Omodele Adigun

Following the apathy of many local banks to lift entrepreneurship and startups, some international banks have taken up the gauntlet to unlock business potential of Nigerian investors.

These good ‘Samaritans’ include the World Bank, European Investment Bank (EIB), the African Development Bank (AfDB), Germany’s KfW and the French Agence Française de Développement (AFD), while the Development Bank of Nigeria (DBN) will serve as their anchor to lend helping hand to private sector investment in the country.

Just last Thursday, EIB agreed on facilitating credit facility to business and agriculture investment in Africa’s biggest economy by finalising a $20-million equity stake in DBN, alongside another $50 million equity participation from AfDB.

EIB is the long-term lending institution of the European Union (EU) owned by its member states. It makes long-term finance available for sound investment in order to contribute towards EU policy goals.

AfDB, on the other hand, is a development finance institution whose overarching objective is to spur sustainable economic development and social progress in its regional member countries, thus contributing to poverty reduction. It aims to achieve this objective by mobilising and allocating resources for investment in regional member countries and providing policy advice and technical assistance to support development efforts.

DBN exists primarily to address financing challenges hindering private sector investment. In fact, the calling of 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.
Just recently, DBN and the Nigeria Incentive-based Risk Sharing System for Agricultural Lending (NIRSAL) signed a Memorandum of Understanding (MoU)aimed at promoting lending to the agricultural sub-sector of the economy and its value chain.

Commenting on EIB and AfDB equity stake, the Managing Director of DBN, Mr. Tony Okpanachi, 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. 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.”

The Director of the Financial Sector Development Department at AfDB, Stefan Nalletamby, also raised hope on the collaboration, saying, “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.”

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For his part, the EIB Vice President, Ambroise Fayolle, has this to say of the deal: “New private sector investment is crucial to create jobs and enable businesses to expand. Limited access to long-term financing holds back economic growth. The EIB is pleased to support the new DBN to strengthen private-sector investment in Africa’s largest economy. We look forward to continued close cooperation with Nigerian and international partners to ensure that once fully operational, the new DBN can help harness the country’s economic potential.

“The EU is committed to supporting private-sector investment in Nigeria. The new backing for DBN by both EIB, the bank of the EU and the AfDB, with 13 EU member state shareholders, will make a clear contribution to tackling the lack of access to credit by entrepreneurs and businesses across the country.

“With more investment, we hope to promote a vibrant economy and stimulate growth, employment and increase opportunities, especially for youths,” said Ambassador Ketil Karlsen, Head of the EU delegation to Nigeria and the Economic Community of West African States (ECOWAS).”
At present, new investment essential for companies to expand and create jobs is hindered by limited access to commercial banks. It is estimated that only 5 per cent of the 37 million entrepreneurs and small businesses in Nigeria that contribute 50 per cent of the GDP can access credit in the financial system.

Other international financial institutions including the World Bank, Germany’s KfW and AFD will also support the DBN alongside backing from the Federal Government.

Speaking recently at the MoU signing ceremony on agricultural lending, Okpanachi noted the partnership is a strategic collaboration that will impact positively on agriculture, all the value chain players and address the concerns of financial institutions on the high risk of lending to the sector.
His words: “The MSMEs, if well managed, have the potential to achieve key macro-economic objectives of the Federal Government, which include, but not limited to job creation, poverty alleviation, financial inclusion, development of technology and so on.”

Okpanachi explained that the core mandate of DBN is to alleviate financing constraints faced by MSMEs and small corporates in Nigeria through the provision of financing and partial credit guarantees to eligible financial intermediaries on a market-conforming and sustainable basis.”
For his part, the Managing Director of NIRSAL, Aliyu Abdulhameed, stated that, “NIRSAL’s primary mandate is to facilitate the flow of credit, finance and investments into agriculture and agribusiness.’’

According to him, “NIRSAL believes strategic collaborations with major stakeholders in the industry is pivotal to achieving defined and well-tailored objectives and results. It is in line with this view that the partnership with DBN is structured. As Development Finance Institutions (DFIs), NIRSAL and DBN share a common goal of supporting investments that will catalyse sustainable economic growth, create more jobs and equip farmers with the capital needed to thrive in the agricultural sector.”

Under this partnership, NIRSAL is expected to provide risk mitigating credit guarantees while DBN is expected to provide the funds for on lending to MSMEs in the agricultural sub-sector and its value chain.

While DBN was established by the Federal Government in collaboration with World Bank, AfDB and other renowned international DFIs to address the major financial constraints faced by MSMEs in Nigeria, NIRSAL was set up by the Central Bank of Nigeria (CBN) to provide the much needed risk management tool to enhance the flow of finance and investment in the agricultural value chain.