The Board of Directors of the African Development Bank (AfDB) Group on Monday unanimously approved a financial package of US$500 million to support the establishment of the Development Bank of Nigeria PLC (DBN), the AfDB announced.
It said the financial package consisted of loans of US$450 million and an equity investment in the DBN of US$50 million.
The funds from the AfDB Group will be used to support micro, small and medium-sized enterprises (MSMEs) operating in various sectors of the Nigerian economy.
The DBN is being established by the Federal Government of Nigeria in close partnership with international development financial institutions such as the AfDB Group, the World Bank, KfW of Germany and the French development agency, Agence Française de Développement (AFD).
“Recognizing the limitations of the existing development finance institutions (DFIs) in Nigeria, the Federal Government has decided to establish a DFI, which will be better regulated and more clearly aligned with development priorities,” said Project Team Leader Sofiane Sekioua.
“Furthermore, to ensure sustainable impact and scale, the mandate, governance and operations of the DBN will be grounded in internationally recognized good practice principles. In fact, the structure and operational design of the DBN have been informed by global experience and the designs of successful DFIs from across the world and have taken into account all the factors that led to the under-performance of the existing DFIs in Nigeria,” the official added.
In presenting the project to the Board, Stefan Nalletamby, Director of the Financial Sector Development Department at the AfDB Group, said: “The MSME sector is critical to the development of the Nigerian economy as it possesses great potential for employment generation and output diversification.
“MSMEs in Nigeria cover the entire range of economic activity; nevertheless, there has been gross under-performance of these enterprises 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. Therefore, through the DBN, the AfDB Group will contribute to mobilizing significant long-term financing to an important yet under-served sector with high development potential.”
The Director also emphasized the critical role that the AfDB Group had played in the design of the DBN and the important role that it would play in its corporate governance as one of its founding shareholders.