The African Development Bank (AfDB) has signed an additional $20 million trade finance facility with FSDH to support Nigeria’s small and medium enterprises (SMEs).

Lamin Barrow, the director-general of AfDB’s country department, said this during the signing ceremony on Thursday in Lagos.

According to Mr 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.

Mr Barrow said the bank supported over 120 financial institutions in 30 African countries and catalysed over $10 billion 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 trade finance line of credit to FSDH. This 3.5-year facility performed well.

“It supported more than 370 transactions, catalysed $375 million of trade and benefitted 60 SMEs and corporates in critical sectors including energy, agri-business, health and boosting intra-Africa trade.”

Mr Barrow said the new $20 million facility comprised a $15 million trade finance line of credit to support eligible SMEs and corporates active in international trade value chains.

He said it also comprised a $5 million transaction guarantee to enhance FSDH’s correspondent banking relationships.

The AfDB official added, “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.”

AfDB has estimated the trade finance gap on the continent to be $81 billion per annum, while a recent study by the WTO and IFC estimated the gap in Nigeria to be $7 billion 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. 

(NAN)