The CBN has come to play an increasing role in development finance in areas where deposit money banks have been reluctant to tread. These include agriculture and micro, small and medium enterprises (MSMEs). Its disbursements had reached N732bn as at November. It is not alone in this field among public bodies, and we mention some other players: we exclude those for individual sectors such as housing as well as the Africa Finance Corporation because it invests in infrastructure across the continent.
The Development Bank of Nigeria (DBN) has now received a licence for wholesale development finance from the CBN, subject, it appears, to a N100bn minimum capital requirement. The bank will be able to draw from funding pledges totaling US$1.3bn from the World Bank, the African Development Bank, and German and French state development funds. The European Investment Bank is expected to provide additional support.
The DBN is mandated to provide medium and long-term finance across the economy. This includes the overlooked MSMEs, which it will, being a wholesale finance institution, support through microfinance banks. Official figures show that the MSMEs account for 48% of GDP but only 5% of lending by DMBs.
Within its broader portfolio, the Bank of Industry disbursed N5.6bn to MSMEs in 2015 and N8.0bn last year. The bank also manages government and sector-specific funds. It has access to concessional wholesale funding, notably a US$535m zero-coupon bond issued by the CBN.
The Nigeria Sovereign Investment Authority is capitalised at US$1.25bn and has a US$500m infrastructure fund in five focus sectors, representing 40% of its funds under management. Its investments include a shareholding in the Nigeria Mortgage Refinance Company and the development of the Second Niger Bridge.
Capital releases within the 2016 budget have reached a record N1trn (Good Morning Nigeria, 29 March 2017), and the FGN’s 2017 budget proposals see a doubling to N2.24trn (US$7.3bn). The target may prove elusive in view of the challenging projection for non-oil revenue generation, so all contributions from public bodies are welcome.
While the field for development finance is crowded and could arguably benefit from consolidation, the infrastructure deficit is huge. Among the many estimates in circulation, we cite the figure of US$70bn investment per year from the UK’s Department for International Development if Nigeria is to emulate the “take-off” achieved by the likes of South Korea and China.