The Nation Newspaper

Tag: funding gap

  • Access Bank bridges N800b agric funding gap

    Access Bank Plc has expressed its commitment to bridging the N800 billion financing gap for agricultural value chain in the country.

    Speaking at the Nigeria Agrofood Fairtrade sponsored by the bank in Lagos, its Head, Agric Desk, Opeyemi Oguntayo, said Nigeria has not been able to fully maximise agricultural gains, as only 40 per cent out of the 80 per cent arable land in the country is being cultivated.

    He, however, said both the government and the private sector improved their interest in agriculture since 2016, adding that such renewed interest has raised the value of agricultural contributions to the country’s Gross Domestic Product (GDP).

    Oguntayo, said Access Bank finances the entire agricultural value chain, adding that the lender’s doors are always open to farmers who want finance for their projects.

    He said the bank is always interested on how the farmer gets his inputs, and other accessories. “There is a lot of support for agriculture and the bank is helping small-holder farmers access such loans. We are not lowering the conditions for borrowing funds, but we want to make it easier for farmers to access the loans,” he said.

    He explained that input supplies, production, processing, distribution and marketing of agricultural products are fully funded by the lender, adding that Nigeria needed to provide infrastructure that would prevent damages of farm produce like tomatoes from farm to markets. A large per cent of the farm produce, he said, are damaged before they get to the markets.

    Head, German Desk at Access Bank Plc, Sebastian Barroso da Fonseca, said the desk is the bridge between Germany and Nigeria, trying to provide finance and first of all, finance for German businesses that want to operate in Nigeria or Nigerian businesses that want to operate in Germany. “Together with its partners, Access Bank and the Delegation of German Industry and Commerce in Nigeria (AHK Nigeria). DEG is offering a new service for German SMEs and their local partners in Nigeria,” he said.

    He said the German Desk enables companies to gain access to financial support and solutions via point of contact, which combines all the products and services offered by Access Bank with the network and support of AHK Nigeria and DEG.

  • $158bn funding gap

    •While NCR is good, it still does not explain why banks do not want to lend to MSMEs

    ONE of the more disturbing revelations at the workshop hosted by the Central Bank of Nigeria (CBN) and the National Judicial Institute (NJI) for judicial officers on the operations of the Secured Transaction in Movable Assets (STMA) Act and the National Collateral Registry (NCR) is the financing gap in the 17.5 million-odd micro, small and medium enterprises (MSMEs) segment of the economy currently put at $158 billion (N48 trillion).

    The CBN governor captures the reality this way: “MSMEs are typically deemed risk-laden, plagued with the high mortality rate, and often lacking adequate collaterals acceptable for conventional credit. Accordingly, the estimated US$158 billion or N48.3 trillion financing gap which characterises MSMEs in Nigeria reflects the risk-driven apathy of financial intermediaries to MSME lending (IFC, 2017)”.

    Yet, our understanding is that the imperative of a funding window cannot be more urgent. Emefiele captures the imperative thus: “In real terms, our GDP grew by 1.8 per cent in the third quarter of 2018 compared with 1.2 per cent in the corresponding period of 2017. The observed growth was largely driven by continued improvements in non-oil sector activities such as agriculture, information technology, manufacturing, transportation and storage, trade and other services.

    “About 96 per cent of enterprises operating within these sectors are MSMEs. These enterprises account for an estimated 48 per cent of Nigeria’s nominal GDP, seven per cent of export and about 84 per cent of workforce.”

    Despite these contributions, he noted that “MSMEs across the country continue to face structural drawbacks, particularly due to their peculiar nature. Poor access to finance, high cost of borrowing, inadequate infrastructure, non-conducive business environment and weak capacity are some of the stylised challenges constraining their growth.”

    For MSMEs the problem of access to finance, like an old tale, is well known. The real challenge is how to utilise the vast potential of movable assets – dormant wealth –as collateral to enhance access to credit by those who need them to boost their operations. This was precisely what the NCR sought to do. With NCR, the CBN maintains a database of MSMEs and their movable assets like vehicles, jewellery, sewing machines, motorcycles, etc., assets regarded as safe and secure for loans to finance start-up vocations or expand existing ones.

    Today, more than three years since the apex bank first rolled out the gazette for the operation of the registry and nearly two years after the instrument setting out its powers and authorities was passed into law, its acceptance is certainly growing, even if the awareness has remained relatively low.

