Frequently Asked Questions

(Updated 22 May, 2008)

Question: What kind of organisation is the AFC? And is Nigeria a member?

Answer: The Africa Finance Corporation is an international financial institution set up by a multilateral agreement (the AFC Establishment Treaty). As with the African Export-Import Bank (Afreximbank), the African Reinsurance Corporation (AfricaRe) and the African Development Bank (AfDB), AFC is a pan-African organisation created to help Africa urgently develop its industrial and infrastructural capacity. To this end, the Federal Government of Nigeria was pivotal in the conception and establishment of the corporation. So far, Nigeria, Guinea Bissau and Sierra Leone have executed the AFC Establishment Treaty, with other countries expected to follow suit. In furtherance of the shared mutual objectives between AFC and Nigeria, the Federal Government of Nigeria executed a Headquarters Agreement on the 28^th of May, 2007.  By that Headquarters Agreement, the Federal Government of Nigeria agreed to host AFC’s headquarters.

Question: What were the legal criteria or conditions for establishing the AFC?

Answer: The legal qualification for establishing the AFC was met by the following criteria. First, the AFC Agreement had to be signed by two member states. These were Nigeria and Guinea-Bissau. Sierra Leone later became the third member of the organization. Other criteria included the deposit of two letters of acceptance; the payment of at least one-tenth of the authorized share capital; the convening of the AFC’s first General Meeting of Shareholders; the election of its Board of Directors and the appointment of the organisation’s Chief Executive Officer (CEO) and external auditors. All of the foregoing requirements have been met.

Question: How does a country become a member of the organisation?

Answer:  A country becomes a member in two stages. The first is by becoming a signatory and the second is by making monetary investment in the corporation. Prospective member states must comply with internal processes in accordance with their own constitutional procedures. Once a country signs on as a member, it is incumbent on it to ensure that all measures are taken for effectiveness under that country’s laws or constitutional procedures. Monetary investment is customarily made through the country’s central bank, through pension funds or other eligible investment vehicles.

Question: Who is eligible for membership?

Answer: Membership of the corporation is open to independent African states represented by their respective central banks, African regional and sub-regional financial institutions, African public and private banks, financial institutions and private investors, and international private investors.

Question:  Is the legal status of AFC called into question at this time in any way by the federal investigation into the CBN’s investment in AFC?

Answer:  The Honourable Attorney-General of the Federation recently issued a statement informing the public that the Presidential Committee investigating the Central Bank of Nigeria’s investment in the Africa Finance Corporation (AFC) has not completed its assignment, and has not submitted its report to government. AFC has not received any report from the Committee or the Government of Nigeria questioning its legal status.

Question: Guinea-Bissau and Sierra Leone recently joined the Africa Finance Corporation. What is the level of interest from other countries?

Answer: Yes, Guinea-Bissau joined the AFC in January 2008 and Sierra Leone became a member in April 2008. There have been expressions of interest from other countries in West and Southern Africa, and we expect that a good many more countries will have joined the organization between now and the end of the year.

Question: So what are the next steps in terms of giving effect to the Headquarters Agreement?

Answer: Under the terms of the Headquarters Agreement, Nigeria is contractually obligated to have taken all necessary measures to make the Headquarters Agreement effective within 90 days of execution. This was to have been not later than August 2007. Unfortunately, this time has since elapsed. AFC has, however, since taken the initiative and set in motion the process to give effect to the agreed terms. The necessary request was conveyed to the Nigerian Ministry of Foreign Affairs on February 4^th, 2008. On March 6^th, the Foreign Ministry acknowledged receipt of this request and gave assurances of expedited action. We expect to see the process concluded as early as possible. 

Question: Who are the directors of AFC and how were they selected?

Answer: Currently, directors are nominees of the Central Bank of Nigeria, the leading Nigerian commercial banks and certain leading industrialists. The directors are elected by the General Meeting. The first General Meeting prescribed that shareholders who have invested between $50-100 million in AFC shall be entitled to automatic representation on the board. In addition, 20 percent of the total number of seats on the board is reserved for independent directors.

Question: So in concrete terms, would you say that AFC has taken off?

