We Will Use Fiscal Instruments To Galvanize DBN’s Capacity To Finance MSMEs—Finance Minister

The Federal Government on Thursday said it will use any available fiscal instrument to galvanize the capacity of the Development Bank of Nigeria to effectively finance the Micro, Small and Medium Enterprises sector of the economy.

The Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed said this in Abuja at the opening session of the DBN’s 3rd Annual Lecture Series with theme, “Thriving in the Face of Domestic and Global Disruptions.”

The DBN was created in collaboration with key development partners to address the financing challenges facing Micro, Small and Medium Scale Enterprises (MSMEs) in Nigeria.

Through the provision of wholesale funding and risk-sharing facilities to Participating Financial Institutions (PFIs) for on-lending to MSMEs, the Minister said the DBN has distinguished itself as a key contributor to unlocking the capacity of MSMEs to catalyse economic growth and job creation in the Nigerian economy.

Quoting statistics from the International Finance Corporation (IFC), Ahmed said between 70 per cent and 95 per cent of new employment opportunities in emerging economies are created by MSMEs.

To ensure their effective contribution to the economy, she told participants at the event that it is imperative to ensure MSMEs are supported in the acquisition of skills and tools to run their businesses efficiently, manage risks and gain access to finance at competitive and affordable rates.

The World Bank Group estimates the finance gap among formal MSMEs in developing economies to be 18 per cent of GDP with potential demand for financing among informal MSMEs as high as 11 per cent of GDP.

Ahmed said this underscores the important role played by the DBN in facilitating access to finance.

With a total loan disbursement of N482bn to 208,000 MSMEs in 2021, of which 27 per cent are youth-owned while 66 per cent are owned by women, the Finance Minister said the DBN continues to be a major driver of MSME growth in Nigeria.

A report jointly released by the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) and the National Bureau of Statistics (NBS) in January 2022, had stated that MSMEs accounted for 96.7 per cent of businesses and contributed 46.3 per cent to Nigeria’s Gross Domestic Product (GDP).

However, they only account for 6.2 per cent of gross exports.

Ahmed said, “The relatively low contribution of MSMEs to exports is concerning given their significant contribution to nominal GDP and for this reason, urgent steps are being taken to alleviate the binding constraints limiting MSME participation in cross-border trade.

“The main policy tools utilised by the Federal Ministry of Finance, Budget and National Planning in supporting the growth of the MSME sector are the annual Finance Acts.

“We have successfully facilitated the approval and implementation of three Finance Acts and have reached an advanced stage in the preparation of the 2022 Finance Act.

“The Finance Acts are an omnibus bill to amend relevant tax, excise and duty statues and we have used them to introduce measures that reduce the tax burden on MSMEs and create opportunities for participation in export markets.

“The administration of President Muhammadu Buhari is deeply committed to providing support to MSMEs as evidenced in the emphasis placed on ensuring their continued operations during the early months of the COVID-19 pandemic which led to the temporary closing down of 53.2 per cent of SMEs and 37.3 per cent of MEs. “

In view of the catalytic role of MSMEs in local production activities and value-added export, she stated further that government has prioritised policy support for the robust growth of MSMEs in the National Development Plan 2021-2025 across the key sectors of the economy.

“We also recognise the need to ensure MSMEs are positioned to take advantage of the AfCFTA and the opportunities it presents, and the Ministry of Finance, Budget and National Planning is collaborating with the Federal Ministry of Trade and Investment, Nigerian Export Promotion Council and other relevant Ministries, Departments and Agencies (MDAs) to remove critical binding constraints to entry of MSMEs into export markets.

“The Ministry will also continue to support other MDAs through programmes such as the FGN Special Intervention Fund for MSMEs under the National Enterprise Development Programme, the Government Enterprise and Empowerment Program (GEEP) and various funds and products managed by the Bank of Industry (BOI),” she added.

Also speaking at the event, the Managing Director of DBN, Mr Tony Okpanachi said the event is being held because there is a compelling need for businesses to continue to innovate especially, as the world gradually recovers from the disruptions caused by Covid-19 which has affected every part of the value chain.

He said, “The effects of Global disruption on international trade often come as a shock to businesses. These series of events have led to uncertainty and radical changes to companies’ well-established strategies across the globe and MSMEs are not exempted.

“The future of work is currently in a state of flux, with many old and new challenges hitting MSMEs particularly hard. Hence, Governments, corporate bodies, and individuals, mostly MSMEs must find ways to adapt to the changing times and the volatility of the market, deal with uncertainty, and figure out how to convert that into opportunities.

“In today´s increasingly turbulent world, MSMEs find themselves frequently affected by unpredictable external factors such as natural disasters, climate change issues, disease outbreaks, technological and cyber changes, trade disputes, policies, etc, which have had an immense impact on local businesses.

“It is, therefore, imperative for us as a Bank to champion the conversation on how MSMEs can prosper despite the odds, by exposing ways through which MSMEs can adapt in these times. Hence, the DBN Annual Lecture Series Initiative,” he added.