EIB, AfDB Offers $70m Support For Nigeria’s Development Bank

The Federal Government determination to establish the Development Bank of Nigeria received a boost on Thursday with the Finance Ministry announcing a US$70m equity participation by the European Investment Bank (EIB) and African Development Bank (AfDB).
A breakdown of the financing support, according a statement by Oluyinka Akintunde, special assistant to Nigeria’s Finance Minister, said the EIB has finalized a US$20m equity stake in the new financial institution, alongside another US$50m equity participation from the AfDB.
These are expected to help strengthen the lending capacity of DBN, which was created by the government to address financing challenges hindering private sector investment in the country, particularly in the area of stimulating economy development and financing sustainable growth through access to inclusive financing,, particularly in agriculture, among others.
Other international financial institutions including the World Bank, Germany’s KfW and the French Agence française de développement (AFD) are also expected to support the new bank alongside backing from the Federal Government of Nigeria.

Funding Gap
The statement quoted Tony Okpanachi, DBN’s Managing Director as saying the new investments will help “overcome the funding gap in the micro-, small- and medium-scale enterprises space and help businesses unlock opportunities across Nigeria.”
DBN’s ambition, he continued, is strengthened by the financial and technical support of international partners, including both the EIB and AfDB, adding that the new institution will build “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.”
Continuing, Stefan Nalletamby, Director of the Financial Sector Development Department at the AfDB noted the critical role of private sector businesses “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,” he added.
For Ambroise Fayolle, Vice-President of EIB, “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,” he stressed.

Supporting Nigerian Investment
Also commenting, Ambassador Ketil Karlsen, Head of the European Union Delegation to Nigeria and the Economic Community of West African States (ECOWAS), expressed the commitment of the European Union “to supporting private-sector investment in Nigeria.”
The new backing for the DBN by both the EIB, the bank of the European Union 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 youth,” he assured.
DBN, the statement continued, is called 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 DBN estimates that only 5% of Nigeria’s 37m entrepreneurs and small businesses that contribute up to 50% of GDP can access credit in the financial system under the present circumstance, a scenario it is poised to significantly alter. READ MORE