((AfDB) – The Board of Directors of the African Development Bank Group has approved a $15 million trade finance line of credit and a $10 million transaction guarantee for Investment bank FSDH in Nigeria. FSDH will use the line of credit to provide loans to local businesses in Nigeria.
The $25 million package will help reduce the trade finance gap in Nigeria by making financial resources available to small and medium-sized enterprises (SMEs) in the industrial sector.
The Bank will also guarantee up to 100% of the risk of non-payment arising from letters of credit and similar trade finance instruments issued by FSDH under the guaranteed party. This will allow confirmation of commercial transactions initiated by FSDH, for the benefit of local import and export companies.
Overall, the facility will catalyze over $200 million in trade finance transactions across multiple sectors, including agriculture, manufacturing and energy over the next three years.
The African Development Bank’s Managing Director for Nigeria, Lamin Barrow, said, “The availability of trade finance instruments to boost post-pandemic economic recovery efforts cannot be overstated. Therefore, the Bank’s financing will help eligible Nigerian SMEs to take advantage of existing and emerging opportunities in national and regional markets.
The African Development Bank estimates the trade finance gap for the continent at $82 billion. SMEs and other domestic firms have more difficulty accessing trade finance than multinationals and large local firms.
Barrow noted that the Covid-19 pandemic and other factors have led global banks to scale back correspondent banking relationships in Africa or exit them altogether.
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 5 strategic priorities: “Feed Africa” and “Industrialize Africa”.
The Bank’s Director of Financial Sector Development, Stefan Nalletamby, said, “We are delighted to finalize this facility with FSDH, as having the Bank as a partner will help FSDH scale up its trade finance offerings in Nigeria to help meet to the growing demand for trade finance. difference. This partnership is expected to catalyze over $200 million in trade finance transactions across multiple sectors such as agriculture, manufacturing and energy over the next 3.5 years.
The African Development Bank anchors its current strategy in Nigeria on two pillars: supporting infrastructure development and promoting social inclusion through agribusiness and skills development. The Bank believes that there are many opportunities for young people and women through its financing and non-lending activities.
The Bank’s current portfolio in Nigeria comprises 53 operations with a total value of $4.5 billion. This is made up of 30 sovereign operations, worth $2.7 billion and representing 60% of total commitments. In addition, there are 23 non-sovereign operations valued at $1.8 billion.