43060 - FBN Nigeria WCS

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Summary of Investment Information

Project Number

43060

Company Name

FIRST BANK OF NIGERIA LTD

Date SPI Disclosed

May 28, 2020

Country

Nigeria

Region

Africa

Projected Board Date

Jun 26, 2020

Environmental Category

FI-2 - Limited

Status

Completed

Last Updated Date

Sep 9, 2023

Department

Regional Industry - FIG ME & Africa

Industry

Financial Markets

Previous Events

Approved : Jun 29, 2020
Signed : Jun 30, 2020
Invested : Dec 10, 2020

Sector

Commercial Banking - General

Project Description

The proposed project consists of an investment of up to US$150 million in First Bank of Nigeria Limited (“FBN” or the “Bank”), a leading bank operating in Nigeria. The investment will be in the form of a working capital solutions facility (“WCS”), to support the Bank in expanding its trade finance program to Small and Medium Enterprises (“SMEs”). The facility will have a maturity of one year, renewable annually up to two times for an aggregate tenor of 3 years. A carve-out of 10% of the WCS facility (up to US$15 mn) will be targeted at supported climate-smart projects while an additional 10% will be dedicated to Women-Owned SMEs (“WSMEs”).

Associated Advisory Engagement

IFC will help FBN grow its climate finance portfolio and integrate climate business with its growth strategy. IFC climate specialist(s) will provide the necessary training and technical guidance in this new area of green finance.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	125.0
Equity

IFC's loan to the financial institution described in this SII is targeted for on-lending to the following sector(s):

Product Type	Use of Proceeds
Straight Senior Loan	Loans to SME Borrowers

IFC's Definitions of Targeted Sectors can be found here.

Development Impact

By supporting trade finance in partnership with one of the largest Nigerian banks, the project will have a demonstration impact, promote competition, and encourage other lenders to participate in funding trade finance in Nigeria: 1. Change in accessibility of trade finance for SMEs: The project is expected to improve access to stable USD liquidity for SMEs to support the importation of raw materials and critical commodities. With the funding from this investment, FBN will be able to reach a wider group of SMEs such as those involved in climate smart agriculture supply chains (irrigation equipment, high quality and climate resilient seeds, and alternative fertilizers, etc.), solar companies and solar supply chains, as well as the import-export and distribution of energy efficient and renewable energy equipment. Name% Shareholding1Eastspring Investments Singapore1.92%2Ayoola Oba Otudeko1.50%3Oyekanmi Hassan-Odulake0.86%4T. Rowe Price Associates0.77%5Norges Bank0.58%6BlackRock Fund Advisors0.35%7Global X Management Co. LLC0.29%8Eaton Vance Management0.23%9Legal & General Group Plc0.15%10Eke Urum Kalu0.06%Total for top 10 largest shareholders6.70%Others 93.30%Total 100.00% 2. Change in accessibility of climate finance: IFC anticipates that the project will increase financial access for climate smart investments by providing financing to FBN for targeted on-lending to climate smart projects by SMEs and corporates, as this is in scarce supply in Nigeria. 3. Competitiveness: The project will help jumpstart the process of raising climate finance and establish a new asset class for the Bank. Through demonstration and replication, IFC expects other banks to adopt a similar systematic approach to establishing their green lending portfolio. 4. Sustainability: IFC's engagement with FBN will help build capacity in the Nigerian banking system to scale up green financing with the introduction of tools to identify, appraise and report on green assets, as well as green certification standards.

1. Financing Structure: IFC's working capital systemic solutions facility will provide the Bank with access to stable USD financing to on-lend to SMEs to support the importation of critical commodities and raw materials. Due to the presence of multiple exchange rate windows, which prioritize petroleum products, as well as the CBN's reduction of daily sales to banks to encourage convergence of the exchange rate windows, there have been delays in banks' access to foreign exchange on behalf of their clients, leading to higher trade finance costs. The unique option to renew the facility twice for a maximum tenor of 3 years provides the Bank with multi-year USD funding certainty which is not readily available in the market. A more stable funding source would provide FBN with greater structuring flexibility to support its clients over the medium term, enabling FBN to increase its trade volumes. 2. Knowledge, Innovation and Capacity Building (Sector Expertise): IFC will help FBN grow its climate finance portfolio and integrate climate business with its growth strategy. IFC climate specialist(s) will provide necessary training and technical guidance in this new area of green finance.

E&S Category Rationale / Risks and Mitigation

This project has been categorized as a Category FI-2 project according to IFC’s Policy and Environmental and Social Sustainability, based on the use of proceeds. The project will support First Bank of Nigeria Limited (FBN) in expanding its trade finance to SMEs, women SMEs (WSMEs) and climate finance. Although FBN’s portfolio includes high risk sectors such oil and gas, power and energy, this project will be targeted towards transactions with lower risk profiles and high-risk transactions will be excluded. The environmental and social risks and impacts associated with the activities of SMEs and non-high-risk climate projects are considered limited and can be managed through mitigation measures. The overall portfolio risk for this project is therefore considered medium. The identified applicable requirements for this project are the IFC Exclusion List and the applicable national environmental and social laws in Nigeria, and for the climate finance portfolio, the IFC Performance Standards in addition to the aforementioned requirements. Given the proposed use of proceeds, this project is not expected to support higher-risk transactions that may include: (a) involuntary resettlement; (b) potential adverse impacts on Indigenous Peoples; (c) significant risks to or impacts on the environment, community health and safety, biodiversity, cultural heritage; or (d) significant occupational health and safety risks. In addition, transactions involving coal mining, coal-related activities and upstream oil and gas activities will be excluded from the project portfolio.

The main E&S risks of this project relate to the ability of FBN to properly identify and manage the E&S risks and impacts associated with its lending activities particularly to the SME sector and climate finance in line with Performance Standard 1. In addition, risks associated with the Bank’s practices regarding labor and working conditions need to be assessed in line with the requirements of Performance Standard 2.

Summary of Client Environmental and Social Management System (ESMS)

The bank has an established E&S management system (ESMS), with a dedicated team and has developed ESMS procedures for the review of relevant risks. The Bank will need to train it staff to ensure there is alignment of the E&S risk management process with the overall credit review process for SME and climate finance projects and revise its E&S risk monitoring procedures. In relation to IFC Performance Standard 2, the bank’s labor standards meet the requirements of this Performance Standard.

Contacts

For Inquiries About the Project, Contact

First Bank of Nigeria Limited
Rotimi Adegbemile
Business Manager, Financial Institutions
+234 802 7739101
olurotimi.adegbemile@firstbanknigeria.com
Samuel Asabia House, 35 Marina, Lagos, Nigeria
www.firstbanknigeria.com

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