The imperative of proposed WDFIs as an agent of growth
Determined to accelerate the pace of development of the Nigeria economy and in realization of the key role of some critical sectors in the process, the Federal Government has over the years established development finance institutions (DFIs) to provide financial interventions in some identified sectors, targeting micro-, small- and medium- size enterprises (MSMEs) to complement the efforts of banks and other financial institutions.
However, it is a known fact that despite the existence of these institutions, such as the Bank of Industry, Bank of Infrastructure, Bank of Agriculture, Nigeria Export-Import Bank (NEXIM) and NERFUND, Nigerians have continued to witness limited access to long-term and low-interest funds.
It is against this background that the present government’s collaboration with development partners and international financial institutions (IFIs) to sponsor the establishment of a Wholesale DFI (WDFI) to bridge the gap and to increase the availability of and access to finance, in particular for MSMEs should be commended.
Already the Central Bank of Nigeria (CBN) has developed regulatory and supervisory guidelines to provide a level playing field for participants in the DFI subsector and to further direct private capital to participating financial institutions.
The proposed WDFI is expected to provide wholesale funds at affordable rates so as to accelerate development through establishment of financial products and facilitate technical assistance to eligible participating financial institutions (PFIs).
Over the years, development finance institutions have been seen as part of government apparatus whereby political patronage is dispersed through appointment of party members who may not have requisite knowledge and expertise to run these institutions.
The fact that government is at the vanguard of this initiative agrees to the fact that these institutions have not achieved the purpose for which they were created. In running the proposed institution, government should be wary of sycophants and hangers-on in appointments to management and board of the institution. The present inefficient way in which these institutions are being run should be avoided as appointments should be based on merit rather than political patronage.
Government should also learn from experiences in other countries where these institutions are run for the common good of the citizens. For instance, in Germany, there is the KfW banking group which covers over 90 percent of its borrowing needs in the capital markets, mainly through bonds that are guaranteed by the federal government. The KfW (banking group) gives impetuses to the economy, politics, society and ecology in Germany, Europe and the world. In fact, for more than 60 years, the bank has proven to be an efficient promotional bank of the Federal Republic of Germany, through its commitment to the primary goal of the German development cooperation, which is to sustainably improve the economic and social conditions of the people in developing countries.
Similarly, the Brazilian Development Bank (BNDES) is the main financing agent for development in Brazil. Since its foundation, in 1952, it had played and continued to play fundamental role in stimulating the expansion of industry and infrastructure in the country. Interestingly, over the course of the Bank’s history, its operations have evolved in accordance with the country’s socio-economic challenges, and are actively involved in the support for exports, technological innovation, sustainable socio-environmental development and the modernization of public administration.
Nigerians deserve nothing short of the critical roles being played by these institutions in these countries and more which are instrumental to their socio-political development. Anything short of this is unacceptable to Nigerians.