Nigerian Lender Sees Credit Surge as Banks Sign Up for Loans

(Bloomberg) -- Development Bank of Nigeria Plc, a state-owned lender set up to improve access to credit in Africa’s largest economy, expects loans to small businesses to surge after the number of banks signing up to disburse the facilities more than doubled.

The state-owned bank, which targets more loans this year, expects lending to small- and medium-sized companies to reach “hundreds of billions of naira” in the coming years, Chief Executive Officer Tony Okpanachi said Tuesday in an interview in Abuja, the capital. DBN signed up 15 banks this year, adding to the seven that joined in 2017, he said.

Established two years ago, DBN seeks to plug a gap left by banks that are investing in Nigerian government Treasury bills that offer yields in excess of 14 percent and are considered less risky than providing credit to companies. DBN has granted loans to about 10,000 small businesses this year, or half its target, Okpanachi said.

“We are going to see more up-tick from this July” as the newly signed-up lenders “bring their pipeline to us,” he said.

Credit Guarantees

DBN plans to set up a subsidiary that will provide partial credit guarantees to lenders and expects the unit, which will have $35 million of start up funding, to become operational in a year. Funding for the new unit, which will provide 50 percent guarantees for all credit disbursed through DBN, will be increased as it takes on more portfolios, Okpanachi said.

“We already have all the regulatory approvals and we project that by some time in the middle of next year the company should come on board,” he said.

Less than 5 percent of Nigeria’s more than 37 million small- and mid-sized companies are able to access bank credit, according to Okpanachi. Providing credit guarantees may help curb the apathy that commercial banks have when it comes to lending to SMEs, he said.

Backed by $1.3 billion of funding from the Nigerian government, the African Development Bank, World Bank and other international development-finance institutions, DBN is unlikely to require new funding for at least another three years, Okpanachi said.

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