The African Development Bank (AfDB) Group has announced that FSDH Merchant Bank has been given permission to offer loans to Nigerian small businesses under a $15 million trade finance credit line and a $10 million transaction guarantee.
The $25 million package, which its Board of Directors authorized, will aid in closing Nigeria’s trade finance deficit by increasing crucial financing for small and medium-sized businesses (SMEs).
The regional bank stated that as part of the guarantee section, it would also cover non-payment risks resulting from letters of credit and other comparable trade finance instruments issued by FSDH up to 100%. This would permit verification of commercial transactions started by FSDH, which will help local import and export business.
Over the following three years, it is anticipated that the facility will catalyze trade finance transactions totaling more than $200 million in various important industries like manufacturing, agriculture, and energy.
The availability of trade finance instruments to support post-pandemic economic recovery efforts cannot be overemphasized, according to Lamin Barrow, director general of the AfDB for Nigeria. As a result, the financing provided by the Bank would assist qualifying Nigerian SMEs in seizing both current and future market possibilities.
The bank estimates the $82 billion trade finance shortfall in Africa. Accessing trade financing from local lenders is a difficult task for SMEs.
According to a statement from the bank, the facility is in line with the organization’s Financial Sector Development Policy and Strategy to strengthen Africa’s financial systems. Additionally, it supports two of the Bank’s High 5 strategic priorities: industrializing and feeding Africa.