TEMPLARS has advised the African Development Bank on a US$20 million trade finance facility extended to FSDH Merchant Bank Limited (FSDH). The trade finance package includes a US$15 million trade finance line of credit for the support of small and medium-sized enterprises (SMEs) and indigenous corporates and a US$5 million transaction guarantee to facilitate the confirmation of FSDH’s trade finance transactions.
Under the arrangement, the African Development Bank will guarantee up to 100 percent of non-payment risks from letters of credit and similar trade finance instruments issued by FSDH under the transaction guarantee for the benefit of local import and export businesses.
The African Development Bank estimates that the facility will, over the next three years, catalyze over US $200 million of trade finance transactions across such sectors as agriculture, manufacturing and energy, etc.
Speaking at the signing ceremony in Lagos in December, the Nigeria Country Head for African Development Bank, Lamin Barrow said that the transaction was testament to the bank’s commitment to plugging Nigeria’s trade finance gap by working with strategic partners like FSDH to provide critical support to SMEs. He further stated that: “Lack of sufficient correspondent banking lines of credit and inadequate access to foreign exchange have been identified as some of the major reasons banks in Nigeria do not finance trade finance requests from their clients. That is why the African Development Bank established a dedicated Trade Finance Program in 2013 to provide critical liquidity and risk mitigation support to financial institutions in Africa for the benefit of SME and local corporate importers and exporters.”
The TEMPLARS team on the transaction was led by Deputy Managing Partner and Head of Finance Practice Group, Chike Obianwu with support from Finance Partner Dupe Saba (nee Dabiri), Senior Associate Victor Sameria and Associate Olaotan Oyekan.