Development Bank of Nigeria Raises N23bn Local Bond for MSMEs.

The Development Bank of Nigeria Plc (DBN) has issued a N23 billion bond issuance as part of its N100 billion medium-term bond program to accelerate funding of the critical sectors, especially the micro, small and medium enterprises (MSMEs).

According to the bank, the programme’s objective is to expand its capacity to provide funding that will spur the growth and development of MSMEs in the country –- which is the core mandate of the DBN, especially at a time Nigeria is faced with a troubled economy.

The N20 billion series 1 bond issuance was over-subscribed and was issued at a 14.40 per cent coupon rate with a maturity of five years.

Analysts say the over-subscription shows the high level of confidence in the instrument at a time investors are trooping back to the equities market which has seen unusually bullish trend in recent times.

“It is a sign of confidence in the business of DBN because investors are trooping back to the equities market to position for the forthcoming earnings season,” said Raymond Adekunle, an investment analyst.

At the official signing ceremony in Lagos, on Thursday, July 13th, 2023, the Managing Director/CEO of DBN, Dr Tony Okpanachi, reiterated the Bank’s commitment to its core corporate objective of supporting MSMEs by deepening its access to funds to enable them to play their critical role of creating wealth and job opportunities for the nation’s unemployed youths.

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‘’The purpose of this issuance is to locally raise capital to meet the need of the MSME sub-sector of the economy which is huge and whatever we are trying to raise will boost our funding base for them,

“We have been providing MSMES funding to banks since we commenced operation about almost six years ago. Our initial funding was from our development partners which are outside our shores and this now the first time we are sourcing funds locally,” he noted.

Mr. Okpanachi also emphasised that as an institution, the DBN’s primary purpose is to alleviate financing constraints faced by MSMEs and small corporates in Nigeria through the provision of financing and partial credit guarantees to eligible financial intermediaries on a market-conforming and fully financially sustainable basis.

“What we are doing essentially, is expanding our funding base beyond the development partners to catalyze fund within the economy itself to lend to MSMEs,” he noted.

He further urged young entrepreneurs to take advantage of these funds to upscale their business operations, to thrive and enable them build sustainable businesses.

“The monies borrowed from the development partners would be repaid, just like the funds given to MSMEs, as they are all loans. Therefore, I advise the beneficiaries to make themselves bankable to have access to these funds.

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“We have also put in place monitoring and evaluation measures to ascertain which businesses have borrowed these monies from the financial institutions and the impact of these funds on their business” he emphasised.

DLM Advisory was the lead issuing house for this bond issuance, with Standard Chartered Bank as joint issuing house. Other parties to the transaction include G. Elias, Meristem, First City Monument Bank, Access Bank, Deloitte, Zenith Bank, Agusto &Co., GCR Ratings an affiliate of Moody’s Investors Service, Olaniwun Ajayi, and ARM Trustees.

Speaking on the offer, Vice President, Investment Banking at DLM Advisory Limited, Mr. Nwabu Okonkwo, said that the bond issuance was well received by the market and attracted participation from a wide range of investors, including domestic pension funds, asset managers, and insurance companies.

The Bank initially sought to raise ₦20 Billion but recorded total subscriptions of ₦25.37 Billion, representing 1.26 times oversubscription. The Series 1 Bond was launched at a clearing coupon of 14.40% with ₦23 Billion in qualified bids.

Meanwhile, the Executive Director of Standard Chartered Capital & Advisory Limited, Amaka Nsofor, described the bond issuance as a landmark issue.

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She said, “This move made by DBN has not only brought diversification to the market by enabling MSMEs to access funding but will also improve the drive to achieve financial inclusion and establish sustainable partnerships to accelerate the growth of MSMEs in Nigeria.”

THEWILL had reported the views of investment experts that DBN be adequately capitalised to pursue its core mandate of providing funding for the development of the MSMEs.

In an earlier interview with the CEO, Centre for the Promotion of Private Enterprise (CPPE), Dr Muda Yusuf, the immediate past Director-General of the Lagos Chamber of Commerce and Industry (LCCI) applauded the role of DBN in developing the SMEs which constitute the engine of the economy.

He urged the DBN to do more at this time and suggested that the development bank be recapitalised to enable it to play a bigger role in providing financing and capacity building to the SMEs.

“I know Development Bank of Nigeria focuses on SMEs financing and it has played this role effectively. This is the time to do more given the present economic realities. They can raise the capital base, if necessary, to enable the bank to play a greater role in the backward integration scheme that the MSMEs are actively involved in”, Yusuf said.

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