In the wake of the ravaging COVID-19 pandemic, the federal government announced a number of stimulus packages to help small businesses tide things over. However, opinions are divided as to whether these funds are adequate enough to cater for the funding gaps of the over 41.5million micro, small and medium-scale enterprises (MSMEs) across the country, reports Charles Okonji
Worried about the short and long term effects of the coronavirus scourge on small businesses, the federal government through the Central Bank of Nigeria (CBN) had announced N50billion stimulus package for those involved in the manufacturing as well as an additional N100billion for those involved in the pharmaceutical sub-sectors of the economy.
Specifically, the N50 billion Targeted Credit Facility (TCF) stimulus package, is to be disbursed through the NIRSAL Microfinance Bank (NMFB).
Of the N100billion lifeline approved for the health sector, the CBN set N2 billion as the maximum borrowing limit for any healthcare provider seeking to access same.
The fund was established to cushion the impact of Coronavirus (COVID-19) pandemic on the economy and to support healthcare providers.
The guideline, signed by CBN Director, Financial Policy Regulation Department, Kevin Amugo, said working capital loans shall be considered based on 20 per cent of the average of three years of the proposed borrower’s turnover, subject to a maximum of N500 million per obligor.
According to the guideline, the eligible participants under the scheme shall include healthcare product manufacturers- pharmaceutical drug and medical equipment; healthcare service providers/medical facilities- hospitals/clinics, diagnostic centers/ laboratories, fitness and wellness centres, rehabilitation centres, dialysis centres, blood banks, among others.
The CBN guideline said: “The modalities require that a corporate entity submits its application to a participating financial institution of its choice with a bankable business plan.
“The participating financial institution shall appraise and conduct due diligence on the application. Upon approval by the participating financial institution’s Credit Committee, the application shall be submitted to the CBN with relevant documents attached. The CBN will process and disburse funds to the participating financial institution for onward release to the project.”
According to the guidelines, the scheme will be funded from the real sector support facility, with Deposit Money Banks, Development Finance Institutions named as participating financial institutions.
It was also meant to support the provision of shared services through one-stop healthcare solution to enhance competition and reduce the cost of healthcare delivery in the country.
The CBN announced the N100 billion package for the healthcare industry to strengthen the sector’s capacity to meet potential increase in the demand for healthcare and services.
According to the bank, the scheme will improve access to affordable credit by indigenous pharmaceutical companies to expand their operations and comply with the World Health Organisation’s (WHO) good manufacturing practices.
While many considered this a bold step on the part of the government, not a few are persuaded that it will address the myriad of challenges besetting the small business landscape in the country.
Justification for stimulus package
The Chairman of the Presidential Task Force on COVID-19, Mr Boss Mustapha, during the daily briefing of the task force last Thursday said owners of SMEs can access between N500, 000 to N25 million loan through the CBN to get their businesses going.
Mustapha said: “The eligibility criteria is provided for on the website of the central bank of Nigeria (CBN). Like I said, there are two packages – the first N100 billion is designed to deal with major hospitals and pharmaceutical companies.
“The essence is that after COVID -19 or even in the processes of COVID-19 we will be able to build our health infrastructure.
That is why that money is made available for our major manufacturing companies to begin to explore the possibilities of manufacturing drugs sufficient to deal with COVID-19 and other health related matters.
“The second component – that is, the N50 billion is the one that is designed for SMEs. Even within the context of those SMEs, there is a package that is designed for household and within the household they have the mini, they have the micro and they have the micro plus.
“The amount that you access under the mini scheme is N500, 000 for households that can show that their businesses were affected by cobid-19. For the micro, it is from N500, 000 to N1.5 million.
“And for the micro plus, it is N1.5 million to N3 million. But under the SMEs, the maximum you can access is N25 million. That’s entirely designed to deal with the lower level of our business and enterprises that they can access and the conditions are not many and they are not difficult.”
The Director-General of the Nigeria Centre for Disease Control, Dr. Chikwe Ihekweazu said the SMEs remain the most hit by COVID-19.
The NCDC DG stated that there was need to support owners of SMEs in order to avoid job losses. “No aspect of the economy has been hit more than the SMEs because this is really where most of Nigerians work and we have to support them in surviving because if they don’t survive, people (will) lose work, if people lose work they don’t pay attention to their health, our job becomes a lot more difficult.”
How N50 billion SME fund will impact economy
As the global economy has been on the reverse gear occasioned by the outbreak of the novel COVID-19 pandemic, countries of the world have worked out different policies to stimulate their various economies by preventing them from total collapse.
The western world, such as the United States of America, released trillions of dollars to the manufacturing sector of the economy to be able sustain employment and still remain afloat, but the case of Nigeria, which is considered the largest economy in Africa seems to be different as it has release a fraction described by some economic analysts as not enough.
According to the Director General of the Lagos Chamber of Commerce and Industry (LCCI), Dr Muda Yusuf, the N50 billion stimulus announced by the CBN to cushion the effects of the coronavirus outbreak on the Nigerian economy is laudable. It is a step in the right direction, especially as the fund is targeted at SMEs and households. It would have positive impact on businesses that can access the facility. It will impact their liquidity and operating cost. It also has a symbolic significance.
It is also important acknowledge other interventions by the CBN which include the one year moratorium on CBN intervention facilities; interest rate reduction on intervention funds; restructuring and refinancing opportunities for existing facilities; activation of N1.5 trillion InfraCo project for building infrastructure; N100 billion facilities for pharmaceutical companies and healthcare practitioners, and N1 trillion loans to boost local manufacturing and production across sectors.
A reversal of the current slide in the economy is critical to strengthen the demand side of the economy. A supply side stimulus needs a complementary demand side fortification otherwise there would be the unintended outcomes of unsold inventories build up. It is therefore important to bolster purchasing power of citizens which has been decimated by the slump in economic activities.
Role development finance institutions
There are a few development finance institutions that have been supporting the economy with funding. They include the Bank of Industry, NEXIM Bank, Infrastructure Bank, Development Bank of Nigeria and Agricultural Development Bank. The impact of these institutions on the economy has not been as effective as expected.
Many are not adequately capitalised; some have risk management and governance issues which has eroded their capital because of huge loan losses. Others have very strict lending conditions which makes access to the facilities difficult.
MAN not at ease with stimulus package
In the view of the Acting Director General of Manufacturers Association of Nigeria, Mr. Ambrose Oruche, the N50 billion SME fund is too little too late.
Speaking in an exclusive interview with our correspondent at the weekend, he said the purpose of the N50 billion, which was basically to sustain the SMEs and households. Also households were considered because they have also suffered the negative impact of the pandemic.
According to him, most SMEs may not survive the fallout of the COVID-19 pandemic. “A lot of manufacturers may not come back as well because their businesses have been adversely affected. This is not a child’s play. It is not a joke. It so serious that the economy itself is in a very bad shape, everything is going down because we are import dependent.”
Justifying his position, he further argued that, whereas countries like the USA gave trillions of dollars to intervene in the coronavirus crisis, the N50 billion the government made available merely scratch the surface.
While attempting a comparative analysis, he raised some posers, “Is it not the same challenge that our SMEs are facing that US is addressing with trillions of dollar? If you carry out research, you will find out that other economies of the world are releasing trillions of dollars for the same purpose of revamping the SME sectors.
N50 billion cannot even solve the issues of companies within Ikeja Local Government. It is also known that the N50 billion involves households, which implies that if my household is facing COVID-19 challenges, It will apply for the same loan.”
Leave a Reply