Africa is sitting on around $4 trillion in untapped capital resources yet the continent’s most transformative opportunities remain underfunded because of a “systematic misallocation” of funds, according to a new report from Nigeria’s United Bank for Africa.
Some 85% of the continent’s domestic financial assets are being absorbed by sovereign borrowing and flowing into so-called safe assets like short-term government securities, wrote UBA.
The resources — made up of a mix of commercial bank assets, pension and insurance funds, national reserves, and remittances — could be more efficiently deployed to invest in key areas to support small and medium enterprises and back climate finance, and importantly in funding infrastructure to enable intra-African trade, the bank argued. Lagos-based infrastructure financier Africa Finance Corporation first pointed to the $4 trillion opportunity back in June.
“The real opportunity isn’t just building roads to the sea, but railways and digital networks that connect Africans to each other,” said Harvard professor Marlous van Waijenburg, at a launch event for the report, which makes the case for accelerating the implementation of the African Continental Free Trade Area agreement.
