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Concerns Over Interest Rates, Capacity, as DBN Kicks Off With N398.45b

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  • Concerns Over Interest Rates, Capacity, as DBN Kicks Off With N398.45b

With about 70,000 micro, small and medium enterprises seeking various forms of financial intervention to take their businesses to the next level, there are concerns about the ability of the Development Bank of Nigeria (DBN) to meet such demands with its $1.3 billion (N398.45 billion:N306.5/$1) start-up capital.

After over two years of delay, the Development Bank of Nigeria (DBN) is set to take off following the approval of its operating license by the Central Bank of Nigeria (CBN) and would have to battle with a growing market of small businesses, many of which are unstructured and seek access to finance at single-digit interest rates.

With a major mandate to spur growth through financing of projects, particularly the medium, small and medium scale industries, the $1.3 billion (N398.45billion) Development Bank of Nigeria is jointly funded by the World Bank (WB), KfW (German Development Bank), the African Development Bank (AfDB) and the Agence Française de Development (French Development Agency). The bank is also finalising agreements with the European Investment Bank (EIB) for more investment.

The newly-licensed bank however dismissed concerns saying that it will finance 20,000 micro, small and medium enterprises (SMEs) in the first year of its operation.
Its Managing Director, Tony Okpanachi, said part of the strategies of the bank was to de-risk the sector by making sure that loans were provided at a longer period of 10 years with a moratorium that would enable the loans to be repaid within 12 years.

He said the loans would be given at a competitive rate, adding that this would be used to promote the development of the sector.

Okpanachi said: “DBN is a new dawn for MSMEs because we will provide small businesses with funds and this will create the needed impact on the economy.

“We will create a sustainable finding model and also ensure financial inclusion through access to funding.

“We are also looking at more female participation and about 20,000 SMEs will be funded in the first year of our operation.”

Okpanachi said the bank would not be dealing directly with individuals, but rather through their conventional bankers like microfinance and commercial banks.

On the DBN operations, the Ministry of Finance explained that the DBN will provide loans to all sectors of the economy including, manufacturing, services and other industries not currently served by existing development banks thereby filling an important gap in the provision of finance to Micro, Small and Medium Enterprises (MSMEs).

In his reaction, President of the Manufacturers Association of Nigeria (MAN), Dr. Frank Jacobs believes the bank’s capital base is strong to meet the demands of SMEs adding that it would be a support to the efforts of the Bank of Industry (BoI) in addressing the financing needs of the real sector of the economy.

Chief Executive Officer of Financial Derivatives Limited, Bismarck Rewane, said the $1.3 billion take off fund is huge, considering the exchange rate and represents more than 12 commercial banks’ minimum capital base.

He dismissed concerns over duplication of roles, saying that the new bank is focused on small businesses, not industries, as well as provision of funds for that purpose to commercial banks, which will in turn meet the needs of the small businesses.

“It is a commendable move. If this segment does not exist today, Nigeria would have stopped existing and we must ensure their sustainability to go forward,” he said.

“The more the merrier. The initial proposal was to scrap BoI and BoA but it didn’t happen. A mix of financial needs and this will further have impact on the real sector. Development banks usually have concessionary rates and their rates are generally lower and better than that of commercial banks”, Director-General of the Lagos Chamber of Commerce and Industry (LCCI), Muda Yusuf added.

On the number of financial institutions that will work with DBN as participating financial institutions, the ministry noted that banks and financial institutions that meet up with a full set of eligibility requirements will be qualified to receive funds from the bank, adding that the operations of the DBN will not in any way, result in the elimination of the Bank of Industry (BoI), Bank of Agriculture (BOA) or any other existing development bank.

Operators in the real sector had raised objection on the repealing of BoI Act in order to set up the DBN.

Addressing concerns, the Ministry of Finance said: “The operations of the DBN is distinct from other development banks as it is focused on supporting small businesses defined by size and not by sectors.

“The DBN will provide loans to all sectors of the economy including, manufacturing, services and other industries not currently served by existing development banks thereby filling and important financing gap.

“The influx of additional capital from the DBN will lower borrowing rates and the longer tenure of the loans, will provide the required flexibility in the management of cash flows, giving businesses the opportunity to make capital improvements and acquire equipment or supplies.

“As the economy diversifies, the growth of the MSME sector will have a positive impact on the economy through employment generation, wealth creation and economic growth”.

