African Development Bank Boosts Nigerian Businesses with $20 Million Trade Finance Agreement

In a move to bolster small- and medium-sized businesses in Nigeria's industrial and manufacturing sectors, the African Development Bank (AfDB) has signed a significant Trade Finance Facility Agreement with FSDH Merchant Bank, amounting to $20 million.

The agreement comprises a $15 million Trade Finance Line of Credit aimed at supporting SMEs and indigenous corporates, coupled with a $5 million Transaction Guarantee designed to facilitate the confirmation of FSDH's trade finance transactions.

In a parallel development, Ecobank Transnational Incorporated (ETI) has entered into an agreement securing a substantial $200 million sustainability-linked loan from a consortium of five European Development Institutions, including Proparco, Norfund, FMO, DEG, and EFP.

Under the terms of the $20 million facility extended to FSDH, the African Development Bank will assume the responsibility of guaranteeing up to 100 percent of non-payment risks stemming from letters of credit and similar trade finance instruments issued by FSDH. This Transaction Guarantee aims to benefit local import and export businesses.

Projections indicate that over the next three years, the facility is poised to catalyze more than $200 million in trade finance transactions spanning various sectors such as agriculture, manufacturing, and energy.

Lamin Barrow, Director General of the African Development Bank's Nigeria Country Department, expressed satisfaction with the agreement, highlighting its significance in bridging Nigeria's trade finance gap. Barrow emphasized the Bank Group's commitment to collaborating with strategic partners like FSDH to provide crucial support to SMEs.

Barrow stated, "The lack of sufficient correspondent banking lines of credit and inadequate access to foreign exchange have been identified as some of the major reasons banks in Nigeria do not finance trade finance requests from their clients. That is why the African Development Bank established a dedicated Trade Finance Program in 2013 to provide critical liquidity and risk mitigation support to financial institutions in Africa for the benefit of SME and local corporate importers and exporters."

Over the past decade, the Bank Group has played a pivotal role in supporting over 120 financial institutions across 30 African countries, catalyzing a noteworthy $10 billion in trade.

Chima Nwokoji / Nigerian Tribune