As China increasingly looks to Africa as a source of commodities and natural resources, banks are forging closer ties to facilitate trade and investment between the two places.

One recent tie up is between First Bank of Nigeria (FNB) and China Construction Bank (CCB). They have signed an agreement to cooperate in several areas, including letters of credit (L/Cs).

Scope

The two banks have signed a Memorandum of Understanding (MoU) that specifies the two institutions will work together to strengthen business cooperation.

The MoU covers areas such as credit lines, trade finance, syndication and project finance, consultancy services, sharing of business experience, training and foreign exchange transactions.

Trade finance

Specifically, FNB and CCB will provide an appropriate, unadvised credit line to each other subject to mutually acceptable credit terms and conditions.

There will also be a focus on trade finance, specifically L/C confirmation, L/C advising and forfaiting.

Mutual assistance

FNB will provide consultation and assistance to CCB for its business development in Africa.

For its part, CCB will provide consultation and assistance to FNB relating to opportunities for the African bank in China. FNB has already agreed to participate in the financing of a US$500 million industrial project in the Ogun State Free Trade Zone.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.