CBN’S N50bn COVID-19 stim­u­lus fund falls short against fa­mil­iar foes

As less than 3% of SMES re­ceive loans Stake­hold­ers sug­gest ways to in­crease im­pact of fund

Business Day (Nigeria) - - FRONT PAGE - LOLADE AKINMURELE

Awell- mean­ing ini­tia­tive by Nige­ria’s cen­tral bank (CBN) to soften the blow of the COVID-19 pan­demic on house­holds and small busi­nesses has come up against all too fa­mil­iar foes in dodgy ex­e­cu­tion and lack of ad­e­quate trans­parency, with sev­eral in­tended ben­e­fi­cia­ries claim­ing the scheme has eluded them.

The CBN set up a N50 bil­lion Tar­geted Credit Fa­cil­ity (TCF) in March that was sup­posed to be a life­line in form of sin­gle-digit in­ter­est rate loans to house­holds and small busi­nesses whose

liveli­hoods and op­er­a­tions had been up­ended by the pan­demic.

The ini­tial op­ti­mism which greeted the fa­cil­ity has, how­ever, fiz­zled out in a flash as it has been marred by sev­eral com­plaints from peo­ple who are yet to re­ceive the loans. This is de­spite the CBN say­ing 98 per­cent of the loans has been dis­bursed.

De­gun Ag­boade, pres­i­dent and chair­man of coun­cil at the Nige­rian As­so­ci­a­tion of Small and Medium En­ter­prises (NASME), was one of those who had high ex­pec­ta­tions of the fa­cil­ity when it was set up but has since been frus­trated by the process.

Ag­boade, who pre­sides over per­haps the big­gest clus­ter of small busi­nesses in the coun­try, said the ini­tia­tive has not been ef­fec­tive as most of his mem­bers who ap­plied were yet to draw down from the fund.

“Three hun­dred mem­bers of our as­so­ci­a­tion ap­plied na­tion­wide, but less than 10 of them have been cred­ited,” Ag­boade told Busi­ness­day. That’s about 3 per­cent of the to­tal num­ber of ap­pli­cants.

Ag­boade said while one or two of their mem­bers in Sokoto, Bauchi, Kaduna and Akwa-ibom were among the suc­cess­ful ap­pli­cants, none of the As­so­ci­a­tion’s mem­bers from La­gos had re­ceived any­thing.

He fears the ini­tia­tive, like sev­eral ones in the past tar­geted at small busi­nesses, is be­ing bogged down by fa­mil­iar chal­lenges around lack of proper ex­e­cu­tion and mon­i­tor­ing which have muted their in­tended im­pacts.

Busi­ness­day’s sur­vey on 100 SMES on so­cial me­dia plat­form, Twit­ter, showed that only two small busi­ness own­ers had re­ceived fund­ing with 98 still pend­ing.

Yusuf Yila, a di­rec­tor at the de­vel­op­ment fi­nance de­part­ment of the CBN, said last Fri­day through his Twit­ter han­dle that NIRSAL Mi­cro­fi­nance Bank, the in­sti­tu­tion re­spon­si­ble for the dis­burse­ment of the fund, was “work­ing round the clock to make sure the loans are dis­bursed to ev­ery per­son ap­proved by the CBN” and urged pa­tience from those yet to be cred­ited.

“So many in­di­vid­u­als had been paid and the funds were tied up in the NIRSAL bank, but it will be paid out soon,” Yila said.

A few hours later, Yila took to his Twit­ter han­dle again to say that “the CBN is in­ves­ti­gat­ing and try­ing to get the rea­son why a larger num­ber of peo­ple have not been paid”, fol­low­ing nu­mer­ous com­plaints by peo­ple who claimed they were yet to re­ceive funds even after their ap­pli­ca­tions were ap­proved.

For the ma­jor­ity still ex­pect­ing money from the fund, it may never hap­pen, after the CBN said last week that N49 bil­lion had al­ready been dis­bursed. The CBN’S di­rec­tor of com­mu­ni­ca­tions, Isaac Oko­rafor, said this in an in­ter­view on television sta­tion, Chan­nels.

“If the giver claims to have given and the re­ceivers claim oth­er­wise, then the CBN should pub­lish the names and lo­ca­tions of the peo­ple who have ben­e­fit­ted from the fund and set up a com­mit­tee to look into the process of dis­burse­ment and why ma­jor­ity are yet to re­ceive any­thing,” Ag­boade said. “With­out this, the ini­tia­tive may just be an­other ploy to merely hype us up for noth­ing.”

The sup­posed fail­ure of the fund to get into the hands of ma­jor­ity has three im­pli­ca­tions. It could force the clo­sure of many small busi­nesses, lead to job losses feed­ing into a higher un­em­ploy­ment and poverty rate, and in­crease the risk of a deeper eco­nomic re­ces­sion in a coun­try tipped by the In­ter­na­tional Mon­e­tary Fund (IMF) to con­tract by 3.4 per­cent in 2020, the big­gest con­trac­tion in four decades.

Be­yond dodgy im­ple­men­ta­tion, the fund was al­ways go­ing to be in­ad­e­quate to go round in a coun­try with over 40 mil­lion small busi­nesses, ac­cord­ing to some bankers.

