Nigeria is billed to set up a development finance institution that will make access to funds easy and spur economic growth.
Speaking at a Centenary Lecture of the Lagos Chamber of Commerce and Industry (LCCI) on Thursday, Nigeria’s Coordinating Minister for the Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala said the establishment of the development finance institution which will take off in the next 18 months would provide long-term funds and reduce the cost of borrowing.
According to Okonjo-Iweala, “Access to fund to finance in this economy is difficult. We must get medium to long-term money in this economy; if not, we cannot sustain the growth. We have decided that the best way to go is to set up a development finance institution to wholesale money to commercial and specialised banks.”
Nigeria will raise $1.9 billion to finance the programme.
“The African Development Bank has agreed to put in about $400 million into that emergency cash raising project over the next three years; the World Bank will put in $700 million and others are coming in to support us. Part of the money from the Eurobond will also go into that,” she said.
The Minister also hinted that 14 states in the country have been selected for the pilot phase of the proposed Mortgage Refinancing Company (MRC) which would be launched by President Jonathan in November.
Okonjo-Iwela said the World Bank last week approved the $300 million liquidity facility for the MRC.
“The objective for that is to use this as an instrument to drive the housing sector. We are doing this by taking 14 pilot states that have promised to make land available,” she explained.
As an alternative financial institution, development finance institutions include microfinance institutions, community development financial institution and revolving loan funds. These institutions perform a crucial function, providing credit in the form of higher risk loans, equity positions and risk guarantee instruments to private sector investments in developing countries.
In Nigeria, thousands of SMEs lack of access to funds. Perhaps, the initiative might come to the rescue of several micro entrepreneurs whose businesses play a crucial role in the integration, growth and development of the economy.
