The African Development Bank (AfDB) and European Investment Bank (EIB) have agreed to support the creation of the new Development Bank of Nigeria (DBN) to strengthen lending for business and agriculture investment in the country.
Already, the African Development Bank has promised a US $50-million equity participation in the DBN while European Investment Bank has finalized a US $20-million equity stake in the new financing institution.
The Managing Director of the DBN, Tony Okpanachi, said that with the latest supports by the AfDB and EIB, amongst other international finance institutions that had indicated interest in the bank “it will overcome the funding gap in the micro-, small- and medium-scale enterprises space and help businesses unlock opportunities across Nigeria.
According to him, DBN’s ambition is strengthened by the financial and technical support of international partners, including the European Investment Bank and African Development Bank.
Okpanchi explained that the new development finance institution was building on international experience and using 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.
Commenting on the DBN’s critical role in private sector growth in Nigeria, AfDB’s Director of the Financial Sector Development Department, Stefan Nalletamby, 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 Development Bank of Nigeria is expected to contribute to mobilizing significant long-term financing to an important yet underserved sector with high development potential”, Nalletamby stressed.
In his remarks, EIB’s Vice President, Ambroise Fayolle, pointed out that “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.
While expressing his bank management’s pleasure over the support for the DBN to strengthen private-sector investment in Africa’s largest economy, Fayolle said the EIB team looks “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,”
Also, the Head of the European Union Delegation to Nigeria and the Economic Community of West African States (ECOWAS), Ambassador Ketil Karlsen, said that the European Union was committed to supporting private-sector investment in Nigeria.
According to him, the new backing for the Development Bank of Nigeria by both the European Investment Bank, the bank of the European Union and the African Development Bank, 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 youth”, Karlsen said
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% 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.
The Development Bank of Nigeria was created by the Federal Government to address financing challenges hindering private sector investment in the country.
