To Get Personalised contents and be able to add items to your favourites, please Sign In or Sign Up          
 

FG Pools over $1bn to Float Development Bank Before Year End


News » Editorials
Nigeria

IMAGE: Dr. Ngozi Okonjo-Iweala, Minister for the Economy and Minister of Finance »

September.08.2014

After a successful launch of the Nigeria Mortgage Refinance Company (NMRC) and in a bold move to bolster the real sector, the federal government appears set to actualise its proposed wholesale development bank.

The sector has been largely hampered by the twin challenges of lack of access to long-term financing and high interest rate regime.

Reliable information sourced at the weekend indicated that the financial institution, which is already in the mills, is billed to commence operations before the end of the year.

THISDAY investigations revealed that the whole incorporation process of the emerging bank, which is to be christened Development Bank of Nigeria (DBN), is on the verge of consummation with Approval-in-Principle already granted by the  apex bank, the  Central Bank of Nigeria (CBN).

A total commitment of over $1 billion has also been made by partners, including the World Bank, African Development Bank (AfDB), KfW of Germany, and AfB of France.

A source in the working group of the emerging finance institution told THISDAY that the federal government had resolved to tackle the major challenges facing Micro, Small and Medium Enterprises (MSMEs) in the country without further delay by ensuring that DBN commences operations before the end of the year.
According to the source, the emergence of the DBN would give further impetus to the real sector following the recent disbursement of the CBN’s N220 billion fund for MSMEs to states and financial institutions.

President Goodluck Jonathan had at the disbursement forum, reaffirmed plans by his administration to establish a wholesale Development Finance Institution (DFI) that will provide long-term funds for industrial development.

At the event, Jonathan had applauded the apex bank for providing the funds for the development of the sector at an interest rate of nine per cent, adding that the decision to set aside 60 per cent of the funds for women was in tandem with his government’s commitment to women empowerment.

“All over the developed world, the contribution of MSMEs to GDP is on the average of about 47 per cent. This shows clearly how important the MSMEs are to us. With about 17.3 million SMEs in Nigeria, there is need for more concrete and concerted efforts to expand the activities of MSMEs in our country. MSMEs have been recognised globally as the engine of growth in any development-oriented economy,” he said.

Giving further information on DBN, our source said its creation would revolutionise and stimulate the growth of the MSMEs’ sector since it was designed to ensure that thousands of loans were made available to the sector.
The emerging bank, he added, was a special vehicle to expand financial inclusion and a major artery for access to finance via credit products and partial credit guarantees.

Some of the multiplier effects of the growth of the MSMEs, he said, included value chain promotion, capacity building for increased productivity, and increased gender participation based on robust technical assistance for women.

An indication to float the proposed DBN was given in March last year by the Coordinating Minister for the Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala, who said the manufacturing sector, especially the small and medium enterprises (SMEs) could not grow without reliable long-term sources of finance and affordable interest rates.

“As a result, the President and Vice-President have set up a committee to look into the issue. We now have approval to restructure existing DFIs (development finance institutions) as retail outlets for financing domestic lenders, while we build a strong wholesale institution that will increase and drive lending costs down,” she had disclosed.

In a bid to partner the federal government in actualising the DBN project  as well as seek other areas of investment and cooperation with Nigeria, the German Minister for Economic Planning and Development, Mr. Gerd Mueller, and other top German officials and businessmen were in Nigeria recently for talks with Okonjo-Iweala and other Nigerian officials.

The German delegation  also included its country’s Ambassador to Nigeria, Janetzke Wenzel.

During the talks, Nigeria’s request  for a soft loan of $200 million at a concessionary rate to enable the country set up a development bank similar to that of Germany’s globally respected development  bank—KfW, received a positive response.

Although our source could not provide further details of the financial commitment of the other partners to the DBN project, THISDAY gathered that the scope of investment in the proposed bank was wide.

Meanwhile, as the federal government  fast tracks the move to float DBN, it  has commenced the process of partially privatising the Bank of Industry (BoI) and Bank of Agriculture (BoA), in line with its policy of restructuring existing development finance institutions ( DFIs ) in the country.

Article Credit: Thisdaylive

Updated 2 Years ago
 

Find Us On Facebook

Tags:     NMRC     DBN     CBN     AfDB     President Goodluck Jonathan     Dr. Ngozi Okonjo-Iweala     Mr. Gerd Mueller    

RELATED