The African Development Bank
(AfDB) has signed an additional 20 million dollar Trade Finance Facility with
FSDH to support Small and Medium Enterprises (SMEs) in Nigeria.
Director-General, Nigeria
Country Department, AfDB, Mr Lamin Barrow, said this during the signing ceremony
in Lagos.
According to Barrow, trade is
considered the locomotive for economic development, and trade finance is the
lubricant.
He, however, said it was also
not lost on us that the supply of trade finance in Africa was highly constrained
for various reasons.
Barrow said the Bank supported
over 120 financial institutions in 30 African countries and catalysed over 10
billion dollars in trade in the past decade.
He said: “FSDH and the AfDB
have enjoyed an enduring partnership in supporting SMEs and Nigerian Corporates
engaged in trade and export value chains.
“In 2016; the AfDB extended a
50 million dollar Trade Finance Line of Credit to FSDH. This 3.5 – year
Facility performed well.
“It supported more than 370
transactions, catalysed 375 million dollars of trade and benefitted 60 SMEs and
Corporates in critical sectors including energy, agri-business, health and
boosting intra-Africa trade.”
The new 20 million dollar
facility, Barrow said comprises a 15 million dollar Trade Finance Line of
Credit to support eligible SMEs and corporates active in international trade
value chains.
He said it also comprised a
five million dollar Transaction Guarantee to enhance FSDH’s Correspondent
Banking relationships.
“It will provide a 100 per
cent guarantee to Confirming Banks to cover the non-payment risk of FSDH
arising from the issuance of letters of credit and other trade finance
instruments.
“This agreement is a testament
to our collective endeavours to plug the trade finance gap in Nigeria by
working with a valuable partner such as FSDH that provides critical support to
SMEs.
“We look forward to the
successful implementation of this project while reaffirming the AfDB’s
commitment to deepening and strengthening the financial sector in Nigeria,” he
said.
AfDB has estimated the trade
finance gap on the continent to be 81 billion dollars per annum, while a recent
study by the WTO and IFC estimated the gap in Nigeria to be seven billion
dollars annually.
It also reported that banks in
Nigeria rejected a quarter (25 per cent) of all trade finance requests from
their clients.
Lack of sufficient
Correspondent Banking lines and inadequate access to foreign exchange were
cited as major constraints.
That is why the AfDB
established a dedicated Trade Finance Programme in 2013 to provide critical
liquidity and risk mitigation support to financial institutions in Africa and
for the benefit of SMEs and local corporate importers and exporters.
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