Figures released at the SWIFT Business Forum West Africa show that the region has outperformed the total growth of SWIFT globally
Data from SWIFT shows that traffic growth in West Africa has outperformed the total growth of SWIFT globally. In the year to date, total traffic volumes in the West African Monetary Zone (WAMZ) grew by 13.7% versus 5.8% growth for SWIFT worldwide. This is on par with growth across the African continent of 13.6%. It illustrates the increasingly important role that West Africa plays in SWIFT’s global business.
Growth was even more pronounced in Ghana, which saw SWIFT traffic volumes up by 41.2% and compound annual growth over the last five years of 27.5%. Nigeria saw lower growth this year, at 2.9%, as a result of recent economic downturn and the falling price of oil. However, over the same five year period, compound annual growth has been high, at 32.2%.
This growth is underpinned by a significant increase in payments traffic, a reflection that the region continues to see good economic growth despite a more challenging global environment. Payment traffic volumes increased by 15.8% in WAMZ. This is higher than the rest of the continent, however, Africa remains the fastest growing region globally for payments traffic with a rise of 13%, ahead of the rest of EMEA at 5%.
The SWIFT Index, a methodology for anticipating GDP growth by combining global payments data with actual quarterly GDP growth figures, demonstrates that SWIFT data is closely correlated to economic activity. Rising SWIFT traffic volumes are therefore an indicator of economic growth. The data released today indicates long-term and sustainable economic growth across West Africa.
Hugo Smit, Head of Sub-Sahara Africa, SWIFT said: “West Africa holds some of the largest economies in Africa and is an incredibly important market for SWIFT. Despite economic challenges, the region continues to see strong growth, outperforming other regions and SWIFT’s global growth. SWIFT opened its office in West Africa in 2015, and will continue to invest and strengthen its community in the region.”
SWIFT is holding its first ever Business Forum West Africa on 8 November in Lagos, Nigeria. The event is bringing together more than 200 high-level financial representatives from across West Africa. It features several senior speakers and strategic thinkers from Nigeria including representatives from the Central Bank of Nigeria and Bank of Ghana.
The value of SWIFT data: SWIFT Index – independently validated
The power of the SWIFT Index in anticipating GDP growth was empirically tested in collaboration with the Center for Operations Research and Econometrics (CORE), a leading interdisciplinary research institute in the fields of econometrics, economic theory, game theory and operations research. This econometrics expertise was essential to assess how the SWIFT Index relates to GDP growth, and to quantify its superiority relative to standard benchmark models.
Whilst the SWIFT Index is specifically relevant to OECD countries, the validation of SWIFT data and methodology by CORE demonstrates the relevance of SWIFT traffic information as a means of understanding economic activity.
The strength of the SWIFT Index is posited on the ubiquity of SWIFT payment traffic, which acts as a mirror of economic activity. The raw data at the source of the Index is the SWIFT MT 103 message. This is a specific message format that enables the bilateral transfer of information about payment transactions between customers of different banks or financial institutions. It is the de facto global standard for cross-border single customer credit transfers and is used primarily for commercial rather than low-value retail payments. The data collected from these messages is therefore fact-based. Rather than reflecting the sentiment of particular actors, it is an objective measure of real economic activity. To construct the index the header information of MT103 messages is aggregated at a country level providing several million data points each month. In addition to its close correlation with underlying economic activity, the MT103 provides an additional distinguishing advantage for nowcasting: the aggregated volume data is available on a monthly basis within a few days of the end of the preceding month.
Increasingly, the SWIFT Index family of products is being used by economists and decision makers as a delay-free, fact-based leading indicator tool for short-term GDP evolution.