CEM REPORT, MSME | A total sum of $25 million has been approved by the African Development Bank (AfDB) Group for Micro Small and Medium-sized Enterprises (MSMEs) in Nigeria.
The fund according to the bank will help to reduce the trade finance gap in Nigeria as it will scale up the much-needed financing to local enterprises.
While $15 million will cater for the trade finance credit line, $10 million will serve as transaction guarantee for FSDH Merchant Bank to be disbursed as loans to MSMEs.
According to a statement by the bank, it would also guarantee up to 100 percent 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 statement also notes that the facility aligns with the institution’s Financial Sector Development Policy and Strategy to deepen Africa’s financial systems.
It also adds that it also aligns with two of the Bank’s High 5 strategic priorities – ‘Feed Africa’ and ‘Industrialise Africa.
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 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.
The bank pegs Africa’s trade finance gap at $82 billion. SMEs face daunting tasks accessing trade finance from local lenders.