Small businesses play a critical role in the economy of Nigeria. It was this realisation that the Central Bank of Nigeria (CBN) set up the N220 billion Micro, Small and Medium Enterprises Development Fund (MSMEDF) so that small business owners can access funds at a low interest rate. In this report, BAMIDELE OGUNWUSI, IKECHI NZEAKO, OLUSEGUN KOIKI, look at the impact on the economy and a huge part of the fund is lying in the vault of the apex bank. Excerpts:
In a report last year by the National Bureau of Statistics (NBS), the statistical organisation said Nigeria has about 37 million Micro, Small, Medium Enterprises (MSME), and if properly financed, it is expected that they would make far-reaching contributions to the country’s economy.
The recognition of the significant contributions of the MSME sub-sector to the economy, and to bridge existing huge financing gap, the Central Bank of Nigeria (CBN) took a bold step by establishing the N220 billion Micro, Small and Medium Enterprises Development Fund (MSMEDF).
To access the Fund, the CBN asked MSMEs to apply through Participating Financial Institutions (PFIs), as its statutes do not allow it to deal directly with businesses on such issues.
According to the CBN, the PFIs are to submit requests from MSMES to the fund in a format that shall be prescribed by the CBN from time to time.
It also said that applications would be processed on receipt of complete documentation, while it would communicate the terms and conditions for the approved grant within one month of submission.
Guidelines For MSMEDF
In the guidelines for setting up the MSMEDF, the CBN said 10 per cent of the fund is devoted to developmental objectives such as grants, capacity building and administrative costs while 90 per cent commercial component would be released to PFIs at two per cent for on-lending to MSMEs at a maximum interest rate of nine per cent per annum.
To achieve the provision, which stipulated that women’s access to financial services should increased by at least 15 per cent annually to eliminate gender disparity, the CBN earmarked 60 per cent of the fund to providing financial services to women.
In addition, it stated that two per cent of the wholesale component of the fund should go to economically active persons with disabilities, excluding mental disabilities.
The CBN said eligible activities to be financed include agricultural value chain, services, cottage industries, artisans, trade and commerce and any income generating business as may be prescribed by the CBN from time to time.
The broad objective of the fund, the CBN said, was to channel low-interest funds to the MSME sub-sector of the Nigerian economy through PFIs to: enhance access by MSMEs to financial services; increase productivity and output of microenterprises; increase employment and create wealth and engender inclusive growth.
Listing the benefits of the MSMEDF, the CBN said the developmental components would be utilised for capacity building of staff of PFIs, research and provision of other financial services infrastructure.
It also stated that the long-term single digit loans at nine per cent per annum had resulted in reduced cost of borrowing, which will impact positively on the earnings of the MSMEs, adding that the Fund will provide liquidity for the sub-sector and result in general improvement of the financial system stability, while it would ensure job creation.
However, with the myriad of complaints from the expected beneficiaries of the Fund, it is becoming very obvious that many of these objectives are yet to be achieved, while the expected benefits are still far from being seen.
With its reported disbursement of N76.3 billion of the total fund, a large chunk of the money it appears, to be either still sitting in its safes or had been diverted to other purposes, which would require an investigation by the anti-corruption agencies to unravel.
While the CBN claimed that about N76 billion has been disbursed to MSMEs, investigations reveal the opposite.
Engagement with major MSME associations faulted this claim and revealed that most MSMEs have been unable to access a kobo from the Fund.
The complaint of inaccessibility was corroborated by the Bank of Industry (BoI), a major party in the disbursement of the MSMEDF, which disclosed that it was yet to access the fund for onward disbursement to MSMEs.
To buttress the country’s losses due to the poor administration of the fund, the NBS revealed that Nigeria spent N2.29 trillion on importation in the first quarter of 2017 alone.
According to the NBS, Nigeria imported cane sugar worth N38 billion from Brazil; mixtures of odoriferous substances worth N13.2 billion were imported from Ireland; chemical fertilisers with nitrogen worth N7.3 billion were imported from United Arab Emirates and milk preparations worth N4.6 billion were imported from Ireland.
Today, 80 per cent of Nigeria’s consumption comprises foreign products; and if this money had been properly disbursed to local entrepreneurs, the country’s import rate would have dropped by now — because the local manufacturers would be encouraged to produce.
Also, the inability to access funding is stunting economic growth, while many companies, mostly manufacturers, are dying daily due to lack of access to finance.
Furthermore, the CBN was discovered to be flouting some of the guidelines it put forward in setting up the fund.
One critical guideline flouted by the apex bank is its engagement with the steering committee.
Also, investigations revealed that financial institutions, mainly commercial banks, mortgage banks and microfinance banks are frustrating the disbursement of the fund, as many of them are not well disposed to the programme.
The banks are expected to lend to MSMEs at nine per cent, after obtaining funds from the CBN at three per cent, leaving a spread of six per cent for the banks.
Instead of enrolling the MSMEs to the MSMEDF, it was discovered that the banks lend their own funds to the small business owners at between 25 per cent and 30 per cent.
However, despite claims by the CBN, President, Association of Micro Entrepreneurs of Nigeria (AMEN), Saviour Iche, challenged the CBN and BoI to publish the names of the beneficiaries of the fund, while he called on the Economic and Financial Crimes Commission (EFCC) to probe BoI.
He said, “Let them come out and tell us the beneficiaries, because some companies that are not registered are collecting money because somebody is there who knows how to exploit the system. That is the problem we have.
“If the entire MSMEs groups are saying that they are not benefitting from the fund, it means something is wrong. We the MSMEs groups meet at our level and we discuss; none of us has collected the money. Then who is collecting the money? That is the big question that we don’t know.”
The Director General of the Aba Chamber of Commerce, Industries, Mines and Agriculture, ABACCIMA, Henry Nduka, confirmed that with millions of MSMEs in Aba, only three persons have been able to access the fund.
The post MSMEs Grapple With Paucity Of Fund Despite Lifeline appeared first on Independent Newspapers Nigeria.
MSMEs Grapple With Paucity Of Fund Despite Lifeline
CLICK HERE TO READ FULL CONTENT
Brought to you by: RIDBAY | WEBSITE DESIGN & DIGITAL MARKETING
