The International Finance Corporation (IFC) has agreed to provide a US$40mn guarantee to Coronation Merchant Bank in Nigeria, as part of its Global Trade Finance Programme (GTFP).

Under the terms of the deal, the IFC will offer confirming banks full or partial guarantees to cover Coronation Merchant’s trade-related payment obligations, enabling the African bank to support greater numbers of Nigerian exporters.

Kevin Njiraini, IFC’s director for Southern Africa and Nigeria, says: “This relationship will help improve the bank’s trade with other countries, and create new economic opportunities in Nigeria.”

The IFC adds that by joining the programme, Coronation Merchant bank will be able to establish partnerships with several international banks who are also part of the GTFP initiative, which will in turn boost access to finance in Nigeria.

Since its launch in 2005, the GTFP has backed over US$60bn in transactions with guarantees like this, in a bid to mitigate risk for international lenders and boost the flow of goods and services between developing countries. Fifteen years on, the programme is now the largest of the IFC’s seven trade initiatives, with a network of nearly 300 banks.

This is the latest in a series of initiatives aimed at tackling the continent’s sizeable trade finance gap – estimated by the African Development Bank (AfDB) at as much as US$120bn – caused in part by the withdrawal of international banks from African markets, a practice known as derisking. In November last year, Absa and the AfDB signed a US$250mn risk participation agreement, providing for the sharing of default risk on trade transactions originated by African issuing banks, with a focus on SMEs in low-income countries. This followed a similar deal, signed in October by CDC Group, the UK’s development finance institution (DFI), which saw a US$75mn funded and unfunded facility earmarked for onlending to banks across Africa.