N396.5bn Multilateral Fund for New Development Bank as FG Applies for CBN’s Licence

Ndubuisi Francis in Abuja

The federal government has formally applied to the Central Bank of Nigeria (CBN) for an operational licence to float the proposed Development Bank of Nigeria (DBN).

The DBN, initiated in 2014 by the last administration, is being configured as a wholesale development institution, designed to provide Micro, Small and Medium Enterprises (MSMEs) with lower interests and longer tenor loans, which have been considered the missing links in the development of the real sector.

The Federal Ministry of Finance yesterday confirmed the completion of the recruitment exercise for the executive management team of the DBN, adding that it had also formally applied for the issuance of its operating licence from the apex bank.

“The DBN, was conceived in 2014. However, its take-off had been fraught with delays. The President Muhammadu Buhari’s administration inherited the project with a determination to resolve all outstanding issues and set a target of 2017 for its take-off,” a statement by the ministry’s Director of Information, Mr. Salisu Na’Inna Dambatta, said.

The DBN will have access to $1.3 billion (N396.5 billion), which has been jointly provided by the World Bank, KfW (German Development Bank), the African Development Bank (AfDB) and the Agence Française de Development (French Development Agency).

The emerging bank, the statement added, is also finalising agreements with the European Investment Bank (EIB).
It also clarified that the operations of the DBN would not in any way result in the elimination of the Bank of Industry (BOI), Bank of Agriculture (BOA) or any other existing development finance institution (DFI).

“The operations of the DBN is clearly distinct from other development banks as it is focused on supporting small businesses defined by size and not by sectors,” the statement said.

The clarification on the status of the DBN may have become necessary in view of the recent position of the management of BoI, which kicked against the Senate bill seeking to create a fresh development bank, National Development Bank of Nigeria (NDBN), saying the move was anti-people.

According to the statement from the ministry: “The DBN will provide loans to all sectors of the economy including manufacturing, services and other industries not currently served by existing development banks thereby filling an important gap in the provision of finance to Micro, Small and Medium Enterprises (MSMEs).

“As a wholesale bank, the DBN will lend wholesale to microfinance banks, which will on-lend medium to long-term loans to MSMEs. The MSMEs contribute about 48.47 percent to the Gross Domestic Products (GDP) of Nigeria but have access to only about 5 per cent of lending from Deposit Money Banks (DMBs),” the statement noted.

It added that “the influx of additional capital from the DBN will lower borrowing rates and the longer tenor of the loans, will provide the required flexibility in the management of cash flows, giving businesses the opportunity to make capital improvements, and acquire equipment or supplies.”

“As the economy diversifies, the growth of the MSME sector will have a positive impact on the economy through employment generation, wealth creation and economic growth.

“In fact, the recruitment exercise for the DBN has been finalised and a total of $1.3 billion would soon be released for the take-off of the institution,” the statement stressed