The Development Bank of Nigeria (DBN) has resolved to grow its capital base in the next two years to enable it have more funds to support Small and Medium Enterprises (SMEs). Addressing reporters on the sidelines of the DBN Lecture Series in Abuja yesterday, the bank’s chairman, Dr. Shehu Yahaya, said the bank has “done a five-year strategy at the DBN and that is focused on a much greater effectiveness in terms of delivery and support for MSMEs in Nigeria and this will involve substantial expansion of capital of the bank.”
This he said will involve getting many more participating financial institutions, commercial banks, Microfinance Banks (MfBs) to participate together with DBN.
The new capital expansion he added will involve the establishment of a credit guarantee company that will help guarantee some of the lending from commercial banks so that they can use much more of their resources to support MSMEs sector. “That way we can expand the business substantially,” he said.
On the planned capital expansion, he explained: “As you go forward, the idea is to attract additional equity from impact investors as well as multilateral development institutions. Although the government will remain a shareholder, the relative ownership of the government is likely to be substantially diluted in favour of private as well multilateral development institutions.”
Within the next two years, DBN he said plans to bring in additional capital, “they will bring in additional equity investors and the DBN itself will be in a much stronger position to issue its own securities so that it can expand its capital base”.
At the moment, three institutions have equity in DBN. They are the Federal Government; the African Development Bank (AfDB) and the European Investment Bank.
Yahaya said: “The Bank has lent more than N70 billion and impacted on more than 50,000 MSMEs.” He said when the capital expansion is executed, more funds will be available to more MSMEs which contribute about 60 per cent to the gross domestic product (GDP).
“We can quote from some of our partners. The World Bank Mid Term Review of the DBN, July 2019, and I quote: “DBN is institutionally operational and is fully in compliance with prevailing regulations, with exceptional quality of corporate governance standards….”
“In the short period since the DBN became operational in late 2017, it has already established a strong record for effectiveness and professionalism as evidenced by PFIs.”
From the AfDB Annual Supervision Mission in July 2019, I quote: “Four PFIs visited during the mission expressed their overall satisfaction with DBN operations, describing them as prompt and responsive”
Delivering the keynote, former AfDB President Dr Donald Kaberuka appealed to DBN and other development banks to “resolve market failures in a market-friendly way, and diversify the funding base not to be too reliant on the state.”
Above all, he advised that the management of DBN “must be free to take sound independent investment decisions under the authority of boards that assure a good oversight.”
The Permanent Secretary, Federal Ministry of Finance, Dr. Mahmoud Isa- Dutse said the Federal Government reckon with Micro, Small and Medium Scale Enterprises (MSMEs) as the largest employer of labour.
“In many developed nations across the world, governments now recognise the emerging power of MSMEs and go further to assist them with favorable policies, plans, and programs to enable their success. That narrative is also changing in Africa and Nigeria is taking the lead”.
“Since the inception of the President Muhammadu Buhari’s administration, the government has recognised the need to pay the utmost attention to the MSMEs because they account for almost 60 per cent Nigeria’s GDP. This administration has demonstrated a willingness to develop this sector, by either enacting laws or setting up government agencies and institutions to address the challenges faced by the various stakeholders in this critical sector of the economy”, he said.
Earlier in his welcome address, DBN’s Managing Director, Mr. Tony Okpanachi said statistics has shown that “across the continent, and many global economies, MSMEs are the bedrock of economic growth and development because of the critical role they play in accelerating economic transformation and industrialisation.
In Nigeria, he said recent data released by both SMEDAN and National Bureau of Statistics (NBC) hav confirmed that there are about 41.5million MSMEs in Nigeria and collectively they contribute to well over 50% of Nigeria’s GDP.
“However, access to finance is still a concern for this critical segment of the economy. The latest figure indicates that at the Micro level, about 90.5% do not have access to credit whilst the figure for SMEs is put at 67.9%. Other pressing areas which rank high for SMEs are assistance in power and water supply – 83.5% as well as tax rate reduction – 73.1%.”
