Development Bank of Nigeria has said it will empower Micro, Small and Medium Enterprises segment with N100bn before the end of 2019.
In a statement, the Chief Economist, DBN, Prof Joseph Nnanna, disclosed this at the fifth edition of the Refined Economic Development quarterly lecture at the University of Abuja.
In his presentation titled, ‘Contemporary strategies for financial inclusion and prosperity in Nigeria,’ Nnanna reiterated that MSMEs were the backbone of any economy, considering the fact that the segment made up over 90 per cent of all firms and accounted for an average of 60 to 70 per cent of total employment, and roughly 50 per cent of Gross Domestic Product of Nigeria.
It stated that a 2018 survey by the International Finance Corporation showed that only 31 per cent of MSMEs in Nigeria had ever obtained a loan from a financial institution, commercial or micro finance bank.
Nnanna said that reasons for the low figure included lack of collateral, problems with credit history, and unfavourable worthiness of the prospective borrowers.
He stated, “For Nigeria as a whole, we are trying to achieve more access to finance for the MSMEs, because we believe they are the engine that grows any economy in any part of the world.
“This year alone, the DBN plans to disburse N100bn to MSMEs and we are quite on track as it is already.
“We are very confident that we will achieve that this year and beyond.”
To aid in reducing the risks associated with the MSME segment, Nnanna said, “DBN offered partial risk sharing (credit guarantees) with prospective financial institutions granting credit to the operators in the segment.
“In 2018, 22.74 per cent of total credit was allocated to the oil and gas sector and 13.75 per cent was allocated to the manufacturing sector. Conversely, sectors where the MSME participants operate include agriculture which total credit allocated was a paltry 3.16 per cent, general/trade and commerce 6.89 per cent and education which credit to this sector remains subdued, received 0.41 per cent (NBS, 2018).”
According to the don, limited access to finance for the MSME segment severely constrained opportunities for economic diversification in Nigeria.
He noted that from a macro-economic examination, there was “a crowding out effect,” due to government borrowing.
“As a result, over a period of one year, we witnessed an increase in treasury bill rates peaking at 18 per cent in 2017. At the same time, banks facing a challenging external environment worked to reduce risks, crowding out liquidity to real sector including MSMEs.”