Already, the Bank has completed the recruitment of the executive management team ahead of its date of commencement of operations.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Crude Oil

Oil Prices Continue to Slide: Drops Over 1% Amid Surging U.S. Stockpiles

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Amidst growing concerns over surging U.S. stockpiles and indications of static output policies from major oil-producing nations, oil prices declined for a second consecutive day by 1% on Wednesday.

Brent crude oil, against which the Nigerian oil price is measured, shed 97 cents or 1.12% to $85.28 per barrel.

Similarly, U.S. West Texas Intermediate (WTI) crude slumped by 93 cents or a 1.14% fall to close at $80.69.

The recent downtrend in oil prices comes after they reached their highest level since October last week.

However, ongoing concerns regarding burgeoning U.S. crude inventories and uncertainties surrounding potential inaction by the OPEC+ group in their forthcoming technical meeting have exacerbated the downward momentum.

Market analysts attribute the decline to expectations of minimal adjustments to oil output policies by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, known collectively as OPEC+, until a full ministerial meeting scheduled for June.

In addition to concerns about excess supply, the market’s attention is also focused on the impending release of official government data on U.S. crude inventories, scheduled for Wednesday at 10:30 a.m. EDT (1430 GMT).

Analysts are keenly observing OPEC members for any signals of deviation from their production quotas, suggesting further volatility may lie ahead in the oil market.

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Energy

Nigeria Targets $5bn Investments in Oil and Gas Sector, Says Government

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Crude Oil - Investors King

Nigeria is setting its sights on attracting $5 billion worth of investments in its oil and gas sector, according to statements made by government officials during an oil and gas sector retreat in Abuja.

During the retreat organized by the Federal Ministry of Petroleum Resources, Minister of State for Petroleum Resources (Oil), Heineken Lokpobiri, explained the importance of ramping up crude oil production and creating an environment conducive to attracting investments.

He highlighted the need to work closely with agencies like the Nigerian National Petroleum Company Limited (NNPCL) to achieve these goals.

Lokpobiri acknowledged the challenges posed by issues such as insecurity and pipeline vandalism but expressed confidence in the government’s ability to tackle them effectively.

He stressed the necessity of a globally competitive regulatory framework to encourage investment in the sector.

The minister’s remarks were echoed by Mele Kyari, the Group Chief Executive Officer of NNPCL, who spoke at the 2024 Strategic Women in Energy, Oil, and Gas Leadership Summit.

Kyari stressed the critical role of energy in driving economic growth and development and explained that Nigeria still faces challenges in providing stable electricity to its citizens.

Kyari outlined NNPCL’s vision for the future, which includes increasing crude oil production, expanding refining capacity, and growing the company’s retail network.

He highlighted the importance of leveraging Nigeria’s vast gas resources and optimizing dividend payouts to shareholders.

Overall, the government’s commitment to attracting $5 billion in investments reflects its determination to revitalize the oil and gas sector and drive economic growth in Nigeria.

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Commodities

Palm Oil Rebounds on Upbeat Malaysian Exports Amid Indonesian Supply Concerns

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Palm Oil - Investors King

Palm oil prices rebounded from a two-day decline on reports that Malaysian exports will be robust this month despite concerns over potential supply disruptions from Indonesia, the world’s largest palm oil exporter.

The market saw a significant surge as Malaysian export figures for the current month painted a promising picture.

Senior trader David Ng from IcebergX Sdn. in Kuala Lumpur attributed the morning’s gains to Malaysia’s strong export performance, with shipments climbing by a notable 14% during March 1-25 compared to the previous month.

Increased demand from key regions like Africa, India, and the Middle East contributed to this impressive growth, as reported by Intertek Testing Services.

However, amidst this positivity, investors are closely monitoring developments in Indonesia. The Indonesian government’s contemplation of revising its domestic market obligation policy, potentially linking it to production rather than exports, has stirred market concerns.

Edy Priyono, a deputy at the presidential staff office in Jakarta, indicated that this proposed shift aims to mitigate vulnerability to fluctuations in export demand.

Yet, it could potentially constrain supply availability from Indonesia in the future to stabilize domestic prices.

This uncertainty surrounding Indonesian policies has added a layer of complexity to palm oil market dynamics, prompting investors to react cautiously despite Malaysia’s promising export performance.

The prospect of Indonesian supply disruptions underscores the delicacy of global palm oil supply chains and their susceptibility to geopolitical and regulatory factors.

As the market navigates these developments, stakeholders remain attentive to both export data from Malaysia and policy shifts in Indonesia, recognizing their significant impact on palm oil prices and market stability.

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