…By Dorcas Funmi for TDPel Media. Akinwumi Adesina, the President of the African Development Bank (AfDB), recently emphasized the need for improved capitalization of development banks in Nigeria.
He made this statement during his keynote address at the BusinessDay CEO Forum in Lagos.
Adesina stressed that adequately capitalizing institutions such as the Bank of Industry, Nigerian Import and Export Bank, and Bank of Agriculture would enable them to provide loans at affordable interest rates, especially for small and medium-sized enterprises.
Additionally, he highlighted the importance of deepening domestic capital markets to facilitate equity financing for businesses.
Enhancing Capitalization for Affordable Loans:
Adesina underscored the significance of significantly capitalizing development banks in Nigeria to ensure affordable access to funds.
By providing loans at affordable interest rates, especially for manufacturers and small and medium-sized enterprises, these banks can play a pivotal role in supporting economic growth.
Adesina also emphasized the need to deepen domestic capital markets, enabling companies to obtain the equity financing necessary for their expansion and development.
Promoting Integration and Supporting MSMEs:
Adesina highlighted the potential for Nigeria to enhance the integration of its supply chains for regional and global markets by assuring financing to large, medium, and small businesses.
He referred to a report by PWC Nigeria, which estimated that despite accounting for 50 percent of Nigeria’s Gross Domestic Product (GDP), medium, small, and micro-enterprises (MSMEs) only received one percent of total credit from financial institutions.
The financing gap for MSMEs was estimated to be N617 billion.
Adesina emphasized the importance of addressing this gap and providing adequate financial support to MSMEs to promote inclusive economic growth.
Interest Rates and Manufacturing Challenges:
Adesina drew attention to the disparity in interest rates across countries, citing negative interest rates in Japan (-0.1 percent), 3.9 percent in the USA, 0.25 percent in China, and four percent in India.
In contrast, Nigerian manufacturers faced significantly higher interest rates, exceeding 15 percent.
This discrepancy poses a challenge for manufacturers in Nigeria and underlines the need for more favorable interest rates to foster a conducive business environment.
Special Agro-industrial Processing Zones:
Adesina revealed that the AfDB, in collaboration with the Nigerian government, is working on launching Special Agro-industrial Processing Zones across the country.
These zones aim to boost the agro-industrial sector and create employment opportunities.
Adesina mentioned that the AfDB and its partners have already mobilized $520 million for the first phase of these zones, which are projected to generate at least 1.5 million jobs.
The initiative involves close cooperation with federal and state governments, as well as relevant ministries and agencies.
Conclusion:
Akinwumi Adesina’s address at the BusinessDay CEO Forum highlighted the importance of enhancing the capitalization of development banks in Nigeria to provide affordable loans for businesses, particularly MSMEs.
He emphasized the need to deepen domestic capital markets and address the financing gap faced by MSMEs.
Adesina also underlined the challenge of high interest rates for manufacturers and revealed the joint efforts of the AfDB and the Nigerian government to establish Special Agro-industrial Processing Zones to drive economic growth and job creation.
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