Answer: Absolutely.  We commenced operations in September 2007 and today have a plethora of ongoing efforts in Nigeria and other countries. In Nigeria, AFC is helping the Rivers State Government revitalize its electric power program. The 24-month initiative is a central part of the Rivers State Government’s objective of providing reliable power to its citizens through a sustainable public-private partnership (PPP). AFC and the state government have also committed to build an ultra modern high capacity ring road around the capital city of Port Harcourt. The 88-kilometre $700 million ring road will be the largest municipal highway project in Africa, and is expected to be a catalyst to the city’s economic development.

Another landmark project AFC is supporting is the construction of a deep-sea port in Olokola off the coast of Ondo and Ogun states of Nigeria. Areas of active project development elsewhere on the continent include an electric power generation programs in Guinea Bissau and Liberia and oil and gas prospects in Mozambique and Madagascar.

Question: Is it true that the Central Bank of Nigeria (CBN) has withdrawn the $462 million that it invested as initial capital in the AFC?

Answer: These funds have not been withdrawn by the CBN but rather deposited in AFC’s name into an escrow investment account with J.P. Morgan pending the conclusion of the ongoing investigation into the CBN’s investment in AFC.

Question: How will this affect the day-to-day operations of AFC?

Answer: The depositing of these funds in escrow is a temporary measure pending the conclusion of the ongoing investigation. This action should not have any undue adverse effect on the day-to-day operations of the corporation. Given the project development business model the AFC designed from the McKinsey & Company Consultancy engagement and approved by the Board of Directors, we have a project pipeline of over $10 billion at different stages of execution. Our capital is, therefore, currently invested in short-term securities similar to investments in the J.P. Morgan escrow account.

Question: The AFC has spoken about how it intends to change the face of Africa. How do you intend to do that?

Answer: Yes, we are indeed changing the face of Africa. This is a continent that has huge potential in terms of people and resources. Regrettably though, the number of people living in poverty is actually growing. To truly harness Africa’s potential, one of the things Africa must do is address its significant infrastructure deficit. More than half a billion people across the continent today live without modern forms of energy. Only 2% of rural population have access to modern energy. At the same time, intra-African trade is seriously hindered by high transport costs—twice that of other developing regions.

For too long now, Africa has been a recipient of substantial inflows of public funding for development, but with limited results today. Poverty remains pervasive in so many countries across the continent.  It is high time that as Africans we finally take our own destiny in our hands and start lifting up our continent. We want the Millennium Development Goals to have true meaning in Africa as we propel the continent from poverty to prosperity.

AFC’s approach is to address Africa’s development needs through strong private sector-led economic development.  AFC is an anchor investor and financier in transactions that promote inter-African trade and investment. We are also a partner for entrepreneurs and investors, as we promote industries that underpin economic activity in African countries.

Question: What is the strategic direction of the Africa Finance Corporation?

Answer: First, our mission at AFC is to address Africa’s development needs in a profitable way, as I have already noted. We intend to be the world’s leading investment bank for Africa, proactively creating, acquiring and managing infrastructure, industrial, mining and financial assets, and thereby fast-tracking Africa’s economic development through strong private sector leadership. Our strategy is to concentrate on industries with attractive returns and high development impact. Our priorities are power, transport infrastructure, heavy industry, oil and gas, mining and telecommunications. We address all aspects of the finance value chain, focusing on project finance and private equity. AFC’s investment research provides the intellectual leadership on innovative models for project and asset creation in Africa.

Question: To what extent will AFC collaborate with existing multilateral development finance institutions like the African Development Bank (AfDB) and Afreximbank on the development needs of the continent?

Answer: Africa needs all hands on deck to address its development needs—especially if this is to be done within the framework of the Millennium Development Goals (MDGs). The goals are a critical indicator for low-income countries and Africa must strive hard to meet them. We see organizations like the African Development Bank, Afreximbank, the International Finance Corporation and others as active partners in this quest. AFC is working as an assiduous partner with these organisations and African countries themselves. Of course, given that we are a private sector driven organisation, there is some aspect of competition and some competition is healthy. However, Africa’s development needs are far too important for us to let competition overshadow cooperation.

Question: To what extent will AFC cover Africa’s vast landscape and diverse peoples from its Lagos headquarters? Or are there plans towards opening regional offices across the continent? If so, how many, where and when?