THE new regulatory guidelines unveiled recently by the Central Bank of Nigeria (CBN) for Development Finance Institutions (DFIs) clearly indicate the apex bank’s dissatisfaction with the performance of the institutions in fulfilling their core mandates.

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We support measures that will provide a level playing ground for all participants in the Development Financing subsector, as well as the necessary framework that will help the economy grow.
By the instrument setting them up, DFIs are specialized financial jinstitutions with specific mandate to develop and pro­mote key sectors of the economy that are considered to be of strategic importance to the overall socio-economic develop­ment of the country. These financial in­stitutions include the Bank of Industry (BoI), Federal Mortgage Bank of Nigeria (FMBN), Nigeria Export Import Bank (NEXIM) and the Infrastructure Bank. The managements of these institutions were among those sacked last month by President Muhammadu Buhari.
But, last week, at the opening of the maiden edition of the bi-annual Devel­opment Finance Institutions Stakehold­ers Forum and the launch of new Regu­latory and Supervisory Guidelines for DFIs in Abuja, the CBN Governor, who was represented by the Bank’s Deputy Governor, Financial System Stability, Dr Joseph Nnanna, expressed dismay at the performance of the DFIs and disclosed plans to strengthen them. For instance, he disclosed that out of a total credit of N14.7trillion granted to operators in the economy as at June, 2015, the share that came from the DFIs was only N760.8 bil­lion, representing less than 6 percent of the total sum.
CBN is justified in pushing for new guidelines that will strengthen the DFIs to make them discharge their statutory duties more creditably. This has become necessary because over the years, Micro Small and Medium Enterprises (MSMEs) have been groaning over lack of access to loans. Always holding the short end of the stick as they face great hurdles in access­ing funds from DFIs, the MSMEs have suffered, as they contribute less than 25 percent to the Gross Domestic Product (GDP). But in Ghana, small and medium scale enterprises contribute 85 percent to their country’s GDP.
Besides, the MSMEs face high level of non-performing loans as a result of inef­fective credit appraisal, corporate gover­nance issues, weak risk management and under-capitalization.
It is in this regard that we agree with the position of CBN that a “new philoso­phy and paradigm shift” underpinned by a commercial orientation that will guar­antee their financial viability, has become expedient.
But for this to be realistic, there is need to overhaul the present structure of DFIs. The time has come to carefully bal­ance and reconcile the contradictions in their pursuit of profit and development. If properly supervised and monitored, the new guidelines will make the DFIs perform better.
Under the new guidelines, DFIs will henceforth be expected to provide more finance and credit facilities to eligible borrowers, refinance MSMEs and large enterprises loans, invest in government securities, issue bonds and notes to fund their operations as well as provide technical assistance to borrowers. All of these will help to deepen their impact on the economy.
However, in the new guidelines, DFIs will not be permitted to accept or de­mand savings and time deposits, or any type of deposits. Neither will they be allowed to take proprietary positions in real estate other than for their own businesses. They are also not permit­ted to manage pension funds, undertake project management on behalf of clients or engage in foreign exchange transac­tions.
We believe that these fresh guidelines are late in coming. If the DFIs had been closely regulated in the past by the CBN, they would have been more alive to their mandate, and the economy would have received the much-needed boost. But, we agree with CBN that political influ­ence in the appointments of their man­agements, and even in their daily opera­tions, may have somewhat diminished their operational efficiency. In that re­gard, President Buhari should exercise utmost circumspection in the constitu­tion of the boards of the DFIs.
It is regrettable that in spite of the public expectation that MSMEs would be major catalysts for wealth creation and poverty alleviation, their mostly un­coordinated business plans and poorly packaged projects reduce their chances of accessing funds warehoused by DFIs.
We advise the enterprises to package their projects well, with due regard for the proper legal framework, extant reg­ulations and relevant business informa­tion. The expectation is that the CBN’s new operational guidelines will address the current dearth of long term invest­ible funds required to stimulate them and the economy.
With the guidelines now in place to strengthen the DFIs, no excuses or in­fractions should be permitted in the bid to ensure that enterprises that meet the criteria are not denied access to funds. Such loans should also be given at af­fordable interest rates.