The Board of Directors of the African Development Bank Group has approved a $15 million trade finance line of credit and a $10 million deal guarantee. Commercial 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 Nigeria’s trade finance deficit by making financial resources available to small and medium enterprises (SMEs) in the industrial sector.

The bank will also guarantee up to 100% of the default risks arising under letters of credit and similar trade finance instruments issued by FSDH as part of the guarantee arm. This will validate trade transactions initiated by FSDH, benefiting local import and export businesses.

Overall, the facility will catalyze more than $200 million in trade finance transactions across multiple sectors, including agriculture, manufacturing and energy, over the next three years.

The Director General of the African Development Bank in Nigeria, Lamine Barrow, said: “The availability of trade finance instruments to boost post-pandemic economic recovery efforts cannot be overstated. The Bank’s financing will therefore help relevant Nigerian SMEs to take advantage of existing and emerging opportunities in the domestic and regional markets.”

The African Development Bank estimates the continent’s trade finance deficit at $82 billion. SMEs and other domestic firms have more difficulty accessing trade finance than multinationals and large local corporations.

Barrow pointed out that the Covid-19 pandemic and other factors have forced global banks to reduce their correspondent banking relationships in Africa or leave altogether.

The facility is in line with the African Development Bank’s Financial Sector Development Policy and Strategy for Deepening Africa’s Financial Systems. It also aligns with two of the Bank’s top five strategic priorities: Feed Africa and Industrialize Africa.

The Bank’s Director of Financial Sector Development, Stephen Naletambi, said: “We are delighted to finalize this facility with FSDH as the Bank’s partnership will assist FSDH in expanding its trade finance offerings in Nigeria to help meet the ever-growing trade finance demand. gap This partnership is expected to catalyze more than $200 million worth of trade finance transactions across sectors such as agriculture, manufacturing and energy over the next 3.5 years.”

The African Development Bank bases its current strategy in Nigeria on two pillars: supporting infrastructure development and promoting social inclusion through agribusiness and skills development. The bank believes that its financial and non-credit activities open wide opportunities for youth and women.

The Bank’s current portfolio in Nigeria includes 53 operations with a total value of $4.5 billion. This consists of 30 sovereign transactions worth $2.7 billion, which represent 60% of total liabilities. In addition, there are 23 non-sovereign transactions worth $1.8 billion.

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