on the continent. Thus, it is likely that other governments also will seek to get creative about how they finance their ongoing development.
This post can also be found on CovAfrica, the firm’s blog on legal, regulatory, political and economic developments in Africa.