The European Investment Bank (EIB) and the African Development Bank (AfDB) have agreed to support the new Development Bank of Nigeria (DBN) with $70 million.
EIB put in an equity stake of $20 million to finance the bank, while AfDB put in $50 million as equity participation.
A statement sent to PREMIUM TIMES on Thursday showed that the reason behind the contribution was to strengthen lending for business and agriculture investment in the country.
The Development Bank of Nigeria has been created to provide funding and risk sharing facilities to micro, small and medium enterprises as well as small corporates, by the federal government. The bank is also to address financing challenges hindering private sector investment in the country.
According to the statement, at present, new investments essential for companies to expand and create jobs are hindered by limited access to commercial banks. It is estimated by the Development Bank of Nigeria that only five per cent of the 37 million entrepreneurs and small businesses in Nigeria that contribute 50 per cent of GDP can access credit in the financial system.
The Vice-President of the EIB, Ambroise Fayolle, said his bank is pleased to support DBN to enhance private sector investments in Nigeria.
“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 said.
The Director of the Financial Sector Development Department of the AfDB, Stephen Nalletamby, said there has been an under-performance of private sector businesses in Nigeria which has undermined their contribution to economic growth as private sector businesses are critical to the development of the Nigerian economy.
“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 an 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 said.
Tony Okpanachi, Managing Director of the DBN, said the bank will overcome the funding gap and unlock business 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,” he said.
The Head of the European Union Delegation to Nigeria, Ketil Karlsen, pledged the European Union’s commitment to support private sector investment in Nigeria
“The European Union is committed to supporting private-sector investment in Nigeria. 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,” he said.
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 statement showed.
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