“That meant that for ev­ery de­serv­ing house­hold or SME that was paid, 100 de­serv­ing oth­ers were de­nied due to the small size of the fund,” a se­nior banker told Busi­ness­day.

A re­cent sur­vey by the La­gos Cham­ber of Com­merce and In­dus­try (LCCI) showed that 81 per­cent of small busi­nesses op­er­at­ing in sec­tors from hos­pi­tal­ity to air­line ser­vice providers were se­verely af­fected by the pan­demic, which ar­guably puts them in the pool of in­tended ben­e­fi­cia­ries of the CBN fund. Eighty-one per­cent would equate to 32 mil­lion SMES.

It is un­likely that ev­ery af­fected SME ap­plied, but if ev­ery af­fected SME did share the N50bn fund, ex­clud­ing house­holds –which are also en­ti­tled to ap­ply – each would get a pal­try N1,562.

As­sum­ing the money was shared among only 2 mil­lion SMES, it would trans­late to N25,000 each, which is still quite lit­tle.

The CBN may al­ready be over­stretched in terms of pro­vid­ing more loans. There’s a N1 tril­lion fa­cil­ity for man­u­fac­tur­ers which is sep­a­rate from the N50bn fund.

This is why the CBN must find creative ways to grow the size of the fund, an­a­lysts say. One way is to re­lease some of the N10.3 tril­lion of non-in­ter­est-yield­ing banks’ money sit­ting idle with the CBN as Cash Re­serve Re­quire­ment.

“The CBN could al­low banks draw down on some of the enor­mous cash sit­ting in its cof­fers as CRR so that the banks have more liq­uid­ity and can sup­port more busi­nesses at this cru­cial time,” said a de­vel­op­ment econ­o­mist at a mul­ti­lat­eral agency who did not re­ceive im­me­di­ate au­tho­ri­sa­tion by his em­ployer to speak pub­licly on the mat­ter.

“I’m sure the banks will be happy to get 5 per­cent rather than noth­ing on all that cash, so it’s a win-win for all par­ties,” the econ­o­mist said.

More fi­nan­cial in­sti­tu­tions should also be al­lowed to dis­burse the money so that the work­load is not solely on NIRSAL, ac­cord­ing to Oyin Ramon, a small busi­ness owner who ap­plied to the fund in April but is yet to re­ceive any­thing.

“The funds are meant to be given out at NIRSAL Mi­cro­fi­nance Bank but in re­al­ity, ap­pli­ca­tions also have to go to the de­vel­op­ment fi­nance de­part­ment of the CBN and from there on to the of­fice of the CBN; that’s per­haps why the process of dis­burse­ment is so slow and peo­ple are com­plain­ing,” Ramon said. “It’s like putting wa­ter meant to serve a mul­ti­tude of peo­ple through one fun­nel.”

While there might be chal­lenges on the sup­ply-side, Muda Yusuf, di­rec­tor-gen­eral of the LCCI, how­ever, high­lighted de­mand-side chal­lenges caused by busi­nesses that may not have ap­plied prop­erly and with the re­quired doc­u­men­ta­tion.

“Th­ese are loans and not free money, so when a busi­ness fails to ap­ply with sat­is­fac­tory doc­u­men­ta­tion, then they are likely to be turned down. My ex­pe­ri­ence is that some of the busi­nesses yet to re­ceive funds did not ap­ply prop­erly,” Yusuf told Busi­ness­day.

He said 99.8 per­cent of the 41.5 mil­lion SMES are mi­cro en­ter­prises many of whom are not struc­tured enough to be able to ac­cess such a fa­cil­ity.

“It may be more, but only three of our mem­bers con­firmed to me that they have ob­tained money from the Fund, but I don’t have the ex­act num­ber of those that have not re­ceived any­thing,” Yusuf, whose LCCI draws mem­ber­ship from over 2,000 busi­nesses in the coun­try’s commercial cap­i­tal of La­gos, said.

To help SMES that fall short of the re­quire­ments of the loans, Nige­ria can adopt the Credit Guar­an­tee Scheme adopted by many other coun­tries to boost credit to MSMES, an­a­lysts say.

Credit Guar­an­tee Schemes (CGS) pro­vide guar­an­tees to small busi­nesses that do not have ac­cess to credit by cov­er­ing a share of the de­fault risk of the loan.

L-R: Dupe Olu­sola, man­ag­ing di­rec­tor/ceo, Transcorp Ho­tels plc; Em­manuel N. Nnorom, chair­man; Chike Anikwe, com­pany sec­re­tary (Ag.), and Owen Omo­giafo, pres­i­dent/ceo, Transcorp plc, at Transcorp Ho­tels’ Ex­tra­or­di­nary Gen­eral Meet­ing held in La­gos, yes­ter­day.

NAN

L-R: Mai Mala Buni, gov­er­nor, Yobe State/chair­man, APC Care­taker/ex­tra-or­di­nary Con­ven­tion Com­mit­tee; Abubakar Sani, gov­er­nor, Niger State, and Isi­aka Oyetola, gov­er­nor, Osun State, dur­ing the in­au­gu­ra­tion of the com­mit­tee by the chair­man at the party’s na­tional sec­re­tariat in Abuja, yes­ter­day.

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