Juliana Taiwo-Obalonye, Washington DC
The European Investment Bank (EIB) and the African Development Bank (AfDB) have agreed to support the creation of new Development Bank of Nigeria to strengthen lending for business and agriculture investment in the country with $70 million.
This was contained in a statement released to journalists at the ongoing 2018 Spring Meetings in Washington DC, by EIB and AfDB.
The EIB has finalised a $20 million equity stake in the new financing institution, alongside $50 million equity participation from AfDB.
At present, new investment essential for companies to expand and create jobs is hindered by limited access to commercial banks. The DBN estimates that only 5 per cent of the 37 million entrepreneurs and small businesses in Nigeria that contribute about 50 per cent of GDP can access credit in the financial system.
The Federal Government had created the DBN to address financing challenges hindering private sector investment in the country. The bank is called to play an important and catalytic role in providing funding and risk sharing facilities to Micro, Small and Medium Enterprises (MSMEs) as well as small corporates.
Tony Okpanachi, Managing Director of DBN said, “the Development Bank of Nigeria will overcome the funding gap in the micro-, small- and medium-scale enterprises space and help businesses unlock opportunities across Nigeria. DBN’s ambition is strengthened by the financial and technical support of international partners, including the EIB and AfDB. The new institution builds on international experience and uses a business model that has demonstrated proven success to enhance private sector investment across Africa and around the world where other financing options are inadequate or absent.”
Stefan Nalletamby, Director of the Financial Sector Development Department at AfDB said, “private sector businesses are critical to the development of the Nigerian economy as they possess huge potential for employment generation and output diversification. Nevertheless, there has been under-performance of these businesses 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. The DBN is expected to contribute to mobilising significant long-term financing to an important yet underserved sector with high development potential.”
Ambroise Fayolle, Vice President of EIB, said, “new private sector investment is crucial to creating jobs and enable business to expand and limited access to long-term financing holds back economic growth.