Sterling Bank Plc, one of Nigeria’s leading commercial banks, has signed a $75 million deal with the African Export-Import Bank (Afreximbank) to promote non-oil exports within and outside Africa. The deal was penned on the sidelines of the Intra-Africa Trade Fair (IATF) currently held in Cairo, Egypt.
The deal is crucial in financing and deepening trade activities in Nigeria, especially in the non-oil sector, which has been identified as a key driver of economic diversification and growth. According to the statement during the signing ceremony, the deal will contribute to facilitating intra-Africa trade by improving the capacity of Africans in trade finance and addressing foreign currency liquidity constraints.
The facility is expected to make a substantial contribution to the growth of Nigeria’s financial sector by enabling Sterling Bank to secure funds from lenders who in turn support their customers’ import and export trade finance operations. It is a guarantee facility for $75 million, which means that Afreximbank will provide a guarantee to Sterling Bank’s correspondent banks for trade transactions undertaken by the Nigerian bank.
The deal is part of Afreximbank’s core mandate to promote trade within and outside the continent and ensure the full implementation of the African Continental Free Trade Area (AfCFTA), which aims to create a single market for goods and services in Africa. The AfCFTA, which came into force in January 2021, is expected to boost intra-African trade by 52% by 2022, according to the United Nations Economic Commission for Africa.
During the ongoing IATF, which is the second edition of the biennial trade fair organised by Afreximbank in collaboration with the African Union, the bank has used the opportunity to foster trade and investment in the continent by funding organisations that facilitate business in Africa. The bank reported that it has entered deals worth $1 billion during the IATF event. An example of this is its signing of a similar deal with the United Bank of Africa (UBA) of around $150 million to facilitate trade in the continent too.
The deal with Sterling Bank is also in line with the bank’s strategy to support the development of regional value chains and export manufacturing in Africa, which are key to structural transformation and economic diversification. In its 2023 edition of the African Trade Report, Afreximbank highlighted the importance of accelerating the process of industrialisation in Africa, especially in the context of the AfCFTA and the realignment of global supply chains under a new world order.
The deal is a welcome development for Nigeria, which has been struggling with low foreign exchange earnings and reserves due to the volatility of oil prices and the impact of the Covid-19 pandemic. The country’s non-oil exports, which include agricultural products, minerals, manufactured goods and services, have been growing steadily in recent years, reaching $2.52 billion in the first half of 2023, according to the Nigerian Export Promotion Council. However, there is still a huge potential for further growth and diversification, as the country has a large and dynamic population, abundant natural resources and a strategic location in West Africa.
The deal with Afreximbank will enable Sterling Bank to provide more support to its customers in the non-oil export sector, which will in turn boost the country’s foreign exchange earnings, create more jobs, enhance value addition and reduce dependence on oil. It will also strengthen the bank’s position as a leading player in the trade finance market in Nigeria and Africa.
Source: Nairametrics
