With barely 4 months to exiting the European Union – EU, UK entities are gearing up for other markets ex EU. Theresa May, British Prime Minister is faced with a stark situation with immense opposition in parliament as she tries to sell a divorce deal that will see Britain transition out of the EU in March 2019. Various scenarios have been reviewed by Bank of England and the Financial Conduct Authority – FCA.
One group that is preparing to tap the curve of opportunity to hedge the impact of Brexit is Britain’s development finance agency CDC Group. CDC plans to invest up to $4.5 billion across Africa over the next four years to boost ties with the continent. This was confirmed by its Chief Executive Nick O’Donohoe earlier in the week.
With Britain (the world’s 5th largest economy) set to leave the world’s biggest trading bloc in March, government officials have been touring Africa, hoping to bolster ties with main economies such as Nigeria, South Africa, Zambia and Kenya.
Nick O’Donohoe said CDC, which has invested nearly $400 million in Nigeria, had committed $25 million to a local private equity firm, Synergy, to support small and medium sized companies in Africa’s most populous nation.
CDC also provided a $100 million loan to Nigerian fertilizer company Indorama. O’Donohoe said the agency would like to invest more in infrastructure, power, manufacturing and agriculture.
“We are opening a new office to help originate more transactions in Nigeria,” O’Donohoe said.
CDC aims to open a regional office for West Africa in Nigeria’s commercial hub of Lagos early next year and establish a presence in Nairobi, while also expanding in Johannesburg and with representative offices in Abidjan and Cairo.
In August, British Prime Minister Theresa May visited Nigeria where she sought to build a new trading relationship and urged the West African nation to tap London’s financial expertise for its infrastructure projects.
“Part of the reason the prime minister came here was to try to focus people’s attention on the growth opportunity and the investment and trade opportunity in Nigeria and that, you can be cynical to say, that’s partly Brexit,” O’Donohoe said.
Earlier this year, Britain added the naira as a “pre-approved” trade currency for Nigerian firms buying goods in Britain, while also exploring ways to list naira-denominated bonds on the London Stock Exchange to help fund projects.
In April, Britain hosted a meeting of Commonwealth countries, including South Africa, Kenya and Nigeria, seeking to reinvigorate the network of mostly former colonies and drum up new trade among its members.
With Brexit no deal, Britain’s economy is said to shrink as much as 8% in year one with the sterling sliding 25% in value to parity with the dollar. Interest rates could balloon to as high at 5.5% (from current 0.75%) as financial transactions delay and border clearing challenges hamper trade. On the security side Britain could lose access to EU security databases.
Some portions of this article were taken from Reuters.