The Central Bank of Nigeria (CBN) says it may drive the recapitalisation and restructuring of development finance institutions (DFIs) to bridge funding gap facing micro, small, and medium-sized enterprises (MSMEs).
Muhammad Abdullahi, deputy governor for economic policy,
spoke on Tuesday during a panel at the launch of the Nigeria Development Update
by the World Bank in Abuja.
“Across all the DFIs in Nigeria, the total asset base is
slightly above N8 trillion, whereas what is required in development finance for
MSMEs is over N130 trillion,” Abdullahi said.
He said by simply injecting capital would not solve the
problem.
“The only way to address this is not only through public
sector capital injections into these institutions, but also by making them
bankable and investable,” he said.
Abdullahi said the CBN and ministry of finance are reviewing
DFI structures to improve their efficiency and risk appetite.
“We are reviewing the entire sector to ensure that we can
correct the incentives, improve risk appetite, and also strengthen capital
levels,” the deputy governor added.
He also said the reforms aim to introduce stronger
market-based principles.
“We are looking at the structure to see how more market
fundamentals can be incorporated, because the way it has been done in the past
has not delivered the desired results,” Abdullahi said.
On the persistent financing challenge for MSMEs, he said
lending to the real sector has always been one of the structural challenges
“Nigeria’s economy faces in terms of ensuring that credit reaches businesses
that require it”.
Abdullahi also spoke about the role of recent banking sector
recapitalisation.
“With the N4.6 trillion raised by the banking sector, there
are now more funds that must generate returns for investors. We therefore
expect increased credit availability going forward,” he said.
“What we want to strongly avoid is administratively directed
credit. Banks cannot simply be instructed to lend to particular businesses;
they must conduct their own risk assessments.”
Abdullahi added that with the mix of commercial banks with
stronger capital bases and DFIs undergoing structural reforms, “we expect
significantly more credit to flow to businesses”.
The development finance institutions in Nigeria are
Development Finance Institutions Bank of Agriculture (BOA), Bank of Industry,
Development Bank of Nigeria, Federal Mortgage Bank Of Nigeria, National Credit
Guarantee Company Limited, Nigeria Export Import Bank, Nigerian Consumer Credit
Corporation, and The Infrastructure Bank.
On March 31, CBN concluded the recapitalisation exercise of
banks, with 33 banks meeting the capital requirements after raising a combined
N4.65 trillion within 24 months.
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