What's Happening?
Nigeria and South Africa have been removed from the Financial Action Task Force (FATF) 'grey list,' which identifies countries under increased monitoring for weaknesses in anti-money laundering and counter-terrorist
financing regimes. This delisting eases international scrutiny of their financial systems and strengthens their standing with global investors and banks. Mozambique and Burkina Faso were also delisted, marking a significant shift for African markets working to tighten controls on illicit financial flows. The grey list, often referred to as the 'dirty money list,' does not impose automatic sanctions but sends a negative signal to the international community. A study by the International Monetary Fund (IMF) found that greylisting can significantly impact a country's economy, reducing capital inflows by up to 7.6% of GDP and leading to declines in both foreign direct investment and other investments.
Why It's Important?
The removal of Nigeria and South Africa from the FATF grey list is significant as it boosts investor confidence and reduces the perceived risk associated with these countries. Global institutions, banks, and funds are likely to view Nigeria and South Africa as lower risk, facilitating cross-border investment and banking relations. For businesses involved in trade and finance, particularly those transacting internationally, this development reduces the extra layers of scrutiny, delays, and costs that often accompany transactions from a flagged country. In Nigeria, Finance Minister Wale Edun highlighted that this development reinforces confidence in the economy and the integrity of the country's monetary and financial systems. The delisting is expected to lower remittance and cross-border costs, unlocking faster and cheaper payments to and from Nigeria.
What's Next?
The delisting is expected to have a positive impact on the business environment in Nigeria and South Africa. African fintech leaders, such as Flutterwave founder and CEO Olugbenga Agboola, have noted that the additional scrutiny over the past year made international transactions slower and more expensive, especially for remittances and business payments. With the removal from the grey list, these countries can expect a restoration of confidence, which will likely lead to increased foreign direct investment and economic growth. Businesses and financial institutions will be able to operate with fewer restrictions, potentially leading to a more dynamic and competitive market environment.
