CBN N50b Targeted Facility As Lifeline for Households & Businesses: The Coronavirus pandemic has sent economic and social shocks across households and businesses. Amid these developments, the Central Bank of Nigeria (CBN) inaugurated a N50 billion Targeted Credit Facility (TCF) disbursed through NIRSAL Microfinance Bank to households and businesses affected by the pandemic. COLLINS NWEZE writes that the palliative, which is a low-interest loan, became a lifesaver for enterprises with impaired cashflows and households whose sources of income were depleted by the pandemic.
When Adejo Negodu, the managing director, Enegas Limited, started expanding his gas supply chain in March, at the peak of the Covid-19 pandemic, many of his competitors familiar with the cash crunch in the business were astonished.
Just weeks before the exercise, he had complained about the impact of Covid-19 pandemic in the cooking gas segment of the economy, making him suspend expansion plans until the economy improves.
But all that changed when Negodu, who is based in Abuja, became one of the thousands of businesses and households that benefited from the N50 billion Targeted Credit Facility (TCF) disbursed by the Central Bank of Nigeria (CBN) through the NIRSAL Microfinance Bank.
Enegas Limited’s operations were not only expanded outside Abuja, but has surmounted the cashflow challenge through the stimulus package provided by the CBN using the TCF scheme.
“The fund was hardly and has helped us to continue operations amid the pandemic. Our sales volume has gone up and our profitability increased,” Negodu said.
The novel coronavirus outbreak has a severe impact on the livelihood of households and business activities resulting to drop in global demand for goods and services, declined consumer confidence, and a slowdown in production among others.
CBN Governor Godwin Emefiele said the TCF was designed to cushion the adverse effects of COVID-19 on households and MSMEs. He said the scheme was to support households and MSMEs whose economic activities have been significantly disrupted by the COVID-19 pandemic, stimulate credit to MSMEs to expand their productive capacity through equipment upgrade, research and development.
He explained that loan disbursements were based on the activity, cash flow, and industry size of the beneficiaries. Each eligible MSMEs received a maximum of N25 million while qualified households can access a maximum of N3 million each.
Also, working capital was pegged at a maximum of 25 per cent of the average of the previous three years’ annual turnover. But where the enterprise is not up to three years in operation, 25 per cent of the previous year’s turnover sufficed.
Many other MSME beneficiaries spoke about the impact of the fund, and the boost it brought to their businesses.
The Managing Director, Juhel Pharmaceutical Company Limited, Ifeanyi Okoye, was also one of the beneficiaries of the TCF scheme.
According to him, the company has received the palliative loan and working with the fund to expand its facilities and be able to manufacture most drugs in Nigeria.
Another beneficiary, a businessman based in Awka Anambra State, Moses Ogbo, said he applied and secured the loan without problems. “Our TCF was approved within six weeks I applied for it with my mobile phone. I was called by the NIRSAL Microfinance Bank to come and draw down the facility. My business turnover has improved since then,” he said.
Entertainment and Sports Business Specialist, based in Asaba, Delta State, Henry Asimoye, said he had shut down the business when the impact of the pandemic worsened. “When we shut down, I applied and we received the stimulus which enabled us to return to business,” he said.
According to CBN guidelines, access to the facility was smoothed by new provisions requiring that households and MSMEs applying for the fund would not be required to provide guarantors before they can access the credit facility.
All applicants to the N50 billion credit facility, who have completed the application processes and submitted their account details, got the funds credited to their accounts within 48 hours.
The CBN Director, Corporate Communications Department, Isaac Okorafor, disclosed that the CBN had waived the requirement for the provision of guarantors by households and small and medium enterprises applying for the loan to assuage the concerns of those who had fulfilled all requirements for the loan but were yet to have their accounts credited, particularly as other persons had begun to receive credit alerts.
Speaking on the reality and impact of the scheme, Senator Uba Sani (APC, Kaduna Central), said the loans have impacted positively on the businesses and income of households that took the loans at five per cent interest rate. He said the scheme has boosted businesses and economy, businesses and household beneficiaries.
NIRSAL Microfinance Bank, on behalf of CBN, had since April 2020, commenced the disbursement of the fund to beneficiaries.
NIRSAL Microfinance Bank Managing Director Abubakar Kure said the facility was available for service providers in the health sector, trading and all those businesses that have been affected by the COVID-19 pandemic. He said the objective was to provide cash flow which has been disrupted by the lockdown occasioned by the pandemic.
He said the bank had improved its processes, systems, people to be able to meet up with the expectations. “You are fully aware that this loan is for a short term. It’s a short term seamless package by Central Bank intended to cushion the effect on businesses and people,” he added.
Understanding TCF Modalities
According to the CBN guidelines, the scheme was funded from the Micro, Small and Medium Enterprises Development Fund (MSMEDF) and the eligible participating financial institution for the scheme is NIRSAL Microfinance Bank (NMFB).
The apex bank sourced the fund from its MSME development fund which was administered through NIRSAL Microfinance Bank. Thus, while the CBN provided the funds, applicants applied for the loan through NIRSAL Microfinance Bank.
According to the CBN guidelines, the first step is for an eligible household to apply NIRSAL MFB, which must, among others, contain Bank Verification Number, business registration (where applicable) and business plan with clear evidence of the opportunity or adverse impact as a result of COVID-19 pandemic.
The NMFB then appraised and conducted due diligence applications and upon a satisfactory appraisal of application, NMFB forwarded the applications to the CBN for final approval, then, CBN reviews applications and gives final approval for disbursement to NMFB.
For corporate entities like their MSMEs counterparts, applications were submitted to NMFB with clear evidence of the opportunity or adverse impact as a result of COVID-19 pandemic. Also, NMFB appraised and conducted due diligence applications, after a satisfactory appraisal of the application, NMFB forwarded the applications to the CBN for final approval. CBN reviewed applications and gives final approval for disbursement to NMFB.
The interest rate under the intervention was pegged at five per cent per annum (all-inclusive) up to February 28, 2021, and thereafter, the interest on the facility shall revert to nine per cent per annum (all-inclusive) as from March 1, 2021.
Other Stimulus packages by the apex bank
Data from the CBN showed that the apex bank had disbursed the total sum of N107.45 billion to beneficiaries from the N1.15 trillion Covid-19 Pandemic Intervention Funds so far.
The bank has also disbursed N93.2 billion under the Real Sector Support Fund to boost local manufacturing, which consists of 44 Greenfield and Brownfield projects.
The Bank has approved N10.9 billion to 14,331 beneficiaries under the N50 billion Targeted Credit Facility for Households and SMEs, out of which N4.1 billion has been disbursed to 5,868 successful beneficiaries.
Recovery plans for the economy
As part of the lessons from the current pandemic, the CBN said there was a need to ensure that Nigeria’s value-added sector, the manufacturing industry, is strengthened.
Accordingly, the CBN will pursue policies that will reinvigorate our financial support for the manufacturing sector by expanding the intervention all through its value-chain.
Source: The Nation