FG sets aside N15bn for recapitalisation of Development Finance Institution next year
The total assets of the country’s seven development finance institutions (DFIs) increased by 22.3 per cent to N2.5 trillion at end-June 2020, compared with N2.02 trillion at end-December 2019, the Central Bank of Nigeria (CBN) has said.
The institutions include Bank of Industry (BOI), Federal Mortgage Bank of Nigeria (FMBN), Nigerian Export Import Bank (NEXIM), Bank of Agriculture (BoA), Development Bank of Nigeria (DBN),
The Infrastructure Bank (TIB) and the Nigeria Mortgage Re-finance Company (NMRC), CBN, which disclosed this in its Economic Report for H1’20 released a few days ago, attributed the rise in the DFIs’ assets to increases in reserves, deposits, borrowings and long-term liabilities, as well as increases in investments and other assets.
However, the report showed that the DFIs’ paid-up capital remained unchanged at N238.78 billion, while their net loans and advances decreased by 4.1 per cent to N1,130.89 billion at end- June 2020, compared with N1,179.28 billion at end-December 2019.
According to the report, the DFIs’ investments, other assets and fixed assets rose by 537.7 per cent, 66.9 per cent and 10.1 per cent, respectively in the review period. Specifically, CBN stated: “The sharp increase in investments was traced, largely, to short–term investments, majorly, treasury instruments, following a reduction of funds in bank placements.
Aggregate shareholders’ funds also increased by 22.3 per cent to N364.10 billion at end-June 2020, from N297.82 billion at end- December 2019. “The increase was due, mainly, to accretion to reserves of the BOI, DBN and NMRC. A disaggregation of the total assets by institution, indicated that the BOI, DBN, FMB, NEXIM, NMRC, BOA and TIB accounted for 57.0, 19.3, 14.6, 4.4, 3.0, 1.5 and 0.2 per cent, respectively.
The BOI, FMBN, DBN, NEXIM, NMRC and BOA accounted for 64.1, 21.3, 7.3, 5.4, 1.6 and 0.3 per cent, of total net loans and advances, respectively,” it added. The regulator, however, noted in the report that “the activities of some of the DFIs were relatively marred by operational inefficiency and negative adjusted capital.
Some of these institutions incurred high operating costs, persistent operating losses and erosion of capital, which adversely affected their performance.”
It further stated: “Most of the DFIs exhibited weak board oversight, poor credit appraisal and administration, inadequate project monitoring and low loan recovery efforts, which resulted in poor asset quality and high loan loss provisions, negatively affecting earnings and capital. Necessary statutory corrective measures were affected by the monetary authorities to safeguard the system.”
Over the past few years, the Federal Government has made moves to recapitalise some of the DFIs. For instance, in January 2017, government inaugurated the National Council on Privatisation (NCP) Steering Committee on the restructuring and recapitalisation of the BoI and the Project Delivery Team to revitalise the operations of the BoA.
Inaugurating the Steering Committee and Project Delivery Team on behalf of the vice president, a former Minister of Agriculture and Rural Development, Chief Audu Ogbeh, said that the plan was to make the BoA more responsive to its mandate of serving as a veritable platform for providing loans to MSMEs, rural farmers, cooperatives and agro-allied industries, among others.
He explained that the approach was preferred by the Federal Government as a pre-privatization strategy to pave the way for injection of financial and other requisite resources.
Also, giving the breakdown of the 2021 budget estimates submitted to the National Assembly by President Muhammadu Buhari, the Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, disclosed that government has made provision to inject N15 billion into “Development Finance Institution (DFI)” next year. She, however, did not specify if the N15 billion is for all the DFIs or just one.
Analysts point out that there have been plans to recapitalise the Development Bank of Nigeria (DBN) with 2021 as the target year for additional funds to be injected into the DFI, which commenced lending operations in November 2017. Similarly, the government has said that it plans to release a grant of N10 billion to the BoI next year to support low-interest lending to Small and Medium Enterprises (SMEs).
Meanwhile, commenting on developments in the NMRC in its H1’20 economic report, the CBN said that total assets of the company stood at N74.71 billion at end-June 2020, compared with N73.71 billion at end-December 2019.
It, however, stated that refinanced mortgages decreased by N0.85 billion to N17.67 billion at end-June 2020, below the N18.35 billion in 2019, due to a decrease in the creation of additional mortgages.
“The adjusted capital of N13.70 billion was higher than the minimum capital requirement of N5.0 billion for the company.
“Similarly, the Capital Adequacy Ratio (CAR) at 86.20 per cent, was above both the regulatory minimum of 10.0 per cent and the Company’s internal benchmark of 15.0 per cent,” the apex bank said.
It added: “The company had also maintained its capacity to generate capital internally, as its earnings retention rate remained at 100.0 per cent since its commencement of operations.”