The African Development Bank (AfDB) has revealed that it has supported at least 120 financial institutions with over $ 10 billion in 30 African countries in the past decade. The international body also noted that it recently signed a deal worth $ 20 million.
The Director-General of the Nigeria Country Department at AfDB, Mr. Lamin Barrow, revealed this recently. He emphasised the pivotal role of trade in economic development when he likened trade finance to its lubricant.
While acknowledging the constraints in the supply of trade finance in Africa, the AFDB Boss noted that “FSDH and the AfDB have enjoyed an enduring partnership in supporting SMEs and Nigerian Corporations engaged in trade and export value chains.”
He said, “In 2016, the AfDB extended a $50 million Trade Finance Line of Credit to FSDH. This 3.5–year Facility performed well. It supported more than 370 transactions, catalysed $375 million of trade and benefitted 60 SMEs and Corporations in critical sectors including energy, agri-business, health and boosting intra-Africa trade.” He revealed 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 to strengthen FSDH’s Correspondent Banking relationships. The African Development Bank (AfDB) has projected the annual trade finance gap on the continent to be $81 billion. 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.
AfDB initiated a specialised Trade Finance Programme in 2013 in response to these challenges. This program aims to deliver crucial liquidity and risk mitigation support to financial institutions in Africa, focusing on benefiting SMEs and local corporate importers and exporters.
