AfDB Approves a Financial Package of USD 500 Million for the Bank of Industry (Nigeria)
On May 26th, the Board of Directors of the African Development Bank (AfDB) Group approved a sovereign guaranteed Program, in the amount of USD 500 million, to the Bank of Industry (BOI) for financing domestic-oriented Small and Medium-sized Enterprises (SMEs) in Nigeria. The funds for the Program will be channeled through BOI by way of a multi-tranche Line of Credit. A portion of the proceeds of the Program will be used to pay for a Technical Assistance for capacity building at both BOI and the SMEs.
The SME sector represents a strategic pillar for Nigeria’s quest to modernize and improve its economy, while diversifying away from heavy dependence on the oil industry. According to the Nigerian Federal Office of Statistics, SMEs account for 97% of all businesses in Nigeria, contributing 50% of employment and output in the non-oil sector. This compares unfavorably with many peers, reflecting a relative underperformance of the SME sector in Nigeria. One of the major impediments to SME growth and development is limited access to bank credit. This Program will contribute to fill this gap at a time when the banking crisis in Nigeria has exacerbated the difficulty of SMEs in accessing bank financing.
The funds for this Program will be deployed by BOI towards systematic poverty reduction, employment generation, wealth creation through entrepreneurial, social and economic development. The financing will be extended for loans to SMEs as well as for capital projects in the form of cluster and infrastructure development. The associated TA package will contribute to strengthen capacity at both BOI and SMEs.
This Program aligns with the renewed Federal Government of Nigeria’s strategy to revitalize the economy by developing its SME sector. It is also well aligned with the AfDB’s priority areas as it will enhance SME access to finance, therefore contributing to their growth and development; contribute to financial sector development; promote sustainable economic growth in Nigeria; and support capacity building in the financial and productive sectors, therefore enhancing productivity and competitiveness.
In sum, this Program is expected to generate significant additional lending to domestic-oriented SMEs at a time when commercial banks are notably reluctant to finance this important sector of the economy.
AfDB’s intervention would complement the efforts of the Federal Government of Nigeriato support SMEs.
The technical assistance will contribute to build BOI’s capacity and to enhance the bankability of SMEs.