By Antonio Guerrero
Nigerian central bank’s energy fund has caused controversy
South Africa’s $2 billion dollar-denominated sovereign bond issue in March marked the country’s largest-ever foreign-currency-denominated security. The 10-year paper carries a 5.5% coupon, which is the lowest rate paid by South Africa for a dollar-denominated deal, and was priced to yield 1.97 percentage points over 10-year US treasuries. Proceeds will be used to finance the nation’s budget gap, which the government hopes to lower to 6.2% of GDP in the fiscal year through March 2011. The South African government plans to issue an additional $5 billion worth of debt through fiscal year 2013.
The Central Bank of Nigeria’s decision to set aside $3.3 billion to finance much-needed energy projects has sparked criticism among some finance experts, who say the CBN may have overstepped its bounds. Critics contend the CBN should focus on monetary policy, interest rates and capital flows, leaving responsibility for infrastructure development to the finance ministry and the ministry of power.
During his third trip to Africa in 12 months, IMF managing director Dominique Strauss-Kahn said improved economic policies are helping African nations emerge from the global economic downturn. The IMF predicts the region will post average GDP growth of 4.5% in 2010 and 5.5% in 2011. Average GDP growth in sub-Saharan Africa fell from 5.6% in 2008 to 2% in 2009 amid the global crisis. Strauss-Kahn expects much of the recovery to be supported by the prudent pre-crisis policies that helped African nations slash debt loads and boost international reserves. He warns, though, that Africa remains vulnerable to natural disasters, commodity price volatility and political instability.