COVID-19: The Nigeria’s N50 Billion Targeted Facility For Small Businesses

As every country in the world affected by the coronavirus pandemic push to save its economy by doling out grants for businesses and households, Nigeria appears to be following suit.

The most critical of it all has been sustenance as many states are embarking on lockdown and restriction of movement to quell the spread of the virus.

As part of its Social Intervention Program, the federal government of Nigeria, through the Central Bank of Nigeria (CBN), announced last month that it is giving N50 billion Targeted Credit Facility to households and businesses affected by the pandemic. The arrangement is to be facilitated through CBN’s agency, the Nigerian Incentive-based Risk Sharing System for Agricultural Lending (NIRSAL) Microfinance Bank.

In a surprising turn, the NIRSAL Microfinance Bank is demanding N10,000 fee from small business owners as prerequisite for accessing the intervention loan, according to Sahara reporters.

According to circular shared earlier by the Apex Bank, businesses eligible for the loan scheme include hospitality, health (pharmaceuticals and medical supplies), agricultural value chain activities, airline service providers, manufacturing and value addition, trading.

One other condition to access the loan is that businesses must provide evidence that they have been adversely affected by the pandemic. A statement published in NIRSAL’s website earlier in March said that there must an evidence of downturn of business activities as a result of COVID-19, for enterprises seeking to obtain loan from the Targeted Credit Facility.

The alleged request for N10,000 access fee has cast doubt on the genuineness of the scheme even though the CBN has refuted it.

The outbreak of coronavirus has wreaked unprecedented havoc on businesses around the world, and Nigeria is not immune to its devastating impacts. Every business is counting losses, and every enterprise has such a claim to make. From the oil industry to the financial sector to entertainment to transport and sports, there are undeniable effects of the virus on every business as deserted streets show.

NIRSAL said it’s charging N10,000 as application processing fee, and compared to intervention programs rolled out by other countries, it is more like a revenue generating scheme, since every business that accessed the fund would repay it with interest.

The maximum amount to be accessed is N25 million and households can access N3 million with an interest rate of 5% per annum and the maximum period is one year.

Some other countries in Africa are also rolling out sustainability measures as the scourge bites harder. The Central Bank of Kenya (CBK), in March advised commercial banks to provide relief to borrowers. In Egypt, the central bank announced a huge 300 basis point cut as the country is working to limit the economic pains stemming from the virus.

African countries are focused mainly on health infrastructure as the negligence of their health sector has exposed many to vulnerability of the disease. A few however, are making provisions for businesses and the economy as a whole.

However, economists believe that Nigeria’s N50 billion Credit Facility fund is quite insignificant to the economic intervention needed. Nigeria and South Africa are the African continent’s largest economies and have been hardly hit by economic turmoil. South Africa is technically in recession while the downturn in the oil market puts Nigeria in line.

Experts believe that without stronger economic measures in the continent, there will be more trouble. Stephen Karingi, the director of the trade division at the UN’s Economic Commission for Africa, told VOA in March, that Africa’s economy will be devastated.

“As things stand now, the 3.2 percent growth has actually been insignificant when it comes to meeting these SDG goals. That’s the point we want to make. In other words, we are going to see an increase in the number of people who are actually poor or below the poverty,” he said.

Nigeria as a net oil exporter has suffered gross loss as the price of the commodity plummet in the wake of coronavirus. Economists said there would be severe impact in coming months as the disruption in supply chains across the globe gets on the increase.

Vera Songwe, secretary general of the United Nations Economic Commission for Africa, said Nigeria is going to feel the impact according to the performance of the oil market.

“If you’re a country like Nigeria, which is a net oil exporter – one, we’re demanding less oil from you, but secondly the amount of oil that we’re demanding from you has dropped {in price}. We’ve estimated that Nigeria could lose almost $19 billion if the trend continues and that’s a big shock to Nigeria’s economy, which was already growing at quite a low rate of 2.8 percent,” Songwe said.

Though OPEC reached a deal to cut oil production so as to increase demand, it will be a long call as the global supply chains remain largely closed.

Nigerian option to sustain its economy will depend on SMEs and all non-oil sector business as borrowing will not easily happen now. The situation places emphasis on the need to sustain small businesses. Economists have called on the Nigerian government to increase the Targeted Credit Facility fund and help as many businesses as possible in order to curtail the looming mass layoffs that will follow the liquidation of businesses.

Updated: The Central Bank of Nigeria had denied of any fee collection for the loan application.

“The attention of CBN has again been drawn to false reports on the social media circles, that loan seekers and owners of small scale businesses who apply for loans provided to cushion the effects of COVID-19 are required to pay a certain amount as application processing fees.CBN urges members of the public to disregard any message requiring them to pay any amount to process their applications.

“Members of the public, particularly, households and owners of small scale businesses are therefore advised to disregard any message requiring them to pay any amount to process their applications.

“Prospective applicants are advised to approach NIRSAL Micro Finance Bank or the CBN branch nearest to them for clarification on the procedure for accessing any of the bank’s related loans.

“Any observed irregularities should be reported to the Consumer Protection department of the CBN via [email protected] or call 07002255226”