    The picture as presented by Emefiele obviously speaks to this reality. Today, 628 financial institutions are currently registered on the NCR portal.  Of the lot are 21 deposit money banks, four merchant banks, one non-interest bank, four development finance institutions, 551 microfinance banks, 13 non-bank financial institutions, and 34 finance companies. However, compared with the $158 billion overall financing gap for the MSMEs sector, the value of registered movable assets on the NCR portal currently put at N1.23 trillion, US$1.14 billion and €6.08 million through 41,408 financing statements comes to a tiny droplet in the desert of needs.

    The workshop is therefore important not just as a means of sensitising important stakeholders but also in deepening the awareness about the innovative policy. However, while that is one way to go, the idea still does not answer in any fundamental sense the question why our banks are generally averse to partnering with MSMEs without the requirement for immovable assets. That would obviously require more than the existence of the NCR infrastructure can deliver.

    While we harbour no illusions that the operation of the NCR would constitute a magic wand to solve the problem of credit, it certainly will go a long way to narrow the current unacceptable gap.

     

  • $158bn funding gap

    •While NCR is good, it still does not explain why banks do not want to lend to MSMEs

    ONE of the more disturbing revelations at the workshop hosted by the Central Bank of Nigeria (CBN) and the National Judicial Institute (NJI) for judicial officers on the operations of the Secured Transaction in Movable Assets (STMA) Act and the National Collateral Registry (NCR) is the financing gap in the 17.5 million-odd micro, small and medium enterprises (MSMEs) segment of the economy currently put at $158 billion (N48 trillion).

    The CBN governor captures the reality this way: “MSMEs are typically deemed risk-laden, plagued with the high mortality rate, and often lacking adequate collaterals acceptable for conventional credit. Accordingly, the estimated US$158 billion or N48.3 trillion financing gap which characterises MSMEs in Nigeria reflects the risk-driven apathy of financial intermediaries to MSME lending (IFC, 2017)”.

    Yet, our understanding is that the imperative of a funding window cannot be more urgent. Emefiele captures the imperative thus: “In real terms, our GDP grew by 1.8 per cent in the third quarter of 2018 compared with 1.2 per cent in the corresponding period of 2017. The observed growth was largely driven by continued improvements in non-oil sector activities such as agriculture, information technology, manufacturing, transportation and storage, trade and other services.

    “About 96 per cent of enterprises operating within these sectors are MSMEs. These enterprises account for an estimated 48 per cent of Nigeria’s nominal GDP, seven per cent of export and about 84 per cent of workforce.”

    Despite these contributions, he noted that “MSMEs across the country continue to face structural drawbacks, particularly due to their peculiar nature. Poor access to finance, high cost of borrowing, inadequate infrastructure, non-conducive business environment and weak capacity are some of the stylised challenges constraining their growth.”

    For MSMEs the problem of access to finance, like an old tale, is well known. The real challenge is how to utilise the vast potential of movable assets – dormant wealth –as collateral to enhance access to credit by those who need them to boost their operations. This was precisely what the NCR sought to do. With NCR, the CBN maintains a database of MSMEs and their movable assets like vehicles, jewellery, sewing machines, motorcycles, etc., assets regarded as safe and secure for loans to finance start-up vocations or expand existing ones.

    Today, more than three years since the apex bank first rolled out the gazette for the operation of the registry and nearly two years after the instrument setting out its powers and authorities was passed into law, its acceptance is certainly growing, even if the awareness has remained relatively low.

    The picture as presented by Emefiele obviously speaks to this reality. Today, 628 financial institutions are currently registered on the NCR portal.  Of the lot are 21 deposit money banks, four merchant banks, one non-interest bank, four development finance institutions, 551 microfinance banks, 13 non-bank financial institutions, and 34 finance companies. However, compared with the $158 billion overall financing gap for the MSMEs sector, the value of registered movable assets on the NCR portal currently put at N1.23 trillion, US$1.14 billion and €6.08 million through 41,408 financing statements comes to a tiny droplet in the desert of needs.

    The workshop is therefore important not just as a means of sensitising important stakeholders but also in deepening the awareness about the innovative policy. However, while that is one way to go, the idea still does not answer in any fundamental sense the question why our banks are generally averse to partnering with MSMEs without the requirement for immovable assets. That would obviously require more than the existence of the NCR infrastructure can deliver.

    While we harbour no illusions that the operation of the NCR would constitute a magic wand to solve the problem of credit, it certainly will go a long way to narrow the current unacceptable gap.

  • Banks bridge funding gap for agribusiness

    The Central Bank of Nigeria (CBN) is working with the Federal Government and banks to boost funding for agriculture. The banks are supporting agric financing through CBN-backed intervention schemes that promote single digit interest rate on loans, writes COLLINS NWEZE.

