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By Faridat Salifu
In a recent momentous occasion, held in lagos Mr. Lamin Barrow, Director General of the Nigeria Country Department at the African Development Bank Group, gathered at the signing ceremony of a significant trade finance facility to FSDH, expressing his delight and gratitude to the team for the warm welcome extended to him and his colleagues.
Highlighting the crucial role of trade finance as the “lubricant” for economic development, Mr. Barrow acknowledged the significant constraints in the supply of trade finance in Africa. The African Development Bank has estimated the trade finance gap on the continent to be approximately $81 billion per annum, with a recent study by the WTO and IFC indicating a gap of $7 billion per annum in Nigeria. Additionally, banks in Nigeria were reported to reject a notable quarter (25%) of trade finance requests from their clients due to various constraints, including insufficient correspondent banking lines and inadequate access to foreign exchange.
In addressing these challenges, the African Development Bank has established a dedicated Trade Finance Program since 2013, aimed at providing critical liquidity and risk mitigation support to financial institutions in Africa, particularly for the benefit of SMEs and local corporate importers and exporters. Over the past decade, the Bank has supported over 120 financial institutions in 30 African countries, catalyzing in excess of $10 billion of trade.
The enduring partnership between FSDH and the African Development Bank was lauded, with Mr. Barrow reflecting on the successful extension of a $50 million Trade Finance Line of Credit to FSDH in 2016. This support facilitated more than 370 transactions, catalyzing $375 million of trade and benefiting 60 SMEs and Corporates in pivotal sectors such as energy, agri-business, health, and intra-Africa trade.
The newly signed $20 million Trade Finance package comprises a $15 million Trade Finance Line of Credit to support eligible SMEs and corporates active in international trade value chains, along with a $5 million Transaction Guarantee to enhance FSDH’s Correspondent Banking relationships. This guarantee is slated to cover the non-payment risk of FSDH arising from the issuance of letters of credit and other trade finance instruments, providing vital support to the bank and further strengthening their role in aiding SMEs.
The signing of this Agreement signifies collective efforts to address the trade finance gap in Nigeria, emphasizing the African Development Bank’s commitment.
