DBN calls for policies to spur MSMEs growth

The Development Bank of Nigeria (DBN) has advocated government policies that encourage smaller businesses to grow and formalise their operations, including cutting down registration fees, as well as deferring their tax liability within a specified time frame.

DBN, which is Nigeria’s foremost wholesale development finance institution, described the growth and formalisation of these smaller enterprises as of utmost importance because of the attendant benefits to the economy and the government.

Total assets of the 39,654,385 Micro, Small and Medium-scale Enterprises (MSMEs) operating in the country as at 2020 reached N8.41 trillion, according to data from the National Bureau of Statistics. But of this figure, over 34 million of them are informal.

At a press briefing in Abuja, BusinessDay had raised concerns on why this huge number of MSMEs still operates as informal businesses, considering the gains that could be harnessed for the struggling economy.

Responding, Tony Okpanachi, DBN’s managing director, said the government had done considerable work in promoting the importance of MSMEs, adding that more needed to be done.

According to him, MSMEs are already facing a tough time staying afloat, and some of the most pressing problems they face include obtaining finance, irregular power supply, infrastructure deficit, multiple taxation, rent, and cost of capital.

He said formal businesses have a higher survival rate, enhanced capacity to run profitably and ability to use debt more efficiently, which better place them for more significant impact on economic activities, employment and government revenues by way of taxes and levies.

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“However, policies, which of course should be time-bound, like the reduction of fees for business registration and deferred taxes, would surely encourage the formalisation of some of these businesses,” Okpanachi said.

According to him, as a development-based institution, DBN is committed to help alleviate financing constraints faced by the MSMEs in the country.

DBN was set up to provide wholesale credit and risk-sharing facilities through participating financial institutions, including commercial banks, microfinance banks, existing development finance institutions and leasing companies for onward lending to businesses.

Okpanachi said that in the past five years, the bank had demonstrated how best to deliver development financing, while ensuring desirable social impact, resilience and sustainability.

He said as at the end of 2021, the DBN disbursed funding worth some N482 billion to more than 208,000 MSMEs, according to available numbers.

According to the bank’s financial statements, profit before tax and profit after tax stood at N22.7 billion and N15.7 billion respectively, translating to return on assets and return on equity of 4.8 percent and 12.8 percent respectively for 2021, according to the bank’s financial statements.

But like many other institutions, global and domestic headwinds from COVID-19 and now Russia-Ukraine war have impacted its operations, making the pricing of its loans less attractive to financial intermediaries.

Okpanachi said: “Nevertheless, we keep broadening our funding base to make financing more available for MSMEs in line with our overarching mandate to alleviate financing constraints for MSMEs in Nigeria.

“In addition, DBN has various products and programs targeted at meeting the needs of MSMEs. For instance, DBN has an interest drawback program for its PFIs through which they grant rebates on loans to MSMEs playing within sustainability sectors such as renewable energy, waste management, among others.”