Nigeria and South Africa Poised to Exit FATF Gray List in October

Nigeria and South Africa are on track to be removed from the Financial Action Task Force’s (FATF) “gray list” in October 2023. This potential development marks a significant shift for two of Africa’s largest economies. According to a report from Bloomberg, FATF assessors have noted considerable progress in the action plans of these nations, alongside Burkina Faso and Mozambique.

The FATF initially placed Nigeria and South Africa under heightened scrutiny in February 2023 due to deficiencies in combating illicit financial flows. Recent on-site evaluations by the Paris-based organization have yielded positive feedback regarding the advancements made by these countries. Sources indicate that the formal announcement regarding their removal from the gray list could occur on October 24, 2023, during the final day of an FATF plenary session in Paris.

Temitope Ajayi, a spokesman for the Nigerian government, expressed optimism about this potential outcome, stating that it would reflect “the remarkable work the government is doing” to fulfill international obligations and enhance Nigeria’s attractiveness to investors. The sentiment surrounding the exit from the gray list is also echoed by financial experts. Lauren van Biljon, a senior portfolio manager at Allspring Global Investments UK Ltd., noted that this development would likely boost market sentiment, although the immediate market impact may be modest.

The FATF’s gray list includes jurisdictions identified as requiring increased monitoring due to weaknesses in their anti-money laundering efforts. Being on this list can significantly affect a country’s investment climate, as global investors often view these nations with caution. A report from the International Monetary Fund (IMF) in 2021 highlighted that countries listed as gray faced a “large and statistically significant reduction in capital inflows.”

In addition to Nigeria and South Africa, Mozambique has successfully completed the 26 actions necessary for its delisting. Luís Abel Cezerilo, the national coordinator for Mozambique’s removal, stated, “We expect a good result, but we need to wait.” This upcoming delisting aligns with the anticipated resumption of TotalEnergies SE’s $20 billion natural gas export project, which could greatly benefit Mozambique’s economy.

Meanwhile, Burkina Faso has also implemented all 37 measures required to exit the gray list, according to officials from the Inter-Governmental Action Group against Money Laundering in West Africa. The FATF’s decision will ultimately hinge on a consensus among its members, which include the United States, the United Kingdom, the European Commission, and major Asian economies such as China, Japan, and India.

Under the leadership of Elisa de Anda Madrazo, the FATF has updated its gray-listing criteria, placing increased emphasis on scrutinizing wealthier member jurisdictions while reducing focus on less-developed countries, which typically present a lower systemic risk.

The upcoming decisions by the FATF carry significant implications for Nigeria, South Africa, and their regional counterparts, potentially paving the way for a more favorable investment landscape and improved economic stability in the months ahead. As the October date approaches, officials and stakeholders are keenly awaiting the final verdict from the FATF.