- Afreximbank has launched a $10 billion programme to support African and Caribbean economies hit by Middle East disruption.
- The Strait of Hormuz closure has driven up energy and fertiliser costs, weakening currencies and raising living costs.
- Despite risks, some countries may benefit from higher commodity prices and shifting trade routes.
On Tuesday, 7 April, the African Export-Import Bank (Afreximbank) announced a $10 billion Gulf Crisis Response Programme (GCRP), aiming to protect African and Caribbean economies from the ongoing disruption stemming from the conflict in the Middle East.
The pan-African bank’s programme intends to support vulnerable states by:
- Helping maintain access to essential imports such as fuel, liquified natural gas (LNG), food, fertiliser, and pharmaceuticals, through the provision of short-term foreign exchange (FX) and liquidity.
- Seeking to enable African energy and mineral exporters to benefit from high global prices and shifting trade patterns by expanding production capacity in key commodities.
- Offering immediate relief to African and Caribbean countries whose tourism sectors have been negatively affected.
- Aiming to fast-track the completion of vital energy, port, and logistics infrastructure projects.
“The programme will support African countries in adjusting smoothly to the crisis while strengthening their resilience to future shocks through interventions that transform the structure of their economies,” said Dr. George Elombi, President and Chairman of the Board of Directors at Afreximbank.
The conflict, which escalated at the end of February, led to the effective closure of the Strait of Hormuz. This waterway had previously facilitated the transit of 25–30% of the global oil supply and 20% of the global LNG supply, positioning the conflict as a major driver of a worldwide energy crisis.
The blockade has also strained 30% of the global urea supply (a high-nitrogen fertiliser) and 44% of sulphur supply, both critical for plant growth.
The impact is particularly acute for regions reliant on the Gulf for energy, agriculture, and food security. The Middle East makes up 15.8% of Africa’s imports and 10.9% of its exports. If the conflict exceeds six months, Africa’s GDP could drop by 0.2% and spark a cost-of-living crisis across the continent, driven by higher fuel and food prices.
For many African countries, the disruption of fertiliser flows might be felt even more starkly than that of oil, as the threats to urea production could limit access to fertilisers during the critical planting season between March and May. This would in turn raise food prices, threatening the livelihoods of low-income households at the margins of Africa’s economy.
29 African currencies have already weakened, depleting FX reserves and increasing the costs of imports. The pressures are likely to be particularly poignant for countries that have high debt service – where a large proportion of revenue is spent on interest payments – and large fuel and food import bills, as well as weak reserves. Countries facing high risk include Senegal, Sudan, Cabo Verde, South Sudan, and the Gambia.
The economy of the Caribbean is also vulnerable to ripple effects from Hormuz. Heavily reliant on tourism, the region is having to grapple with spikes in plane ticket prices due to fuel shortages (which account for around 30% of a plane’s operating expenses).
However, the crisis may open opportunities for certain countries. High oil prices and increased exports from the Dangote Refinery could work in Nigeria’s favour, while Mozambique may benefit from renewed progress in liquefied natural gas (LNG) projects and higher traffic through the Port of Maputo.
Meanwhile, South Africa’s Durban port, Namibia’s Walvis Bay, and Mauritius are seeing increased activity as shipping routes; Kenya is positioning itself as a logistics hub; and Ethiopia is leveraging its location as an emergency air corridor.
