Products are displayed for sale inside a Shoprite store in Abuja, Nigeria August 3, 2020. (Photo: Agencies)

Nigeria, the largest economy in Africa, has joined the African Trade Insurance Agency, a pan-African institution that provides political risk insurance to companies, investors and lenders interested in doing business in Africa.

This move will enable the West African country to access additional trade and investment insurance capacity to help cushion it against the negative economic impacts of coronavirus.

Nigeria is the third most affected country by coronavirus in Africa, with 47,743 cases and 956 deaths as of Aug 13 according to the Africa Centers for Disease Control and Prevention.

The country's economy is expected to contract 5.4 percent in 2020 due to plummeting oil prices, lower oil production quotas and declining activity caused by coronavirus.

The International Monetary Fund predicts falling oil prices will halve Nigeria's export earnings to $26 billion, which traditionally accounts for 90 percent of the government's budget.

The insurance agency is thus expected to support the country through the pandemic and post-pandemic recovery.

Additionally, membership increases the agency's capacity to support sovereign and commercial transactions in the country.

The African Trade Insurance Agency has already provided significant support in the country's oil and gas sector, covering oil traders as well as insuring financial institutions.

"As one of the largest economies in Africa with a vibrant private sector, the African Trade Insurance Agency looks forward to working with the Ministry of Finance, the Central Bank, local financial institutions and corporate traders to support Nigeria's economic diversification plans and its post-coronavirus recovery," said Benjamin Mugisha, chief underwriting officer at the agency.

Nigeria contributed $14.1 million to the insurance agency's capital in 2019 with the African Development Bank's financial support, and fully completed its membership process through the ratification of the African Trade Insurance Agency treaty.

Between 2010 and 2020, the African Development Bank has provided $70 million to fund shareholding in seven African governments, including Benin, Côte d'Ivoire, Ethiopia, Mali, Nigeria, South Sudan and Zimbabwe.

The insurance agency expects an estimated $138 million in additional capital from prospective new shareholders in the coming months.

Nigeria joins four months after Togo, bringing the total number of African sovereign shareholders to 19.

Five countries are expected to become full-fledged members in the coming months, while an existing member state has indicated its intention to increase its capital contribution.

These countries will cumulatively benefit from $91 million in financial support from the African Development Bank and the European Investment Bank, the agency's other strategic partner.