Development Bank of Nigeria (DBN) has received a licence for wholesale development finance from the CBN.

Development Bank of Nigeria (DBN) has received a licence for wholesale development finance from the CBN.

On a brighter note, the Development Bank of Nigeria (DBN) has received a licence for wholesale development finance from the CBN. The bank will be able to draw from funding pledges totaling US$1.3bn from the World Bank, the African Development Bank, and German and French state development funds. The DBN will provide loans at lower rates to all sectors of the economy, including manufacturing. In late February the CBN announced a change in direction in its exchange-rate policy with two circulars. They stated that the CBN would make additional fx available for invisible transactions (school, medical and personal travel): currently the CBN sells to the banks at N357 per US dollar, and the banks to retail at N360. Additionally, the CBN has since injected about US$2.7bn through forward transactions for importers.

Given that most manufacturers depend upon a blended fx mix to secure their import needs, this greater fx liquidity and the naira appreciation on the parallel market bode well for them. The benefit can be seen in the recent climb in this sub-index (and others too). It is unclear whether this naira appreciation is sustainable and we still see a much weaker naira on the interbank market by end-year.

The output readings should be more consistent whenever the turnaround of the power sector gains greater momentum. According to one of several industry estimates in circulation, an annual investment of US$15bn for three years is required to lift generation to 8,000 megawatts (MW). The largest allocation for capital spending in the FGN’s budget proposals for 2017 is N529bn for power, works and housing but it nonetheless accounts for little more than 10% of the identified annual investment requirement.

This reading increased significantly from 54.5 to 63. The improvement was seen in both large and, to a lesser extent, medium-sized companies. The largest number of respondents (45%) reported higher output. Our trigger questions introduced by our partners revealed that some companies reported the “introduction of new products” as well as “securing new contracts” as reasons for improved output in April.

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