USD 50 million to support Zenith Bank Plc of Nigeria
Tunis – 22 July 2009- The Board of Directors of the African Development Bank (AfDB) Group approved on Wednesday in Tunis, a senior loan of US$ 50 million to Zenith Bank Plc of Nigeria. This loan is aimed at revamping Zenith’s liquidity to cushion the effects of the financial crisis and lessen potential funding disruptions to vital ongoing projects in the infrastructure and industrial sectors.
Over the past 18 months, the impact of the global financial crisis has resulted in commercial lenders retreating from transactions and funding lines being withdrawn or cut drastically, causing a severe liquidity crisis in the banking sector in Nigeria. Through this Facility, the AfDB will provide urgently needed foreign currency resources for ongoing subprojects that are currently at risk of being delayed or abandoned completely. The AfDB’s intervention is therefore critical, as it will help bridge an important gap and sustain the funding by Zenith to clients in key sectors of the economy at a time of serious financial market dislocation. By filling this countercyclical role, the AfDB sends a positive message to international commercial lenders and foreign investors that financial systems are generally robust and that Africa, and Nigeria in particular, remains a sound investment destination.
This transaction aligns well with the recently approved Emergency Liquidity Facility (ELF), which forms part of a broad set of initiatives by the Bank to respond to the economic impact of the financial crisis; emphasizing the drastic reduction in international financial flows driven mainly by the general loss of confidence, which has resulted in the emergence of a liquidity crisis in many RMCs.
By facilitating the flow of scarce liquidity to the private sector, the loan will help secure existing jobs, create new employment opportunities, grow incomes, and improve living standards. This loan will therefore complement Zenith’s own internally generated resources and equity, to underpin its domestic resources mobilization.
The loan to Zenith is consistent with the Bank’s Private Sector Strategy, which seeks to extend financial assistance to sound financial intermediaries to promote economic growth and development in the real sector. Moreover, the intervention aligns well with Nigeria’s strategic priorities, which emphasize, the need for a strong and vibrant financial sector to facilitate the supply of credit to the private sector in order to help reduce the infrastructure deficit and grow the economy.