The African Development Bank (AfDB) is planning a $230 million trade finance package for Access Bank Plc, aimed at supporting trade finance activities and providing foreign exchange liquidity to small and medium-sized enterprises (SMEs) in Nigeria.
This was disclosed in a Project Summary Note seen by Nairametrics on Wednesday, detailing the facility’s structure and expected impact on Nigeria’s trade ecosystem.
According to the document, the financing package consists of two components:
- A $170 million Trade Finance Line of Credit (TFLoC) with a 3.5-year tenure to provide critically needed FX liquidity to SMEs and corporate clients engaged in trade.
- A $60 million Transaction Guarantee (TG) with a three-year tenure, enabling Access Bank to act as an Issuing Bank (IB) while the AfDB provides up to 100% risk coverage to Confirming Banks (CBs) for trade transactions.
Enhancing trade and SME access to finance
The AfDB’s trade finance package aims to bridge the gap in trade finance for Nigerian businesses, allowing them to settle obligations and maintain access to international financial markets and global supply chains. Many Nigerian SMEs depend on imports for raw materials, equipment, and intermediate goods, making FX liquidity crucial for their operations.
The Project Summary Note highlights that this initiative aligns with Nigeria’s 2020-2024 Country Strategy Paper (CSP) and AfDB’s Ten-Year Strategy (TYS) 2024-2033, particularly focusing on economic revitalization through enterprise development. It also supports AfDB’s High 5s Agenda, specifically its goals to ‘Feed Africa,’ ‘Integrate Africa,’ and ‘Industrialize Africa’ by fostering regional trade and strengthening local industries.
Implementation and regulatory approvals
The trade finance facility will be implemented through two separate legal agreements governing fund disbursement, repayment terms, and environmental and social compliance measures. The document states that Central Bank of Nigeria (CBN) approval will be required before disbursement, making it a condition precedent for the financing package.
The Transaction Guarantee (TG) component will be executed through an Issuing Bank Agreement between AfDB and Access Bank, with specific eligibility criteria for trade transactions. The Private Sector and Industrial Development Finance (PIFD) department at AfDB will oversee the approval process for individual trade finance guarantees.
Expected development impact
The $230 million package is expected to have broad economic and social benefits, including:
- Supporting Nigeria’s private sector by addressing trade finance constraints.
- Boosting women-led businesses, as part of the facility, will be allocated to women-owned SMEs (WSMEs) engaged in trade finance.
- Facilitating access to critical goods such as agricultural inputs, food products, and capital goods, especially amid dollar liquidity shortages.
Access Bank’s role in trade finance
- As one of Nigeria’s Tier 1 banks, Access Bank Plc has a significant footprint in the financial sector, with subsidiaries in 15 African countries, as well as operations in France, the United Kingdom, and the United Arab Emirates.
- The bank also maintains representative offices in China, Lebanon, and India, making it a strategic player in global trade facilitation.
- The AfDB’s planned $230 million trade finance package for Access Bank Nigeria represents a major intervention to address forex liquidity constraints and boost trade finance in the country.
