AfDB boosts FirstBank, Merchant Bank activities with $350 million loan

In other to support local enterprises involved in import-export activity, the African Development Bank (AfDB) has extended a $350 million lifeline to First Bank of Nigeria (FBN) and FSDH Merchant Bank Nigeria.

Of the amount, $300-million stands as Trade Finance Loans to FBN and and $50-million  to FSDH Merchant Bank, representing AfDB’s broader efforts to provide countercyclical support to the Nigerian economy.

According to AfDB, the facility became necessary given the falling commodity prices, which has caused shortages in foreign currency supply and led to unmet demand for trade finance instruments to support Nigeria’s ongoing economic transitions.

“The project will help address critical market demand for trade finance and dollar liquidity by supporting vital economic sectors such as agri-business, chemicals, construction, and engineering, food processing, manufacturing and non-traditional exports.” AfDB said in a statement.

AfDB also said the loan will enhance support to domestic enterprises whose businesses are being hamstrung by shortages in dollar funding. “If fully utilized, counting rollovers, the interventions are expected facilitate about $2.5 billion of export-import related activity in intermediate and finished goods, raw materials and equipment to support economic growth and tax generation over a 3.5-year period,” the bank said.

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It added that the facilities will contribute to the attainment of AfDB’s five operational priorities (the High 5s)- Light up and Power Africa, Feed Africa, Industrialize Africa, Integrate Africa and Improve the quality of life of the people of Africa.

The project also aligns with AfDB’s 10-Year Strategy, particularly the bank’s Financial Sector Development Strategy, which seeks to increase access to financial services for the underserved, and broaden and deepen Africa’s financial systems.

It also aligns with the bank’s Private Sector Strategy by contributing to the improvement of the investment and business climate in Nigeria with medium term trade finance; promoting enterprise development through increased access to appropriate levels of trade finance for SMEs and local corporates.

FBN is Nigeria’s oldest and largest banking institution with over 960 branches across 12 countries, with 750 in Nigeria. It is a leading provider of trade finance in Nigeria and a strong financier of the SME sector while FSDH is Nigeria’s largest merchant bank with a niche as a provider of finance and advisory support to emerging local corporates involved in transformative sectors such as manufacturing, industry and services and agribusiness thereby supporting job creation and import substitution.