British International Investment (BII) has granted Access Bank a loan facility totaling US$60 million to enhance the supply of trade finance to five African markets that are heavily dependent on imports.
According to Access Bank, which has its headquarters in Nigeria, the facility is anticipated to boost finance for imports of items used in manufacturing, construction, and agriculture and increase African trade volumes by up to US$90 million.
The lender is going after businesses in the DR Congo, Mozambique, Rwanda, Sierra Leone, and Zambia because these nations have historically had trouble getting trade financing and because of unstable currencies, rising interest rates, and tumultuous political situations.
In a time of difficult macroeconomic conditions, the loan “facilitates the provision of systemic liquidity,” according to the statement.
According to Access Bank, currency instability in Nigeria may limit the spread of dollar-denominated trade loans throughout African markets, making it more difficult for nations to take advantage of opportunities presented by the African Continental Free Trade [Area] agreement.
The increased accessibility of US dollar-denominated trade loans would assure the availability of essential raw materials and manufacturing inputs for the manufacture and export of goods by focusing on import-dependent economies.
By offering accessible finance to Black African-owned firms and those who adhere to Access Bank’s gender commitments, the facility also strives to increase financial inclusion.
The arrangement “comes at a time when Nigeria’s fragile economic situation needs additional funding, particularly from countercyclical investors like development finance institutions,” according to Benson Adenuga, head of office and coverage director for Nigeria at BII.
The loan is “a significant step closer to narrowing the trade finance gap in Africa,” says Admir Imami, director and head of trade and supply chain finance at BII.
According to him, “access to finance in fragile states is greatly restricted, as these nations are frequently buffeted by macroeconomic events far beyond their control.”
The African Development Bank believes that the continent’s trade finance gap, which is defined as the difference between the demand and supply for financing facilities, is approximately US$81 billion per year.
According to a UN study released in August, African SMEs are frequently seen as high-risk or struggle to supply adequate credit information, which drives up the cost of funding.