Minister Directs DBN To Provide Affordable Financing To MSMEs

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Following the devastating effects of the Russia-Ukraine war on the Nigerian economy, the Federal government has directed the Development Bank of Nigeria (DBN) to provide affordable financing to a wider cross-section of the country’s Small and Medium Scale Enterprises (MSMEs).

The Minister of Finance Budget, and National Planning, Zainab Ahmed gave the directive while declaring open on behalf of the Vice-president, Yemi Osinbajo, the 3rd Annual Lecture Series of the Bank with the theme: “Thriving in the Face of Domestic and Global Disruptions”, in Abuja on Thursday.

Ahmed said DBN’s intervention has become imperative because of the resultant impact of the war on the cost of doing business, and the difficulties facing MSMEs which have increased significantly, adding, “It is important that the DBN step up to the plate and expand its funding windows to provide affordable financing to a wider cross-section of MSMEs”.

The Minister said, “The Federal Ministry of Finance, Budget and National Planning and all its agencies stand ready to utilize the fiscal policy tools at our disposal to support the DBN and other public and private sector actors working towards the common goal of ensuring MSMEs can become key drivers of economic growth and create sustainable and livelihood-enhancing jobs for segments of the working population prone to vulnerability”.

She pointed out that the DBN was created in collaboration with key development partners to address the financing challenges facing MSMEs in Nigeria.

“Through its work of providing wholesale funding and risk-sharing facilities to Participating Financial Institutions (PFIs) for on-lending to MSMEs, the DBN has distinguished itself as a key contributor to unlocking the capacity of MSMEs to catalyze economic growth and job creation in the Nigerian economy.

“According to the International Finance Corporation (IFC), between 70 and 95 per cent of new employment opportunities in emerging economies are created by MSMEs. To ensure their effective contribution to the economy, it is imperative to ensure MSMEs are supported in the acquisition of skills and tools to run their businesses efficiently, manage risks and gain access to finance at competitive and affordable rates.

“The World Bank Group estimates the finance gap among formal MSMEs in developing economies to be 18 percent of GDP with potential demand for financing among informal MSMEs as high as 11 per cent of GDP.

“This underscores the important role played by the DBN in facilitating access to finance and with a total loan disbursement of N482 billion to 208,000 MSMEs in 2021, of which 27 per cent are youth-owned while 66 percent are owned by women, the DBN continues to be a major driver of MSME growth in Nigeria”, she further said.

The Minister said the administration of President Muhammadu Buhari is deeply committed to providing support to MSMEs as evidenced in the emphasis placed on ensuring their continued operations during the early months of the COVID-19 pandemic which led to the temporary closing down of 53.2 per cent of SMEs and 37.3 per cent of MEs.

According to her, in the development of the Economic Sustainability Plan (ESP) some of the provisions to support MSMEs include:ana N250 billion grant containing an N50 billion MSME de-risking facility component; a payroll support scheme providing up to N50,000 in monthly salaries for up to 10 staff of qualifying businesses for three months – 1.3 million jobs have been retained through the MSME and payroll support.

Ahmed also listed other interventions to include, including a one-off grant of N30,000 for 333,000 self-employed persons working as transporters and artisans under the Artisan and Transport Scheme; an N50,000 grant for 100,000 MSMEs; provision of financial backing up to N191 billion in loans to 34,144 MSMEs; and capacity building of 125 MSMEs and loan guarantees for 1,748 businesses to the tune of N6.2 billion, etc.

While congratulating the DBN for organizing the 3rd Annual Lecture Series, the Minister said she looked forward to the recommended policy actions following the exchange of ideas during this event.

In his welcome remarks, the Managing Director of DBN, Tony Okpanachi said the theme of this year’s Lecture “speaks directly to our commitment as a financial institution, toward providing a conducive environment for MSMEs to thrive”

He said as the Pioneer Managing Director of the bank that he was very proud to be part of this year’s Annual Lecture Series because it marked its 5th year in operation, and against the backdrop of the strategic role DBN plays as reliable builders of MSMEs, “a segment we are mandated to provide funding for”.

Okpanachi pointed out that disruptions on a global scale “are now a reality in an increasingly interconnected global economy”.

“However, there is still a compelling need for businesses to continue to innovate especially, as the world gradually recovers from the disruptions caused by Covid-19 which has affected every part of the value chain, from raw material sourcing to the end customer; to the suffering induced by the humanitarian crisis caused by Russia’s invasion of Ukraine, resulting in slower economic growth and rising inflation across nations”, he added.

The Chairman of the Bank, Shehu Yahaya, stressed that the Annual Lecture Series is one of the ways the DBN has continued to engage with all stakeholders to search for solutions and influence policies aimed at addressing the constraints faced by the MSMEs especially as it relates to access to finance and building their capacity to upscale sustainably.

He stated that MSMEs occupy a critical part of the Nigerian economy and contribute 48% to Nigeria’s GDP, adding that through the activities of this subsector, Nigeria can be transformed from a consuming to a producing nation.

According to him, the strategy is to overcome MSMEs’ major challenges and transform them into a major fulcrum for the transformation of the Nigerian economy so that they are at the center of technological innovation and transformation, local value addition, non-oil export drive with dynamic linkages to larger enterprises, and a veritable engine for job generation.

“This is the whole focus of this year’s Annual Lecture, to combine our efforts with all other stakeholders to develop ideas, policies, programs, and projects to boost growth, bolster macroeconomic frameworks, reduce financial vulnerabilities, provide support to vulnerable population groups, and reduce the long-term impacts of the global shocks of recent years”, he added.

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