African Development Bank (AfDB) has approved a $25 million credit facility for FSDH Merchant Bank to support Small and Medium Enterprises (SMEs) in Nigeria.
FSDH, which provides investment banking and security trading services, received a $15 million trade finance line of credit and another $10 million in loan transaction guarantee to provide loans for SMEs.
Following several limitations faced by SMEs in the country which have stifled their growth, the $25 million facility will enable FSDH to work towards ensuring the growth of SMEs by reducing the trade finance gap in Nigeria and ensuring the availability of funds for small and medium-sized enterprises (SMEs) in the industrial sector.
The Bank will also guarantee up to 100% of non-payment risks arising from letters of credit and similar trade finance instruments issued by FSDH under the guarantee portion. This will allow confirmation of trade transactions originated by FSDH, benefiting local import and export businesses.
Overall, the facility will catalyze more than $200 million of trade finance transactions across multi-sectors, including agriculture, manufacturing, and energy over the next three years.
Speaking on the recently approved funds, the Director General of The African Development Bank (AFDB), 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.”
Also commenting is the Bank’s Director for Financial Sector Development, Stefan Nalletamby, he said, “We are excited about finalizing this facility with FSDH as having the Bank as a partner will aid FSDH in scaling up its trade finance offerings in Nigeria to help meet the ever-increasing trade finance gap.
“This partnership is expected to catalyze more than $200 million value of trade finance transactions across multi-sectors such as agriculture, manufacturing, and energy over the next 3.5 years.”
The African Development Bank (AFDB) anchors its current Nigeria strategy on two pillars which are supporting infrastructure development and promoting social inclusion through agribusiness and skills development.