With unprecedented global events unfolding: the energy shock from the US-Iran conflict and the continuing uncertainty about the status of the Strait of Hormuz, gold prices at historic highs, copper and aluminium markets repriced overnight by US tariffs and fertilizer shortages, African economies cannot just sit this out and hope the storm will pass without too much damage to them.
Africa's exposure to commodities, currency and interest rate shocks is becoming increasingly more significant.
Consider what is at stake: A producer attempting to lock in commodity prices at record highs; a sovereign now facing exchange rate movements that threaten to erode the very benefit of having raised finance in a new market; a project sponsor seeking revenue certainty for its lenders - and the list goes on.
The instruments to hedge each of these exposures exist and are liquid in global markets. Yet, while sophisticated risk management tools exist, access to them at the scale and tenor that African sovereigns and corporates require remain constrained.
Originally published by African Business.