Renewed assurance came from Nigeria’s Minister of Finance Kemi Adeosun that government would position SMEs sector to develop the nation’s economy. At an inaugural strategy retreat organized by the incoming board, management and development partners of Development Bank of Nigeria, DBN, in Abuja, Monday, February 27, 2017, in anticipation of the bank’s operating license from Central Bank of Nigeria, Adeosun said government would provide needed support for the financial institution.
SMEs account for 45 percent of Nigeria’s GDP. Adeosun said 10 percent of SMEs in Nigeria accessed bank credit, compared to other countries such as Brazil 63 percent, Ghana 36 percent, China 30 percent, Kenya 24 percent and South Africa 21 percent. With DBN strategically in place, Adeosun believed the problems obstructing the growth of SMEs sector would be tackled.
About 17 million micro, small and medium enterprises, MSMEs are spread across the country. In Nigeria’s rebased economy, SMEs contributed over 45 percent to its GDP, and employs above 66 percent of the country’s labour force. Yet, SMEs in Nigeria had suffered years of neglect and under-funding. The position of SMEs in the GDP signifies the importance of the sector in growing the economy.
Former President Goodluck Jonathan inaugurated Development Bank of Nigeria, DBN, in March 2015, with sole objective to revolutionize small businesses in Nigeria. DBN as articulated by Jonathan’s government would be private sector driven. It would alleviate financial constraints experienced by investors in small businesses, as well as, eliminate obstacles hindering growth in the sector, and their inability to generate needed jobs in the country.
The bank’s structure, by Jonathan’s government, had a start-up operational capital of about $1.5 billion, and expected to increase to $5 billion within 10 years. The first five years of operation, DBN would disburse more than 200,000 new loans to SMEs with each SME creating an average of five new jobs. Over one million direct jobs and several more indirect jobs were expected to be created.
DBN and its development partners would provide business training for projected over one million SMEs to enable them become more reliable and attractive for commercial banks lending. The expectation was that the contribution of SMEs to Nigeria’s GDP would increase significantly from the present 45 percent, given the SMEs increased access to finance, access to quality financial education and access to markets.
The successful operations of DBN would be milestone in empowering more micro, small and medium enterprises across the country. Investors in this sector represent Nigerians with very strong entrepreneur spirit and vigorous work ethics that would impact positively on the country’s economy.
Development partners of DBN are African Development Bank, ADB, World bank, Agence Francaise de Development, afd, and KFW Entwicklungs Bank of Germany. DBN’s operational success would be hinged on financial discipline and adoption of international best practices in its business operations. The participating partners and Nigerian government, and the private sector investors in the bank have onerous responsibilities to ensure the success of DBN.
DBD would lend to specialized institutions such as Bank of Industry, Bank of Agriculture and commercial banks for onward lending to SMEs. It would provide medium to long term lending with duration of up to 10 years and moratorium period of up to 18 months. This would give SMEs grace period before repayment begins, and allow SMEs investors to match loan terms with longer term investment circle.
DBN’s focus should be self-sufficient institution that should shy away from government subsidy, but source funds for its operations by leveraging on existing structure of the financial sector. If DBN stays on course, it would stimulate needed growth in agriculture and manufacturing in SMEs which in turn would impact positively on the lives of Nigerians.
