The African Development Bank (AfDB) and FSDH have recently inked a new $20 million Trade Finance Facility to bolster Small and Medium Enterprises (SMEs) in Nigeria.
Mr. Lamin Barrow, the Director-General of the Nigeria Country Department at AfDB, emphasized the pivotal role of trade in economic development, likening trade finance to its lubricant.
While acknowledging the constraints in the supply of trade finance in Africa, Barrow highlighted the AfDB’s support for more than 120 financial institutions across 30 African countries, resulting in the catalysis of over $10 billion in trade over the past decade.
Speaking on the deal, Mr. Barrow said, “FSDH and the AfDB have enjoyed an enduring partnership in supporting SMEs and Nigerian Corporates engaged in trade and export value chains.”
Barrow explained that the recently signed $20 million facility includes a $15 million Trade Finance Line of Credit dedicated to assisting eligible SMEs and corporates engaged in international trade value chains.
Additionally, it incorporates a $5 million Transaction Guarantee aimed at strengthening FSDH’s Correspondent Banking relationships.
The African Development Bank (AfDB) has projected the annual trade finance gap on the continent to be $81 billion, while a recent study by the WTO and IFC estimated the gap in Nigeria to be $7 billion each year.
The report also highlighted that Nigerian banks turned down a quarter (25%) of all trade finance requests from their clients, attributing this trend to the insufficient availability of Correspondent Banking lines and limited access to foreign exchange.
In response to these challenges, AfDB initiated a specialized Trade Finance Programme in 2013.
This program aims to deliver crucial liquidity and risk mitigation support to financial institutions in Africa, with a focus on benefiting SMEs, as well as local corporate importers and exporters.