The European Investment Bank and the African Development Bank have agreed to support the creation of the new Development Bank of Nigeria to strengthen lending for business and agriculture investment in the country.
According to a press statement, the European Investment Bank has finalised a $20-million equity stake in the new financing institution, alongside $50-million equity participation from the African Development Bank.
The Development Bank of Nigeria was created by the federal government to address financing challenges hindering private sector investment in the country and to play an important and catalytic role in providing funding and risk sharing facilities to micro, small and medium enterprises as well as small corporates.
The managing director of the Development Bank of Nigeria, 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, including the European Investment Bank and African Development Bank.
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.
“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.’
’ Also, the director of the Financial Sector Development Department at the African Development Bank, Stefan Nalletamby, said the Development Bank of Nigeria is expected to contribute to mobilizing significant long-term financing to an important yet underserved sector with high development potential.
“New private sector investment is crucial to create jobs and enable business to expand and limited access to long-term financing holds back economic growth. The European Investment Bank is pleased to support the new Development Bank of Nigeria 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 Development Bank of Nigeria can help harness the country’s economic potential,” said Ambroise Fayolle, VicePresident of the European Investment Bank (EIB).
At present, new investment essential for companies to expand and create jobs is hindered by limited access to commercial banks.
It is estimated by the Development Bank of Nigeria that only 5 per cent of the 37 million entrepreneurs and small businesses in Nigeria that contribute to 50% of GDP can access credit in the financial system.
Other international financial institutions including the World Bank, Germany’s KfW and the French Agence française de développement (AFD) will also support the new bank alongside backing from the Federal Government of Nigeria.