The African Development Bank (AfDB) is to pump $75m in medium term line credit to Fidelity Bank Plc, the sixth largest bank in Nigeria in what was described as critical to the continued effort to strengthening the Nigerian banking sector.
The AfDB said its funding is to be complemented by an additional AfDB arranged-syndicated financing of up to US $75 million.
The AfDB characterized its funding as critical to the strengthening of Fidelity Bank and the entire Nigerian banking sector which was hit by a confidence crisis over the past few years. The Nigerian banking sector came close to a collapse during the 2008/09 global financial crisis. It was saved by intervention from the Central Bank of Nigeria. Chief executive officers of eight of the country’s 24 banks were fired in 2009 and the Asset Management Corp was set up to mop through buying of bad debt.
The situation has greatly improved as partly witnessed through entry of foreign players. South African banks are in the mix. Standard Bank is represented in the Nigerian market through Stanbic IBTC. RMB secured an operating license early this year.
About its funding the AfDB said its Board of Directors approved the $75million medium-term line of credit (LoC) to Fidelity Bank to fund selected projects in sectors that are critical to Nigeria’s transformation agenda and economic growth. These sectors include infrastructure, manufacturing and Small and Medium Enterprises (SMEs).
The Afdb added that “the LoC was in recognition of the positive impact of the Central Bank of Nigeria’s efforts to strengthen its supervisory framework, stabilize and instill confidence in the local financial system as well as improve liquidity and credit flows”.
“This LoC sends strong signals that Nigeria’s financial sector has stabilized and confirms a return of confidence to the Nigerian banking sector. It is also symbolic of AfDB partnership role in supporting the private sector to play its rightful and important part in building the Nigerian economy”
Fidelity Bank Plc is an indigenous universal bank that has been operational since 2001. It has over 200 branches and over two million customers located in the six geopolitical zones of Nigeria. It is thus strategically placed to tap into various sectors and ensure diversification of its client base. As at December 2012, Fidelity had a total shareholders fund amounting to US $1.04 billion. Fidelity is ranked among the top six banks in Nigeria by equity base and eighth in terms of deposits and totals assets. The LoC will complement Fidelity’s other fundraising efforts through deposits mobilization and financing lines from Development Finance Institutions (DFIs), commercial banks and proceeds from its recent bond issuance.
The AfDB’s LoC contribute to bridging Fidelity’s financing gap by providing much-needed longer-term liquidity to meet its pipeline demands against the background of a financial market that has hitherto slanted towards short-term liquidity inhibiting access to medium- to long-term lending. This financing will allow Fidelity to better serve and fund its clients, increase the tenors of loans to subprojects and expand its loan portfolio, particularly in the manufacturing and infrastructure sectors. Twenty per cent of the LoC proceeds will be dedicated to SMEs.