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EIB, AfDB to support new Development Bank of Nigeria with $70m, aide easy access to loans

EIB, AfDB to support new Development Bank of Nigeria with $70m, aide easy access to loans

- The European Investment Bank (EIB) finalised a US $20-million equity stake in the new bank

- The African Development Bank also has $50-million equity participation in the Development Bank of Nigeria

- The finance ministry believes the Development Bank of Nigeria would help to ease access to loans for investments and expansion of businesses

The European Investment Bank (EIB) and the African Development Bank (AfDB) have agreed to support the creation of the new Development Bank of Nigeria to strengthen lending for business and agriculture investment in the country, has learnt.

To make this a success, the EIB has finalised a US $20-million equity stake in the new financing institution, alongside $50-million equity participation from the African Development Bank.

It was learnt that the Development Bank of Nigeria was created by the federal government to address financing challenges hindering private sector investment in the country.

The bank is expected 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.

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“The Development Bank of Nigeria will overcome the funding gap in the micro-, small- and medium-scale enterprises space and help businesses unlock 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,” Tony Okpanachi, the managing director of the bank said in a statement received by from the finance ministry.

Also speaking, Stefan Nalletamby, director of the financial sector development department at the AfDB, said: “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 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.”

Ambroise Fayolle, vice-president of the EIB, was quoted as saying: “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."

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The finance ministry noted that currenty, new investments and companies’ expansion and job creation are hindered by limited access to commercial banks.

It is therefore estimated by the Development Bank of Nigeria that only five percent of the 37 million entrepreneurs and small businesses in Nigeria that contribute to 50 percent of GDP can access credit in the financial system.

The statement however added that 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. reported how the African Development Bank (AfDB), headed by Akinwunmi Adesina, former agriculture minister, on Monday, September 26, 2016, approved the sum of $1 billion as loan to the Nigerian government.

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