Succor for Households, MSMEs

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Dike Onwuamaeze writes on the impact of the targeted credit facility meant to cushion the impact of the COVID-19 on the economy

Some households and operators of micro, small and medium scale enterprises (MSMEs) that were beneficiaries of the Central Bank of Nigeria’s (CBN) N50 billion Targeted Credit Facility meant to cushion the impact of the COVID-19 on the economy, have continued to heap praises on the Bank for the intervention.

According to some of the beneficiaries, the fund which came at a time when the world was feeling the excruciating effects of the pandemic went a long way in helping them mitigating the impact of the pandemic.

The CBN recently revealed that it has so far disbursed N49 billion out of the intervention fund.
Giving details of the Targeted Credit Facility disbursement, CBN’s Director, Corporate Communications, Mr. Isaac Okorafor, revealed that about 80,000 operators of MSMEs and families benefitted from the intervention fund.
He said the fund was expected to support the federal government’s measures to stimulate economic activities as well as to help the economy avert a looming economic recession.

“So far, out of the N50 billion targeted credit facility for households and small businesses, we have disbursed about N49 billion. We also have other intervention funds such as the N100 billion healthcare facility, whose disbursement is ongoing as well,” he had explained.

The NISRAL Microfinance Bank (NMFB) served as the disbursing financial institution and the fund is meant for SMEs, households and enterprises that have verifiable evidence of livelihood and evidence of business activities adversely impacted by the pandemic.
For Mr. Benjamin Adeoye, a school proprietor, who benefited from the fun, he sent in his application using his mobile phone and after some weeks he was contacted that the loan had been approved.
“I thank god for the intervention. I got about N1.6 million with which we procured more computers to enable us to transit to online learning.

“Our classes are ongoing and we have managed to retain our teachers because parents can see that we are still adding values to their children despite learning from home,” he said.

Also, Faith Oluku, an operator of a micro business who resides in Abuja, said the process of accessing the loan was seamless.
Darlington Efughi Chukwuyere who is into fashion designing in Aba is another beneficiary. He said to: “I applied for N1 million but after the oral interview with the NIRSAL team, N400,000 was approved.
“I can also testify that I didn’t have to go through anyone or provide impossible collaterals to get the loan. I simply applied online.

The apex bank had earlier released guidelines for the disbursement of the special intervention fund.
The guidelines for the fund had listed sectors eligible for the credit facility to include agric value chain, hospitality, health, airline service providers, manufacturing/value addition, trading as well as any other income-generating activities as may be prescribed by the CBN.

The scheme is being financed out of the CBN’s N220 billion Micro, Small and Medium Enterprises Development Fund (MSMEDF).
Out of the fund, the CBN had earmarked a maximum facility of up to N25 million for MSMEs while households can access up to N3 million based on the activity, cashflow and industry/segment size of a beneficiary.

“Working capital shall be a maximum of 25 per cent of the average of the previous three years’ annual turnover; where the enterprise is not up to three years in operation, 25 per cent of the previous year’s turnover will suffice.

“Interest rate under the intervention shall be five per cent per annum all-inclusive up to 28th February 2021 and thereafter, the interest on the facility shall revert to nine per cent as from 1st March 2021,” part of guidelines for accessing the fund had stated.
According to the CBN, for households/MSMEs, the first step is for an eligible household to submit an application to NIRSAL MFB, which must, among others, contain BVN number, business registration (where applicable) and business plan with clear evidence of the opportunity or adverse impact as a result of COVID-19 pandemic

NMFB shall appraise and conduct due diligence applications. Upon satisfactory appraisal of application, NMFB shall forward the applications to the CBN for final approval, Then, CBN reviews applications and gives final approval for disbursement to NMFB.
For corporates, like their MSMEs counterparts, applications are submitted to NMFB with clear evidence of the opportunity or adverse impact as a result of COVID-19 pandemic.

Also, NMFB shall appraise and conduct due diligence applications, after a satisfactory appraisal of the application, NMFB shall forward the applications to the CBN for final approval. After that, the CBN reviews applications and gives final approval for disbursement to NMFB.

Indeed, since the outbreak of the virus in the country, the CBN has adopted an expansionary monetary policy stance in order to save jobs and livelihoods.
The first step was for the bank to unveil palliative measures to cushion impact of the virus on economy. These measures beside the N50 billion for households and MSMEs, included the extension of moratorium on all CBN intervention facilities; interest rate reduction; Credit Support for Healthcare Industry; regulatory forbearance; as well as the strengthening of its loan-to-deposit ratio policy.
In addition, the CBN also announced that the N100 billion credit support facility would be funded from the Real Sector Support Facility – Differentiated Cash Reserves Requirement (RSSF-DCCR).

It listed eligible participants under the scheme to include healthcare product manufacturers, including pharmaceutical drugs and medical equipment; healthcare service providers/medical facilities – hospitals/clinics, diagnostic centres, laboratories, fitness and wellness centres, rehabilitation centres, dialysis centres, blood banks, etc.

According to analysts, the intervention by the central bank is essential considering recent predictions by the World Bank that the pandemic could push another five million Nigerians into the poverty bracket if the government doesn’t respond appropriately.
The multilateral institution anticipated that the collapse in oil prices coupled with the pandemic will plunge the Nigerian economy into a severe recession, the worst since the 1980s. It estimated that Nigeria’s economy would likely contract by 3.2 per cent in 2020.
“The macroeconomic impact of the COVID-19 pandemic will likely be significant, even if Nigeria manages to contain the spread of the virus,” it stated.

Oil represents more than 80 per cent of Nigeria’s exports, 30 per cent of its banking-sector credit, and 50 per cent of the overall government revenue.
With the drop in oil prices, government revenues are expected to fall from an already low eight per cent of GDP in 2019 to a projected five per cent in 2020, the bank said.

“This comes at a time when fiscal resources are urgently needed to contain the COVID-19 outbreak and stimulate the economy.
“Meanwhile, the pandemic has also led to a fall in private investment due to greater uncertainty, and is expected to reduce remittances to Nigerian households, which in recent years have been larger than the combined amount of foreign direct investment and overseas development assistance,” it added.

“While before the pandemic, the number of poor Nigerians was expected to increase by about two million largely due to population growth, the number would now increase by seven million – with a poverty rate projected to rise from 40.1 per cent in 2019 to 42.5 per cent in 2020,” the report added.