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UBA secures $175m from AfDB to support private sector, others

UBA mulls rights issue, private placement to meet capital requirements

The African Development Bank (AfDB) on Monday pledged a $175 million facility to the United Bank of Africa (UBA). This financial commitment is aimed at empowering UBA to offer crucial support to the organised private sector, facilitate infrastructure development, and bolster women-owned businesses.

The funding includes a $100 million long-term senior debt, $50 million in trade finance medium-term senior debt, and a $25 million risk participation programme. The announcement came following approval by the AfDB Board of Directors over the weekend.

UBA, in a press statement made available to BusinessDay said that “it plans to allocate the long-term senior debt to vital sectors like infrastructure, agriculture, manufacturing, energy, and SMEs. This funding intends to empower and support key projects within these sectors and their related value chains.”

Read also: African countries lose $90 billion annually to illicit financial flows AFDB

Moreover, the financial package incorporates technical support from the Affirmative Action for Women in Africa (AFAWA) initiative. This inclusion aims to provide financial access and technical assistance to women-owned SMEs, a crucial step towards fostering gender-inclusive economic growth.

The trade finance senior debt is strategically designed to furnish UBA with essential dollar liquidity, benefiting SMEs and local corporates engaged in import-export activities in the short to medium term.

Additionally, the agreement includes an unfunded Risk Participation Agreement. This initiative is geared toward enhancing UBA UK’s role as a regional confirming bank and expanding access to international markets for African issuing banks that have traditionally faced limited opportunities.

Under this agreement, AfDB and UBA UK will equally share the default risk on a portfolio of qualified trade transactions initiated by African issuing banks, and indemnified by UBA UK. This collaboration seeks to bridge the gap for African banks excluded from international markets.

The partnership between AfDB and UBA marks a significant step in promoting economic development in Nigeria, especially in critical sectors, while fostering financial inclusivity and regional trade expansion.

Speaking after the board’s approval, AfDB’s Group Director General for Nigeria Lamin Barrow said, “We are pleased to support UBA with this package, which aligns with four of the African Development Bank’s High five priorities, namely Light up and Power Africa, Feed Africa, Integrate Africa, and Industrialise Africa.”

“This intervention will address unmet demand for trade finance in Nigeria and Africa, respectively, by providing medium-term finance to support exports² and the importation of intermediate goods required to sustain vital economic sectors. It will also unlock stable and affordable funding for SMEs, who are the engine of Nigeria’s economic growth and employment generation⅞,” Ahmed Attout, African Development Bank Acting Director for Financial Sector Development, further said.

Read also: AfDB wants intensified efforts at curbing illicit financial flow in Africa

Also commenting, Oliver Alawuba, the Group Managing Director/CEO, UBA said, “This facility will further deepens our support, which has been very considerable, to the critical sectors of Nigerian economy and especially to Women-owned businesses and small and medium enterprises, which we consider as the engine of any country’s economic development.”