AfDB Warns of Rising Trade Finance Challenges for African Economies

The African Development Bank (AfDB) has warned that Africa’s trade finance gap could widen to $86.6 billion by 2027, with rising geopolitical tensions in the Middle East increasing energy prices and tightening global credit.

The warning comes as the bank appointed the Minister of Aviation and Aerospace Development, Festus Keyamo, to drive its $7 billion Integrated Aviation Transformation Programme for Africa, while expanding its project footprint nationwide.

In its newly-released 2025 Trade Finance Report, the bank said disruptions to critical shipping routes, including the Strait of Hormuz, were creating fresh risks for African economies, which are already struggling with limited access to finance.

According to the bank, rising geopolitical instability has increased import costs, weakened African currencies and heightened lending risks across the continent.

“The conflict has driven a sharp rise in oil and fertiliser prices and elevated insurance and freight costs, which have in turn inflated shipping costs for Africa’s predominantly net oil-importing economies,” the bank stated.

The report noted that at least 29 African currencies had depreciated since the outbreak of the conflict, adding pressure on foreign exchange (FX) reserves and import financing.

The AfDB projected that under a moderate risk scenario, Africa’s trade finance gap could rise to $86.59 billion by 2027, representing about a 17.66 per cent increase from the $73.59 billion recorded in 2024.

The bank warned that weakening African currencies and rising import bills could lead to stricter lending conditions by international correspondent banks, limiting access to trade finance for businesses across the continent.

It added that inflationary pressures across Africa could worsen as sustained energy price shocks continue to affect production and import costs.

According to the report, inflation across Africa could average 10.4 per cent in 2026, nearly one percentage point above earlier forecasts released in January 2026.

The bank projected that in a more severe scenario involving prolonged disruption of the Strait of Hormuz and tighter global credit conditions, the continent’s trade finance gap could widen further to $95.59 billion by 2027.

However, under a baseline scenario without major geopolitical disruptions, AfDB estimated that the trade finance gap could gradually narrow toward $65 billion.

The bank said global financial institutions were increasingly redirecting capital toward conflict-related hedging activities, reducing risk appetite for trade finance exposure in emerging and frontier markets.

In a related development, AfDB appoints Nigeria’s Minister of Aviation and Aerospace Development, Festus Keyamo, to drive its $7 billion Integrated Aviation Transformation Programme for Africa.

The appointment was disclosed in a statement issued by his Special Adviser on Media and Communications, Tunde Moshood.

According to the statement, the appointment forms part of the bank’s broader plan to modernise Africa’s aviation sector, improve infrastructure and attract private and institutional investment across the continent.

The statement said the bank selected Keyamo based on what it described as Nigeria’s leadership and reform efforts in the aviation sector.

“Due to what it describes as Nigeria’s ‘leadership and vision’ in respect of various policy reforms to transform Nigeria’s Aviation sector, the AfDB has appointed Nigeria’s Aviation Minister, Festus Keyamo, as the African Champion to drive its program that has been developed to invest substantially in aviation in Africa.

“This is the Integrated Aviation Transformation Program for Africa (IATP) for which it has earmarked the sum of $7 billion,” the statement said.

It added that African carriers currently account for less than three per cent of global air traffic despite the continent’s population size.

The statement further disclosed that Keyamo was invited to the AfDB Annual Meeting in Brazzaville, held yesterday, where a Letter of Intent between the bank and Nigeria was expected to be formally signed.

AfDB said the programme is structured around the operationalisation of the Single African Air Transport Market, strengthening aviation safety oversight and regulatory compliance, as well as the development of aviation skills to improve efficiency and expand sector employment.

Meanwhile, the bank’s 2025 Country Portfolio Performance Review for Nigeria showed that the North-East emerged as the biggest clearly identifiable regional beneficiary of AfDB-backed projects in the country, while South-East infrastructure projects lagged in disbursement despite approvals.

According to the report, AfDB’s Nigeria portfolio rose to $6.2 billion across 53 operations covering all 36 states and the Federal Capital Territory.

The North-East-linked Inclusive Basic Service Delivery and Livelihood Empowerment Programme was identified as the largest clearly identifiable regional project in the review, with a total value of $259.5 million covering Borno, Adamawa, Bauchi, Gombe and Taraba states.

The programme delivered water, sanitation, health, education, nutrition, MSME, women agribusiness and livelihood interventions across the beneficiary states.

AfDB said 45 out of 60 health facilities were either completed or at advanced stages of implementation, while more than 18,000 pupils received school furniture, uniforms and learning kits.

The report also stated that 1,105 MSME start-ups, 1,507 women-led agribusiness groups and 3,268 vulnerable individuals received support through cash transfers or productive assets.

By contrast, clearly identifiable South-East projects had combined approvals of about $171.3 million, but only $30.93 million had been disbursed as of December 2025.

The report showed that the Ebonyi State Ring Road Project disbursed about $29.6 million out of its $54.6 million approval, while the $115 million Abia State Integrated Infrastructure Project had disbursed only about $0.13 million.

AfDB said its Nigeria portfolio recorded an overall disbursement rate of 53 per cent as of December 2025, while flagged operations declined from 42 per cent in January 2025 to 25 per cent in December 2025.

According to the bank, the improvement followed closer monitoring by AfDB, the Federal Ministry of Finance and project executing agencies, despite implementation delays affecting some projects, particularly in the South-East.

The report identified start-up delays, counterpart funding constraints, procurement issues and disbursement challenges as major bottlenecks affecting implementation across the portfolio.