United Bank for Africa (UBA) Plc on Wednesday received liquidity boost following the signing of a landmark deal of $150 million (N22.2 billion) with African Development Bank (AfDB) under a two loan agreement. The loans were signed under the Emergency Liquidity Facility (ELF) and Trade Finance Initiative (TFI) by the representatives of the two banks.
Concerned that recent trends in global financial markets, in particular the rapidly diminishing availability of capital worldwide, are having increasingly adverse impact on African countries and AfDB clients, the AfDB Group on March 4, 2009, established a $1.5 billion Emergency Liquidity Facility (ELF) as part of a global response to the financial crisis.
Also, it was in response of the financial crisis, which began to hit the trade finance markets in 2008, and is expected to cause a sharp slow-down in trade in 2008 and 2009 that prompted the AfDB to establish a multi-phase $1 billion Trade Finance Initiative on March 4, 2009.
It is thus expected that UBA will take these initiatives to become a major player in the development of the Nigerian economy and that of Africa. Aloysius Uche Ordu, vice president, regional and country programmes and policy from the African Development Bank (AfDB) and Faith Tuedor-Matthews, deputy managing director, UBA, signed two loan agreements for a total of $150 million. The loan agreements were signed under the AfDB Emergency Liquidity Facility (ELF), and Trade Finance Initiative (TFI) designed for the rapid injection of liquidity into African markets via strong private sector partner institutions.
These are the largest facilities to date granted by the AfDB to a private sector financial institution in Africa. The TFI loan totaling $100 million will be used by UBA to advance trade credits to corporate customers across its pan-African network, enabling it fill the gap left by the retreat of non-African institutions from the market.
The loan will permit UBA to significantly increase its intra-African corporate banking operations and specifically the promotion of regional trade. The ELF of $50 million also approved by the AfDB will enable UBA to play a catalytic role in supporting corporate projects, infrastructure and SME financing across Africa.
Speaking at the ceremony, Ordu stated that “regional commercial banks such as the UBA have an important role to play in accelerating Africa’s economic growth, social development and economic integration of our nations”.
“The AfDB is committed,” he said, “to supporting these institutions with comprehensive assistance. We hope that this support will go a long way in strengthening and enhancing UBA’s ability to impact its pan African operations”.
The AfDB vice president further explained that these transactions are consistent with the AfDB’s initiatives formulated in response to the global financial crisis, its Country Strategy Paper for Nigeria as well as the Nigerian government’s millennium development agenda. He added that this financial assistance to UBA also fits with the AfDB’s private sector strategy to support sound and capable financial institutions during the financial crisis.
Also speaking at the signing ceremony, Tuedor-Matthews said “the support from the AfDB will further enhance UBA’s ability to service its customers across the African continent. “Coming at a time of severe credit constraints globally, this deal which represents the single largest commitment to a financial institution in the continent is a major recognition of UBA’s ability to support private and public enterprises across Africa”, he said.