What does Nigeria’s deal with Afreximbank to help it raise an emergency dollar loan at nearly 12% have to do with a Nigerian billionaire losing the top spot as Africa’s richest man? Quite a bit, actually.
The unwillingness of African governments to considerably tighten public financial management during hard times unless forced to do so by an external party like the IMF has led to cycles of macroeconomic turbulence in recent years that have wiped away a lot of private wealth. Such conduct is the real source of the much lamented “African risk premium,” not groundless prejudice.
Not surprisingly, the new “richest man in Africa”, a South African, makes and keeps a lot of his money in Europe, whereas the Nigerian who previously held the spot makes and keeps most of his money in Africa.
Second, Nigeria is resorting to the “natural resource-backed loan” format in a desperate struggle to defend its USD reserve position. Oil is its only weapon in this fight. It will keep using it. But that also endangers efforts to refine more oil domestically.
It almost guarantees that the refinery set up by the former richest man in Africa cannot operate viably for many months henceforth, putting his fortune at further risk.
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