AfDB approves partly-guaranteed $25m loan to Nigeria’s SMEs

The African Development Bank (AfDB) Group has announced the approval of a $15 million trade finance credit line and a $10 million transaction guarantee for FSDH Merchant Bank to provide loans to local enterprises in Nigeria.

The $25 million package, approved by its Board of Directors, will help to reduce the trade finance gap in Nigeria as it will scale up the much-needed financing to small and medium-sized enterprises (SMEs).

The regional bank said it would also guarantee up to 100 per cent of non-payment risks arising from letters of credit and similar trade finance instruments issued by FSDH under the guarantee part. This will allow confirmation of trade transactions originated by FSDH, benefiting local import and export businesses.

The facility is expected to catalyse more than $200 million of trade finance transactions across different key sectors such as agriculture, manufacturing and energy in the next three years.

AfDB Director General for Nigeria, Lamin Barrow, said: “The availability of trade finance instruments to drive post-pandemic economic recovery efforts cannot be overemphasized. Hence, the Bank’s financing will help eligible Nigerian SMEs to take advantage of existing and emerging opportunities in the domestic and regional markets.”

The bank pegs Africa’s trade finance gap at $82 billion. SMEs face daunting tasks accessing trade finance from local lenders.

The facility aligns with the institution’s Financial Sector Development Policy and Strategy to deepen Africa’s financial systems, the bank said in a statement. It also aligns with two of the Bank’s High 5 strategic priorities – ‘Feed Africa’ and ‘Industrialise Africa.