A financial package of $500m to support the establishment of the Development Bank of Nigeria PLC (DBN) has been unanimously agreed by the African Development Bank (AfDB) Group.
The package consists of loans worth $450m and an equity investment in the DBN of $50m according to the AfDB. The funds will be used to support micro, small and medium-sized enterprises (MSMEs) operating in various sectors of the Nigerian economy.
As well as the AfDB Group, other international development financial institutions such as the World Bank (with a commitment of $500m according to THISDAY newspaper), KfW of Germany ($200m) and the French Development Agency, Agence Française de Développement (AFD) are collaborating with the Federal Government of Nigeria (itself providing $200m) to set up the DBN.
“Recognizing the limitations of the existing development finance institutions (DFIs) in Nigeria, the Federal Government has decided to establish a DFI, which will be better regulated and more clearly aligned with development priorities,” PANA quoted Project Team Leader Sofiane Sekioua as saying.
Stefan Nalletamby, Director of the Financial Sector Development Department at the AfDB Group, said: “The MSME sector is critical to the development of the Nigerian economy as it possesses great potential for employment generation and output diversification.
“MSMEs in Nigeria cover the entire range of economic activity; nevertheless, there has been gross under-performance of these enterprises and this has undermined their contribution to economic growth.
“Among the issues affecting their performance, the shortage of finance, particularly investment finance, occupies a very central position. Therefore, through the DBN, the AfDB Group will contribute to mobilizing significant long-term financing to an important yet under-served sector with high development potential.” The Director also emphasized the critical role that the AfDB Group had played in the design of the DBN and the important role that it would play in its corporate governance as one of its founding shareholders.
Nigerian Finance Minister, Dr. Ngozi Okonjo-Iweala has described the proposed bank as a key part of the President’s vision for the country to realise the economy’s potential.
“We want to create an institution that can make wholesale long term finance available to our young entrepreneurs, our businessmen, our industrialists so they can grow their businesses sustainably, create jobs and contribute to the economic development of the country,” she has been quoted as saying.