The International Finance Corporation, a private sector arm of the World Bank, has granted Diamond Bank Plc a $70m loan .

Shares in the bank rose by 1.4 per cent to an 11-week high, bucking the trend on a weak bourse, to value the bank at around N41bn ($254m).

The World Bank unit said the funding would help finance lending to small and medium-sized businesses in the country’s economy.

A statement by the bank said, “The bank considers the dollar denominated investment appropriate firm its medium and long term funding strategies given the high interest rates regime, dearth of such long- term financing in the Nigerian financial markets and the depressed domestic equities market which would have made local borrowing and equity issuance a lot more expensive.

“Moreover, the bank’s current capital structure is optimised with the issue of debt capital rather than equity. Injecting tier 2 capital into the balance sheet will help the bank to achieve a lower weighted average cost of capital and boost the bank’s capital adequacy ratio, while providing a veritable source of funding for customers’ business and the bank’s expansion plans.”

The statement said the facility was also convertible, which gave the IFC entities the option to convert the debts into equity at pre-agreed price share within agreed timelines in the future.

“This is another stamp of authority on the bank and its management as the IFC truly believes in the growth potential of the bank to seek to become a core shareholder in it. This speaks to the existence of excellent corporate governance culture in Diamond Bank,” it added.

Shares in Diamond Bank, which has over 200 branches in Nigeria, have gained almost 46 per cent this year, compared with an overall rise in the sector of about 30 per cent.

Source: Punch/ Ademola Alawiye