The Federal Government has said that it will set up a development finance institution that will make access to funds easy in the economy.
The institution is expected to take off in the next 18 months with a seed fund of $400m from the African Development Bank.
The Minister of Finance, Dr. Ngozi Okonjo-Iweala, stated this in Lagos on Thursday, during the Centenary Lecture of the Lagos Chamber of Commerce and Industry.
She said the establishment of the development finance institution would provide long-term funds and reduce the cost of borrowing.
She said, “Access to fund to finance in this economy is difficult. We must get medium to long-term money in this economy; if not, we cannot sustain the growth. We have decided that the best way to go is to set up a development finance institution to wholesale money to commercial and specialised banks. We will create this institution in the next 18 months.
“When we get this, it will drive down the cost of finance. We are not going to dictate to banks how much they will charge; we will simply put up a system that will provide enough resources for long-term financing. A lot of multilateral institutions are supporting us too.”
Okonjo-Iweala said the institution was an emergency programme to keep the transmission process of the country’s economy going.
“We are to raise $1.9bn; we have raised $1.5bn of the $1.9bn needed for emergency transmission. The African Development Bank has agreed to put in about $400m into that emergency cash raising project over the next three years; the World Bank will put in $700m and others are coming in to support us. Part of the money from the Eurobond will also go into that,” she said.
The minister added that the Federal Government was also working on partnering with the private sector in developing the economy, adding that it was its role to create an environment that would promote private businesses.
According to her, the economy is on its way to recovery as revenues and the Gross Domestic Product that were volatile in the past are returning to normal. She said that income from tax had also risen in the last few years.
Okonjo-Iweala said, “The economy is doing well, it is strong. We may experience cash flow problems from time to time, but that does not amount to an economy that is not strong.
“When you are asset-rich, you may experience cash flow problems. Nigeria is an asset-rich country. The fiscal and monetary authorities expend a lot of our energy on the macro-economic framework because we need that as support.”
She said the Federal Government had created a mortgage refinance institution that would be inaugurated by President Goodluck Jonathan in November.
“The World Bank last week approved a $300m liquidity facility for that purpose. The objective is to use this as an instrument to drive that sector,” the minister said.
According to her, the government has asked 14 pilot states to make land available with certificates of occupancy for the take-off of the initiative.