Nigeria to establish development finance institution
LAGOS- The Nigerian government has commenced work to establish a development finance institution for the purpose of attracting long term funds into the country.
Dr Ngozi Okonjo Iweala, Minister for Finance and Coordinating Minister for the Economy, disclosed this in Lagos while fielding questions from journalists at the 4th Pan-Africa Investor Conference organised by Renaissance Capital.
Okonjo-Iweala said that the new DF is designed to address the scarcity of long term funds in the country, and it is part of efforts to restructure DFIs in the country. She said that the new institution is designed to attract long term funds of about 15 years and then wholesale to the existing DFIs.
“You know we have had DFIs in Nigeria, we have the Agriculture Bank, Bank of Industry, Infrastructure Bank, but they need restructuring, because obviously there are so many actors in Nigeria, SMEs, farmers, who are not getting access to credit. And our commercial banks are not set up to give long term credit. So we have said we don’t want to do it, like when the Minister of Agriculture said doing Agriculture differently, we want to do DFIs, the President has said we should look at the whole issue of long term financing for the economy urgently and differently so we are going to do that.
What we want to do is that we want to be able to attract ten to fifteen years money in today’s economy so we are going to be looking at restructuring the ones that exist on ground. We cannot continue to capitalize them all the time but I must say Bank of Industry, for instance that the MD, Evelyn Oputa has done a fantastic job of trying to restructure the place and turn it around, even Bank of Agriculture the MD is trying.
“So how can we help them? So that private sector can take an interest in these specialized banks and invest and it becomes more private sector driven. At the same time we create an institution that can wholesale long term finance, we don’t have it now, Brazil has it and it worked for them, even Germany, KFW in Germany does that, BNDS in Brazil does that, we don’t have it so if we create it and can get its own credit rating, they can wholesale finance to these other specialized institutions in a way that they are not able to get now so that’s what we are trying to do and we hope to be able to create that.
“Between that and with what we are trying to do for the housing sector. I think by the end of the year you will begin to see a few things that are taking shape within the economy on the finance side. It will take us about eighteen months to be able to get there. The housing institution will take us about 12 months but we are already working now.
So that our dream is that at the beginning of next year the mortgage institution can start working on this but the development finance institution might take a little longer, I suggest 18 months before we are able to get the plans together, get the money needed to back it and get going but the point is we are plugging the holes, financial holes within this economy by creating the right institution not short term intervention points, we have had enough of that and it has not led to any sustainable development. We want a longer term approach and that’s what we are working on now,” the minister said.