The African Development Bank (AFDB) Overview Paper Example

Abstract

The African Development Bank (AFDB) is a multilateral development bank that is based on the African continent. Its principal objective is for economic and social development advancement of the poorest nations of the world. These nations face the risks of financial constraints making it necessary that the (AFDB) steps in to finance them to the levels beneficial to the Regional Member Countries and the financial institution. This study will focus on the (AFDB) impact in Nigeria and employ the use of regression models as well as a correlation model. The Capital Asset Pricing Model has been introduced in the study to help understand investment and financial decisions taken by the (AFDB) to help Nigeria realize the economic development. The study utilizes the secondary data including the annual reports and the financial statements of the investing activities of the (AFDB) in Nigeria totaling to US$7,604.42 million. The data collection is preceded by the quantitative analysis which made use of the SPSS software. The analysis of data aims at determining the correlation between the dependent and the independent variables of the study. A close attention is given to how the operational activities of AfDB impact the GDP, employment rate, poverty and the Human Development Index of Nigeria. The results obtained after the analysis indicate that all the dependent factors, poverty, employment, GDP and HDI are directly affected by AfDB's funding.

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CHAPTER ONE

Introduction

Historically, multilateral developments banks are prominent for supporting infrastructure in developing nations. For several reasons, the significance of (AFDB)s in infrastructure has dropped in relation to previous advancing patterns as well as other sources of investment. The validation of (AFDB)s' participation in infrastructure is essential as it is widely accepted as a key factor in development, poverty eradication, and economic growth. The impacts are channeled through increased productivity, access to markets reduced transaction costs, more significant employment opportunities, and improved asset exploitation (Thiele, Koster, Okoli, & Ruhmann,2018). It is, therefore, vital for (AFDB)s to segment their accomplishments to infrastructure investments to promote development. (AFDB)s can help overcome market failures and achieve more significant investments as private financing cannot fully support the substantial infrastructural needs of the many developing nations. Therefore, the quality and planning of infrastructure are vital. (AFDB)s have proven to be an advantageous model for an international organization, as evidenced by the growing number created since 1971. Purely as financial mediators, (AFDB)s have been extraordinarily effective at raising capital for development.

With a relatively little commitment of investor capital, (AFDB)s have possessed the capacity to raise an extraordinary measure of financing primarily from private sources and directed cash alongside improvement learning and mastery to creating countries (Thiele, Koster, Okoli, and Ruhmann,2018). In spite of their wide productive reputation of diverting fund to building nations at striking monetary terms and joined by formative learning and specialized help, numerous current (AFDB)s confront operational restrictions that keep them from augmenting the capability of their one of a kind authoritative model

Statement of the Research Problem

Amid the financial crisis that began during the second half of 2008, governments and international banking systems were compelled to provide rescue packages to bolster the financial operations of emerging market countries (Hardie & Howarth, 2013). To correct liquidity problems in developing countries, such as those in Central America (CA), which have limited financial an economic power, MDBs had to provide investment policy guidelines. According to Hardie and Howarth, these guidelines define the parameters for investment decisions to meet overall return and risk objectives (Franco & Gerussi, 2013; Hardie & Howarth, 2013; OECD, 2011).

MDBs such as the World Bank and subregional banks such as the AFDB is for Goals for the banks include (a) providing technical and financial assistance to developing countries to foster economic growth and social development, (b) funding sizeable public infrastructure and other development projects such as industry, (c) providing loans tied to policy reforms including grants and loans at a below-market rate interest rates, and (d) fighting the effects of corruption on economic growth (Hardie & Howarth, 2013; Nelson, 2012; Ranis, 2011; Weil, 2012).

Background of the research

The African nation at this point is experiencing a wave of development changes and most governments are trying to move their countries from a third world economy to a middle-class economy and inclusively improve the living conditions and lives of all its citizens (Olaoye, 2014). This proposal is aimed at bringing to light the impact that the (AFDB) has borne to Nigeria to its economy (Mentis et al., 2015). It can be used as a benchmark or a standard to which other African countries looking to boost its economy can use for its investment decisions (Gbandi, & Amissah, 2014). This project also aims at showing how the (AFDB) analyses strategies are used to predict and explain precisely the how to choose a productive asset or investment for attaining the required development goals through the Capital asset pricing model (CAPM)

Nigeria, in its Millennium development goals, aims at joining the twenty countries with the largest economies in the world by the year 2020 (Kanayo, Kizito, & Udefuna, 2013)). To have undergone the transformations required to assemble a sustainable productive economy. The (AFDB) provides the best platform and means to achieve these goals and can be the standard in which other countries can follow on (Boojihawon, & Acholonu, 2013)). This project hence is necessary and extremely timely as the African continent is now on the brink of an economic turnaround. It complements the continents development goals, and this project can be used to source information's of the triumphs, constraints, challenges and including solutions to those problems of the (AFDB) in Africa.

Background of the AfDB

The African Development Bank (AFDB) was formed in the year 1963 on August 14. The first member county agreement came effective in the year 1964 September 10 by the founding member states in Khartoum, Sudan. It has three entities, (a) African Development Fund (ADF), (B) Nigeria Trust Fund (NTF). It has a total of 80 country members, 54 of whom are African countries while 26 of them are from countries across the globe. The (AFDB) s the main objective is to promote investment in both public and private capital investments with the aim of contributing to the economic development and independence as well as promoting the social progress of the Regional Member Countries RMCs. The (AFDB) therefore finances projects and programs with economic impacts to both the government and the privately owned corporations.

The nation initiated the National Development Plan in the year 1962 that set out Nigeria's economic developmental objectives. This is what that the (AFDB) has used as a pointer towards its investment project and financing directive to achieve the nation's financial goals. Over time the National Development Plan objectives have changed as the economic structure if any country is very dynamic. Nigeria has the most substantial shareholding in the bank, and since the countries inception, they have both benefited from operations on either side. It has been the preferred financial partner in Nigeria to achieve the county's goal of being among the top 20 economies in the world in the year 2020. This has been stipulated in the millennial development goals of Nigeria.

Rationale

The African development bank group (AFDB) is categorized as a multilateral development bank (MDB). These are international financial institutions that have been chattered by two or more counties whose primary aim is to encourage economic development through investments. Their main aim is not to prioritize profits but to promote development and strengthen the economies of the member countries (Green, 2017). The (AFDB) was explicitly formed to eradicate poverty in the African continent as well as improving living conditions and attaining financial independence in its regional member countries. It is done through encouraging and facilitating private and public investments (AlMallah et al., 2014). It improves capital tasks and projects that add to the monetary and social development of its regional member countries (RMC).

The (AFDB) is a monetary provider to (RMCs) governments and privately owned businesses that are investing there. Its overreaching objective is to boost sustainable economic development as well as social development to reduce the grappling poverty problem in Africa (AlMallah et al., 2014). It achieves this goal through, (a) mobilizing and allocation of resources in member countries, (b) providing technical and financial support on the development countries in (RMCs) (c) providing proper investment and policy advice to the government and public investors on their economic activities, (d) through providing a platform for member countries to come together and collaborate on development projects that could be beneficial to all countries involved.

Nigeria is a country that is a chartered member of the (AFDB), there is even an entity known as the Nigeria Trust Fund (NTF) that was set up by the Nigerian government with a specific end goal to aid the advancement endeavors in its country as well as the weakest member countries (Studenski et al., 2014). The ((AFDB) )is Nigeria has specific priorities to the nation, these are ; (A) put an end to all forms of poverty in the country, (b) promote good healthcare services and well-being for th...