    Banks with eyes on the future are having a rethink about agricultural financing. Gone are the days when commercial banks were excluded from funding agric projects and its value-chain.

    Today, many banks have identified the agricbusiness as a key area to play in this period of deposit drought and reduced profitability.

    This has given  farmers  more credit to expand their farms and meet the increasing needs of consumers, both  for consumption and raw material for industries. Besides,  food production is a major challenge all over the world, and with rising population, the demand for food has made it imperative for countries to invest heavily in agriculture and banks are playing major roles to see that huge funding goes to agriculture.

    However, to increase funding for the agric sector, the Central Bank of Nigeria (CBN) in collaboration with the Federal Government and the Deposit Money Banks established agricultural intervention schemes like the Commercial Agriculture Credit Scheme (CACS), Commercial Agriculture Development Programme (CADP), the Interest Draw-back scheme, Agricultural Credit Support Scheme as well as the recently introduced Anchor Borrowers’ Programme (ABP).

    The CBN Governor, Godwin Emefiele, said the broad objectives of the  schemes are to fast track development of the agricultural sector by providing credit facilities to commercial agricultural enterprises at a single digit interest rate. They are also enhancing national food security by increasing food supply and effecting lower agricultural produce and product prices. These have also promoted lower food inflation and diversification of revenue base for the country.

    Emefiele said  agric financing is the way forward for the economy, pointing out that the CBN has, as part  of  its  developmental  role and in collaboration with the Federal Government of Nigeria, represented by the Federal    Ministry of Agriculture    and    Rural Development, established  the  CACS for  promoting local commercial agricultural enterprises, which is a sub–component of the Federal Government’ Commercial Agriculture Development  Programme (CADP).

     

    What the banks are doing

    First Bank of Nigeria, Heritage Bank Limited, First City Monument Bank, Sterling Bank, Diamond Bank and United Bank for Africa have also renewed their pledge to intensify support to the agricultural sector and its value chain, including lending more to the sub-sector.

    The lenders insisted that four basic commodities that are consumed by Nigerians – rice, wheat, fish and sugar jointly account for a significant amount of the country’s annual import bill.

    They expressed their conviction that the nation has the capacity to produce these consumables in the required amounts to meet  domestic consumption needs. With its attendant impact on Gross Domestic Product (GDP) and job creation, agriculture remains a critical focus sector of the financial system.

    The banks said they remained focused on being strategic partners to the government and other stakeholders in the agricultural sector to ensure food sufficiency, employment and revenue generation.

    Heritage Bank Plc has continually made funds available to both individuals and corporate organisations in their efforts to increase agricultural output.

    Its Managing Director/CEO, Ifie Sekibo, said agriculture financing remains a priority for the lender, stating that in the last five years of its operation, the bank has continued to support Federal Government’s economic diversification agenda, especially in funding agricultural projects and its value-chains.

    “Within its period of operation, Heritage Bank is being positioned into a bigger and stronger financial institution that is placed to play a big role in the much-envisaged transformation of the nation’s financial sector in line with the country’s stature as one of Africa’s largest economy. But, the country has a great challenge and a great opportunity in its hands- one of feeding its citizens and driving the nation’s economy. These entails harnessing of the energy and skills of the young adults in the production, processing and marketing of food for the teeming Nigerian population,” Sekibo said.

    “Nigerian youths will find opportunities as entrepreneurs, service providers and paid workers in a sector that is becoming a beacon of hope for the economy, which is the agricultural sector.

    Sekibo said Heritage Bank has not only encouraged both government, corporate and individuals (including young people to embrace optimal productivity and greatness in this sector), it has taken the lead in the drive to support them in the attainment of noble agricultural virtues by funding various agricultural projects in several states in the country, especially in Oyo, Kaduna and Zamfara states”.

    The Managing Director/CEO, First Bank of Nigeria Limited and Subsidiaries, Adesola Adeduntan said the bank has over the years, committed to nation building, whilst promoting agric-business and the development of the economy in Nigeria. He spoke at the second consecutive edition of the First Bank Agric Expo  held in Lagos.

    The bank chief said the lender was committed to  increasingly collaborate with public and private sector partners to fully restore the prime role of the agricultural sector as the mainstay of the economy.

    “Over 124 years ago, our bank commenced operations with a major strategic focus on financing agriculture development as well as enabling farmers and agro-businesses. I am pleased to note that agricultural financing across all value chains remains a core part of our business today.”

