By Johnson Eze

The first line responsibility of government is the welfare of its people. When explicitly put in proper perspective, provision of security, food, housing clothing top the list while other needs like education, tourism, transport and some luxury items follow. For any country to live up to expectations expressed in terms of providing the basic needs for its citizens, such a country must have developed its economy sustainably which is perhaps why countries are seldom classified as developed and developing.
These therefore mean that economic well being is the capacity every nation strives to attain.
Needed to put economy in the proper dynamics for growth and development is the effective banking system. Consequently, as Nigeria government takes step to entrench good governance characterized by sound economic condition of the citizenry, right-thinking individuals keeps brainstorming on the best ideas to put the country on the path of sustainable development. On the front burner is the strategy to provide the needed development financing
to drive businesses and enterprises.
Among the ideas on the economic drawing board is the bill being sponsored by Senator Ibrahim Gobir, representing the people of Sokoto East in the upper legislative chamber of Nigerian National Assembly.
Termed National Development Bank bill, the legislation aims to repeal the bank of Industry act, bank of commerce and industry act and the national economic reconstruction fund act bringing their total assets under one body called the National Development Bank.
As a ranking senator and the chairman Senate committee on services who has sponsored closely related bill on poverty eradication, Sen Gobir has shown convincing determination to touch the economic live of Nigerians meaningfully. It is therefore not surprising that he has done a thorough job in packaging the bill of this kind to address the many issues that border on development financing and the Senate itself exhibited so much patriotism not to have wasted any time in passing it for the second reading.
According to a report of United Nations department of economic and social affairs, the history of what is today known as NDBs goes back to the beginnings of the Industrial Revolution, but there is no unique track in their evolution – rather different national and regional experiences. In Europe, where NDBs first appeared, the economic and social development strategies varied and national development banks made significant impact in economic growth. From the middle of the 19th century and on, first in France, then in Germany and Italy, Industrial or Credit Banks were formed to support industrialization. They successfully managed to provide large amounts of financing to their growing industries.
The bill just as the name implies, when passed into law and becomes operational is expected to provide the requisite funding for socio-economic development in the country thereby enabling a quantum leap in industrial development, through easier access to loans for small, Medium and large scale businesses different from what has been the cases. The beauty is that the low interest rates the bank is expected to charge on loans and its capacity to withstand large scale financing due to strong capital base makes it fascinating to policy makers in economy.
NDB apart from filling the gap in financial sector development, to further strengthen the much needed inclusive financial market in an economy, provide long term financing of development project for instance, in the past, sources of long-term financing to governments tended mainly to come from fiscal resources and aid. Yet today, developing countries are increasingly getting funding outside of the government budget, from private sources. This move is being accomplished in part by the increasing use of bond financing, in particular in South-East Asia. But it is also partly being done through the banking sector and NDBs have a crucial role to play in that regard: they can help bridging the gap of domestic credit provided by the banking sector between developing and developed countries.
By reducing credit rationing they can also reduce interest rates and thus reduce risks of adverse selection and moral hazard.
Moreover, NDB provides other Financial Products for Development like short time financing on special cases. Admittedly this was not systematically the case – BNDES for instance was specifically created in the 1950s in Brazil to offer longterm loans that were insufficiently provided in the economy. Yet this was a frequently used mechanism, in particular by agricultural development banks that thrived in the past in developing countries.
Other gains of the NDB value change include securitization and structured finance. Securitization can be a key instrument in developing domestic medium to long-term debt markets, by offering credit enhanced securities to domestic investors. It consists in issuing debt against income generating assets. It is a way to access capital markets, improve liquidity of the bank and lend more money, and to better manage risk. Another worthy of note is Syndication. Syndication is underdeveloped in many developing countries and needed in a number of emerging markets. Syndicated loans are credits granted by a group of banks to a borrower. They are “hybrid instruments combining features of relationship lending and publicly traded debt”. They enable the distribution among institutions of bank loans and securities, in order to share risk and future returns.
Above all NBS can be viewed as a catalyst of economic development.
Developing countries need the equivalent of 5% of GDP for investments in infrastructure. Low income countries cannot find such financing alone and official flows as well as FDI are crucially needed.
While a good fiscal discipline and sound macro-fundamentals are key to attracting FDI, this, in turn, can imply lower budgetary resources for NDBs. Governments are thus in the uncomfortable position of having to respond to the demand for public expenditures on the one hand, and a limited budget on the other – which makes the need for private sector involvement all the more necessary.
National development institutions can help in that regard by attracting external sources of financing. The need to mobilize private sources of funding should also be high on the agenda in the Perspective of sharing risks with other partner, this is where NDB comes in.
With the economy of Nigeria being at abysmal state so many years down the line since the existence of Bank of Industry and all the other finance institutions which are supposed to be providing funding to businesses and industries , it means that something is really fundamentally wrong hence the need for a solution. National Development Bank is said to be the answer. It is therefore an auspicious opportunity presented by Sen Gobir for Nigeria to establish NDB. The Senate should as a matter of urgency expeditiously passes the bill while the House of Representatives is urged to give the required concurrence without delay. The earlier this is done, the better for us all – a stitch in
time they say saves nine.

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