The African Development Bank (AfDB) has approved a US$ 125-million Line of Credit (LOC) to Zenith Bank PLC (Zenith) for on-lending to Small and Medium-sized Enterprises (SMEs) in Nigeria.
This 4th LOC to Zenith approved by the AfDB’s Board of Directors on Wednesday 26 March 2014 in Tunis, will enable Zenith gain access to long-term foreign currency funding to generate additional lending to its SME clients operating in various sectors of the Nigerian economy including agriculture and agribusiness, transportation and manufacturing.
In approving the LOC, the Board of Directors underscored the fact that the SME sector represents a strategic pillar for Nigeria’s quest to modernize and improve its economy while diversifying away from the heavy dependence on the oil industry.
According to the Nigerian Federal Office of Statistics, SMEs account for 97% of all businesses in Nigeria, contributing 50% of employment and output in the non-oil sector. This compares unfavorably with many peers, reflecting a relative underperformance of the SME sector in Nigeria. One of the major impediments to SME growth and development is limited access to bank credit and despite the various widely documented positive reforms to the banking sector since the crisis in 2009, access to credit for the SMEs is still severely constrained. The proposed LOC will therefore contribute to filling this critical financing gap.
The LOC aligns with the renewed strategy of the Government of Nigeria to revitalize the economy by developing its SME sector. It also aligns with the AfDB’s country assistance strategy to support private sector led growth in Nigeria. Furthermore, it is consistent with the AfDB’s strategy to support SMEs through sound and reputable financial intermediaries. Finally, it aligns with the AfDB’s new inclusive growth priority by supporting SMEs in critical sectors of the Nigerian economy.