The Central Bank of Nigeria (CBN) has disbursed N220 billion as part of a commitment to finance micro, small, and medium enterprises (MSMEs) by providing them with an accessible credit line. According to CBN director, Alhaji Ibrahim Mu’azu, the objective of presenting this opportunity to small businesses is to unlock their potential. It also aims to enable them to reach positions where they can contribute to reducing poverty by creating jobs for economic growth.

The CBN has resolved to assist MSMEs’s in Nigeria with a means of finance and to bridge the N9.6 trillion gap in the sub-sector of the economy. Mu’azu, speaking at the 2015 Annual Conference organized by the Finance Correspondents Association of Nigeria, FICAN, in Lagos stated that the business of the MSMEs is limited by a lack of access to credit.

State governments have been granted allowances to access up to N2 billion each for on-lending to eligible beneficiaries through participating financial institutions in their respective states. A huge channel has been created for the administration of the loans through private or state owned microfinance institutions, finance houses, and commercial banks. The CBN hasdesignated 60 percent of the N220 billion for providing credit for women-owned businesses, which are highly underserved in Nigeria.

In a similar event, the Bank of Industry recently secured a $100 million credit line for MSMEs engaged in export-oriented businesses from the African Development Bank (AfDB). This is the first time that the bank is accessing such a foreign facility since 2001, when it was reconstructed out of Nigerian Industrial Development Bank (NIDB).

These two instances are not the first efforts of their kind made to support small businesses through the provision of credit. In 2014, the World Bank – and other development partners – boosted the sub-sector with $500 million through the funding of the Development Finance Project. The aim of the project was to help secure long-term loans for the MSMEs, a luxury they could otherwise not afford with the financial system of the country at the time.

However, these previous efforts to improve the MSMEs businesses through loans have not met a lot of success. According to Abdulganiyu Olariwaju, who spoke on behalf of the BoI’s Managing Director and CEO, Rasheed Olaoluwa at the Finance Correspondents Association of Nigeria (FICAN) conference, the 2014 World Bank report on MSMEs showed that Nigeria was lagging behind other countries in accessing finance.

Commercial banks have been faulted for denying MSMEs access to funds. The issues range from reluctance to give out loans to the business owners, to a limited time in payment maturity, high loan interest rates, and generally cumbersome loan procurement criteria. In addition, Dr Femi Egbesola, President of the Association of Small Business Owners (ASBON) stated that CBN authorised banks do not see the business owners as ‘serious’.

Speaking in defense of the small banks, the BoI listed poor business plans, a clear description of business models, and unsatisfactory accounting records of the MSMEs as part of the reasons for their attitude towards them.

The CBN and the BoI are both respectively currently implementing measures to ensure that MSMEs are ready to receive the credit line support systems that is being made available to them. The BoI is introducing a “capacity building” programme to help both parties mitigate risks and manage their businesses.

On the other hand, the CBN advises that prospective customers (MSMEs) get properly acquainted with the procedures to enable them have a shot at acquiring loans. The funds are to be given at reduced borrowing costs in order to get better economic results from the MSMEs.

Source: Cynthia Okoroafor, Ventures Africa

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