Union Bank of Nigeria (UBN) has become a participant in the International Finance Corporation's (IFC's) Global Trade Finance Programme (GTFP) under which the World Bank Group member will guarantee letters of credit (L/Cs) and other trade finance instruments.

The US$40 million facility aims to boost access to finance for Nigerian businesses, enable increased international trade for Nigeria and help protect the country's economy from the impact of the coronavirus pandemic.

Export boost

The facility will support UBN's efforts to establish working partnerships with some of the nearly 300 major banks within the GTFP network, thereby broadening its access to finance and reducing cash collateral requirements for its customers. The facility also aims to sustain flows of trade credit into the Nigerian market at a time when imports are critical and the country's exports can generate much-needed foreign exchange.

Confirmation guarantees

According to the terms of the agreement, the GTFP will offer confirming banks partial or full guarantees covering payment risks on UBN's trade-related transactions.

These guarantees are transaction-specific and may be used to support a variety of underlying instruments including L/Cs, trade-related promissory notes, guarantees, bonds, and advance payment guarantees.

Innovative L/C offering

UBN says its admission into the GTFP network underscores its focus on developing innovative channels to support Nigerian businesses.

In 2018, the bank introduced its Local Letter of Credit, a first-of-its-kind in Nigeria focused on facilitating domestic trade.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.