The Board of Directors of the African Development Bank (AfDB) Group unanimously approved a financial package of 500 million dollars to support the establishment of the Development Bank of Nigeria PLC (DBN), a statement by the bank said on Wednesday in Abuja.
The statement said the financial package consisted of loans of 450 million dollars and an equity investment of 50 million in the DBN.
It stated that the funds from the AfDB Group would 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 partnership with international development financial institutions such as the AfDB, the World Bank, KfW of Germany and the French Development Agency (AFD).
“Recognising the limitations of the existing Development Finance Institutions (DFIs) in Nigeria, the FGN has decided to establish a DFI, which will be better regulated and more clearly aligned with development priorities.
“Furthermore, to ensure sustainable impact and scale, the mandate, governance and operations of the DBN will be grounded in internationally recognised good practice principles,” it said.
The statement said the structure and operational design of the DBN had been informed by global experience and the designs of successful DFIs from across the world.
It added that AfDB had taken into account all the factors that led to the under performance of the existing DFIs in Nigeria.
The statement said the MSME sector was critical to the development of the Nigerian economy as it possessed great potentials 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 mobilising significant long-term financing to an important yet under-served sector with high development potential,” it added.