Trade Finance in the Maghreb: an interview with Nabil Frik

Trade Finance in the Maghreb: an interview with Nabil Frik

Seizing Opportunities for Trade Finance in the Maghreb: an interview with Nabil Frik of British Arab Commercial Bank

The countries of the Maghreb have historically been closely linked to France while British connections, both for trade and cultural exchanges, have focussed more on the GCC, Egypt and Jordan. But this is changing, as other European countries, as well some from Asia, recognise the business opportunities that exist in North Africa, and as North Africa itself becomes an increasingly important gateway to countries south of the Sahara.

The Arab Bankers Association spoke to Nabil Frik, Managing Director for Francophone Africa and the Maghreb at British Arab Commercial Bank, (BACB), a London-based bank that has long experience in North African trade and business.

 

Arab Bankers Association: First of all, could you clarify what exactly is meant by ‘The Maghreb’?

Nabil Frik: The word ‘Maghreb’ refers to the countries of the Arab west and in particular to Morocco, Algeria and Tunisia. In these three counties, French is the language of business, although English is increasingly widely spoken. In 1989, the “Arab Maghreb Union” was created as a political and economic body, and it includes Mauritania and Libya, as well as the three French-speaking countries.

How significant is the Maghreb as a economy and as a trading block?

Algeria is the biggest gas producer in Africa (and the ninth biggest worldwide) while Libya has the largest oil reserves in Africa. Europe takes a significant amount of its energy needs from these countries: for example, Italy imports 40% of its gas from Algeria.

The combined population of the five Maghreb countries is 100 million and total annual trade volumes (imports plus exports) are around $300 billion. By way of comparison: Egypt’s annual trade volumes are about $110 billion and Saudi Arabia’s about $450 billion.

The Maghreb sits between Europe and sub-Saharan Africa, and Morocco and Algeria in particular are trying to exploit this position by building new road and infrastructure projects in their southern regions and by building new ‘free zones’ that are explicitly aimed at attracting and facilitating sub-Saharan trade. For example, Morocco has the Tanger-Med zone, about 40 kilometres south of Tangier, and Algeria is building a new port in Jijel, on its north east coast, with the help of Chinese investment.

Which of the Maghreb countries is the biggest?

Algeria has a gross domestic product of about $220 billion and is the biggest economy in the Maghreb. Morocco is the second biggest with about $110 billion. Both Tunisia and Libya have smaller economies – about $45 billion – although Libya’s will grow significantly as soon the country’s political situation is stabilisedand normal oil and gas production is able to resume. As for population, Algeria is again the biggest, with about 40 million people, but Morocco is not far behind with about 33 million. Tunisia has about 12 million and Libya about six million.

What are the opportunities in Algeria?

At the moment, the only foreign business banks can do its plain vanilla trade finance such as confirming letters of credit issued by Algerian banks or issuing guarantees or performance bonds in favour of Algerian importers. This is because local companies, both public and private, are not permitted to raise term funding abroad. Furthermore, the Algerian government has forbidden imports of ‘non strategic’ items.

Nonetheless, our bank is conducting quite a bit of business with Algeria. We’ve had a representative office in Algiers since 2001 and we know all the key players in the Algerian business community. One of the big three Algerian banks, Banque Extérieure d’Algérie is one of our shareholders, with 6.1%.

The key business sectors for us reflect the structure of the Algerian economy: 97% of Algerian exports are related to oil and gas, while imports are centred on infrastructure, such as transport, and power and gas utilities. Those are the sectors that we focus on.

The Algerian government has indicated that it is planning to open up the financial sector, allowing local companies to engage with foreign banks, and we think this will lead to considerable opportunities for banks such as ours, but also for investors and for manufacturers who want to export to Algeria.

It’s worth noting that there are already a number of new players in the Algerian economy. For example, China has started to replace France as the main supplier of manufacturing and consumer goods, and Chinese, Turkish and Malaysian companies are replacing some of the big European firms in the infrastructure market.

What is happening in Morocco?

The Moroccan authorities are trying to develop their country both as a gateway to Europe and as a gateway to sub-Saharan Africa. For example, Renault and Peugeot have established significant manufacturing plants in Tangiers. Cars assembled here will be exported both to Europe and to sub-Saharan Africa, with some going to the local market.

All three big Moroccan banks – Banque Centrale Populaire, Attijariwafa and BMCE – have developed big business networks in sub-Saharan Africa.

Our bank sees good opportunities for financing the import of commodities such as wheat, sugar and cooking oils by well performing companies in Morocco. We also see opportunities to help the big Moroccan banks take their local clients into sub-Saharan Africa.

Banque Centrale Populaire, is one of our shareholders and is developing its operations in sub-Saharan Africa through its subsidiary Banque Atlanique, which is based on Côte d’Ivoire.

What about Tunisia and Libya?

In Tunisia we are seeing reforms in the banking sector, including plans to restructure the three state-owned banks (Banque Nationale Agricole, Société Tunisienne de Banque and Banque de l’Habitat) and sell minority stakes to investors. Although political and economic conditions are difficult, we are noticing some interesting developments, such as an increase in intra-Maghreb tourism: about 1.5 million Algeria tourists go to Tunisia every year.

In Libya, everything depends on a lasting political settlement to bring the civil war to an end. But remember that Libya is fundamentally a very wealthy country. It has large oil exports in relation to its population. Libya has the potential to be one of the richest countries in the Middle East and Africa. Once there is peace, there will be huge opportunities for banks. For example, rehabilitating and expanding oil and gas infrastructure is expected to cost about $10 billion. There are also plans to build a 3,170 km national rail network, including a $4.5 billion project to link Benghazi and Sirte with a 554 km railway line.

Our bank will be particularly well placed, since Libya Foreign Bank is our biggest shareholder and we have a representative office in Tripoli.

Isn’t Mauritania too small to be an interesting market?

Actually, no! We are able to do good business by serving clients who are importing from Mauritania or exporting to it. Mauritania is Africa’s second largest exporter of iron ore, and it exports other commodities such as copper. (Did you know that the longest train in the world is in Mauritania – taking iron ore from mines inland to the coast?!) We have strong relationships with Mauritanian banks based on many years of successful business.

 

British Arab Commercial Bank is a London-based bank that showed assets of £3,021 billion and equity of £210 billion at the end of 2015. The bank was founded in 1972 as UBAF Limited and changed its name in 1996 to British Arab Commercial Bank. Nabil Frik is the bank’s Managing Director for Francophone Africa and the Maghreb. He can be contacted at 020 7972 6920 and nabil.frik@bacb.co.uk.