Joy Agwunobi
The Africa Development Bank Group (AfDB) has approved a $175 million financial package to UBA to support private sector development and infrastructure projects in Nigeria. The package consists of a $100 million long-term senior loan, a $50 million medium-term senior loan for trade finance, and a $25 million risk participation programme.
The long-term senior debt facility will enable UBA to finance infrastructure projects in the energy, transport, power, and agribusiness sectors, as well as provide support for manufacturing and SME businesses. It is also expected to help strengthen the bank’s balance sheet and allow it to offer longer-term financing to its customers.
The financial package also includes technical assistance to increase access to finance and technical assistance for women-owned SMEs through the Affirmative Action for Women in Africa (AFAWA) initiative. The trade finance senior debt will provide UBA with the much-needed dollar liquidity to support SMEs and local corporates involved in export-import activities in the short and medium term. In addition,the unfunded risk participation agreement will strengthen UBA UK’s capacity as a regional confirming bank and expand access to international markets for African issuing banks.
Under the terms of the risk participation agreement, the African Development Bank and UBA UK will share the risk associated with a portfolio of trade transactions originated by African issuing banks and indemnified by UBA UK. The agreement provides a mechanism for sharing risk between the two institutions, with each party bearing 50 per cent of the risk in the event of a default. This is considered an important element of the overall financial package, as it will help to reduce the risk exposure of UBA UK and enable it to support more trade finance transactions.
Following the approval of the package by the AfDB’s board of directors, Lamin Barrow, director general for Nigeria at the AfDB Group, expressed his excitement to support UBA with the package.
Barrow stated that the package aligns with four of the bank’s “High 5” priorities, which are Light Up and Power Africa, Feed Africa, Integrate Africa, and Industrialise Africa. These priorities are part of the Bank’s Ten-Year Strategy for 2013-2022 and focus on supporting inclusive and sustainable economic growth in Africa.
Ahmed Attout, acting director for financial sector development at the AfDB, stated that the intervention will help meet unmet demand for trade finance in Nigeria and Africa by providing medium-term finance to support exports and the importation of intermediate goods needed to sustain key economic sectors.
Attout noted further that It will also unlock stable and affordable funding for SMEs, which are the engines of Nigeria’s economic growth and job creation.
Oliver Alawuba, Group managing director and CEO of UBA, commented that the new facility will further strengthen UBA’s support for key sectors of the Nigerian economy, especially women-owned businesses and SMEs, which are often referred to as the ‘engine of any country’s economic development.
