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June 21, 2024

AfDB, FSDH Merchant Bank Sign $20m Trade Finance Agreement to Support SMEs, Others in Nigeria

In a significant move to bolster Nigeria’s industrial and manufacturing sectors, the African Development Bank (AfDB) has inked a groundbreaking $20 million Trade Finance Facility Agreement with FSDH Merchant Bank. 

This strategic partnership aims to provide crucial support to small- and medium-sized businesses (SMEs) in the country.

According to AfDB, the facility encompasses a $15 million Trade Finance Line of Credit, specifically tailored to support SMEs and indigenous corporates. 

AfDB further noted that a $5 million Transaction Guarantee has been established to facilitate the confirmation of FSDH’s trade finance transactions.

The AfDB’s commitment involves guaranteeing up to 100% of non-payment risks associated with letters of credit and similar trade finance instruments issued by FSDH. 

This initiative aims to benefit local importers and exporters in the agriculture, manufacturing, and energy sectors.

Over the next three years, the $20 million facility is anticipated to catalyze more than $200 million in trade finance transactions, addressing critical gaps in Nigeria’s trade finance landscape.

Lamin Barrow, the African Development Bank’s Director General for the Nigeria Country Department, emphasized the institution’s dedication to bridging the trade finance gap in Nigeria.

Barrow stated, “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.”

The FSDH Managing Director/CEO, Bukola Smith, expressed gratitude for the AfDB’s support and underscored the commitment to prioritize women-owned businesses during fund disbursement. 

Smith highlighted the potential impact of the financing on business growth and meeting the needs of clients, especially women-owned enterprises.

This latest agreement follows the successful extension of a $50 million Trade Finance Line of Credit to FSDH in 2016, which significantly supported various beneficiaries across critical sectors, including energy, agri-business, and health. 

The AfDB’s active portfolio in Nigeria now comprises 48 operations valued at $4.4 billion, demonstrating a substantial commitment to fostering economic development in the region.

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