The Board of Directors of the African Development Bank Group (AfDB) has approved a $15 million trade finance line of credit and $10 million transaction guarantee for FSDH Merchant Bank in Nigeria to provide loans to local enterprises in Nigeria.
The $25 million package will help to reduce the trade finance gap in Nigeria by making financial resources available to small and medium-sized enterprises (SMEs) in the industrial sector.
A statement from the bank stated that it will also guarantee up to 100% of non-payment risks arising from letters of credit and similar trade finance instruments issued by FSDH under the guarantee portion. This will allow confirmation of trade transactions originated by FSDH, benefiting local import and export businesses.
Overall, the facility will catalyze more than $200 million of trade finance transactions across multi-sectors, including agriculture, manufacturing, and energy over the next three years.
AfDB Approves $25m Facility For FSDH Merchant Bank For Local SMEs
AfDB’s Director General for Nigeria, Lamin Barrow said: “The availability of trade finance instruments to drive post-pandemic economic recovery efforts cannot be overemphasized. Hence, the bank’s financing will help eligible Nigerian SMEs to take advantage of existing and emerging opportunities in the domestic and regional markets.”
AfDB estimates the trade finance gap for the continent at $82 billion. SMEs and other domestic firms have greater difficulty accessing trade finance than multinational and large local corporates.
Barrow noted that the Covid-19 pandemic and other factors had led global banks to reduce their correspondent banking relationships in Africa or to exit completely.
He added that the facility aligns with the African Development Bank’s Financial Sector Development Policy and Strategy to deepen Africa’s financial systems. It also aligns with two of the bank’s High 5 strategic priorities: ‘Feed Africa’, and ‘Industrialize Africa.
Source: Vanguard Newspaper