The African Development Bank (AfDB) has announced plans to provide a $230 million trade finance facility for Access Bank Plc, a leading deposit money bank (DMB) in Nigeria, as part of its sustained efforts to support trade and ease foreign exchange (FX) liquidity constraints for small and medium-sized enterprises (SMEs) in the country
A Project Summary Note from the development finance institution, which captured the facility’s structure and expected impact on Nigeria’s trade sector, indicated that the facility comprised a $170 million Trade Finance Line of Credit with a 3.5-year tenure and a $60 million Transaction Guarantee with a three-year tenure.
According to the figures, the Trade Finance Line of Credit will provide much-needed FX liquidity for the SMEs in the country to settle trade finance obligations and maintain access to international financial markets and global supply chains.
The Note stated that the package involves the “provision of a $230m, Trade Finance Package (Facility) to Access Bank Plc (“Access Bank” or “ABN”) comprising (i) a $170m Trade Finance Line of Credit with a 3.5-year tenor and (ii) a $60m Transaction Guarantee instrument with a tenor of 3 years.
“The TFLOC will provide critically needed FX liquidity to support SMEs and local enterprises operating in the tradable sectors to settle maturing trade finance obligations and continue to have unencumbered access to international financial markets and global supply chains as they procure critical inputs such as raw material, equipment, and intermediate goods for further local processing”, the bank added.
The transaction guarantee will allow Access Bank to act as an Issuing Bank for trade finance transactions, while the AfDB will provide up to 100% risk coverage to Confirming Banks against non-payment risks linked to letters of credit and other trade finance instruments issued by the DMB.
The facility is expected to address foreign exchange liquidity challenges faced by Nigerian businesses, particularly SMEs that rely on imports for raw materials, equipment, and intermediate goods
A further analysis of the terms and conditions stated in the Project Summary Note indicated that the initiative aligns with Nigeria’s 2020-2024 Country Strategy Paper and AfDB’s Ten-Year Strategy (2024-2033), which prioritises economic growth through enterprise development.
In addition, the facility support for Access Bank also supports the AfDB’s High 5s agenda, particularly its goals to ‘Feed Africa,’ ‘Integrate Africa,’ and ‘Industrialise Africa’ by enhancing regional trade integration and strengthening domestic production.
On the management of the facility, the Note showed that the trade finance package would be implemented through separate legal agreements outlining fund disbursement, repayment terms, and compliance with environmental and social regulations.
The document further stated that Central Bank of Nigeria’s (CBN’s) approval would be required before disbursement, thereby making it a condition precedent for the financing package while the Transaction Guarantee component would be governed by an Issuing Bank Agreement between AfDB and Access Bank, detailing responsibilities and eligibility criteria for trade finance transactions.
The Project Summary Note further provided that the AfDB’s Private Sector and Industrial Development Finance Department would oversee approvals for individual trade finance guarantees.
Analysts believe that the facility will support the nation’s industrial sector’s growth by easing trade finance hiccups for businesses and expanding finance access to women-led enterprises, as a portion of the facility has been set aside for women-owned SMEs engaged in trade, amongst other benefits.