    As a result of the Agric Expo, the First Bank’s Agric portfolio recorded a growth of N11.65 billion as a direct impact.

     

    More views  from stakeholders

    Sekibo said the lender would remain focused in supporting agribusiness through financing the purchase of modern technology, as it would bring about transformative development to the economy in general.

    He said the bank would support the drive for cash crop commodities to boost Nigeria’s foreign exchange earnings.

    For its enormous support to this sector, Heritage Bank Plc, Nigeria’s Most Innovative Banking Service Provider in 2017 was bestowed with the inaugural Nigeria Sustainable Banking Award convened by the CBN “For Sustainable Transaction of The Year in Agriculture” among other laurels won.

    In a bid to further support the real sector and unlock food potentials, Heritage Bank Plc in collaboration with CBN provided N2 billion long term facility under the Commercial Agriculture Credit Scheme (CACS) to Triton Aqua Africa Ltd (TAAL).(

    TAAL known as Triton Farm accessed the CACS through Heritage Bank, which was used to set up aquaculture businesses; nursery/hatchery to produce fingerlings and brood stock in Ikeja and earthen ponds for catfish and Tilapia in Asejire, Iwo and Gambari towns in Oyo State.

    The company’s strategy is to embrace backward integration through production of fish locally and reduce its importation of frozen fish and as well assist small scale farms by producing quality breed fingerlings.

    Under the arrangement, TAAL will also help small-scale farms increase their fish production by making fingerlings available to them. In the short term, the loan is expected to help Triton double its current production capacity of 25,000 metric tonnes with a projection to scale it up to 100,000 metric tonnes in five years.

    The bank also has thrown its weight behind Globus Resources Limited, a subsidiary of Triton Group, to flag off the second phase of afforestation programme in Oyo State.

    Statistics showed that Nigeria’s current demand capacity for fish is estimated at 2.7 million metric tons and the country currently produces 800,000 metric tons. Triton is now producing 25,000 metric tons and with them on board, about 25,000 metric tons capacity will be added to our current production, the company’s projection is to reach 100,000 metric tons in five years.

    Heritage Bank has also supported thousands of small holder farms in Kaduna and Zamfara states to benefit from the bank’s financial support for rice and soya beans production under the Central Bank of Nigeria’s Anchor Borrowers Programme (ABP).

    Sekibo said the bank’s drive to support rice production is borne out of the conviction that agribusiness is profitable and act of patriotism to achieve food security and sufficiency in the country.

    He hints that Heritage Bank is effectively tackling the bottlenecks since it has long identified the opportunities in agribusiness before the collapse of crude oil prices through its various programmes, which will contribute to the projection for year 2020 in the production of 7.7million metric tons of milled rice or 10.8million metric tons of paddy rice at milling recovery ratio of 62 per cent.

    For the ABP, the bank provides on-lending funding to aggregated farmers to grow various produce that will serve as raw materials to the processors, thereby ensuring market linkages and access to market as well as reduce importation and conserve Nigeria’s external reserves.

    In 2016, the sums of N54.8 million  and N248.4 million were sourced from CBN and disbursed as loans to 185 rice farmers and 414 soya beans farmers respectively in Kaduna State.

    In 2016, N37.9 million was disbursed to 259 rice farmers via 11 cooperatives in Zamfara State.

     

    More agric-funded

    projects unveiled

    Heritage Bank Plc signed a N232 million pilot phase of out-growers agreement with Biase Plantations Limited (BPL), and its joint venture partner, PZ Wilmar Limited to produce best-in-class palm oil, using the ABP model. The first tranche of N113 million has been received and disbursed accordingly. The pilot scheme covers 45 farmers, grouped into four co-operative societies with a land mass of 150 hectares, and the funds to be administered is from BPL.

    The youths are also encouraged through the bank’s partnership with CBN under the Youth Innovative Entrepreneurship Development Program (YIEDP) to start young and create wealth, adding that from available statistics, 80 per cent of applicants under the youth empowerment programme choose agriculture as the preferred sector.

    Undeniably, most of the ventures in the agriculture sector fall within the Micro, Small and Medium Scale Enterprises (MSME) sectors of the economy, which Heritage Bank in close collaboration with CBN has been championing.

     

     

  • States won’t borrow to bridge funding gap

    States won’t borrow to bridge funding gap

    …States have ruled out borrowing to bridge their funding gaps

     

    The chairman of the Finance Commissioners Forum, Adamawa State Commissioner for Finance Mahmood Yunusa, yesterday told reporters at the end of the Federation Account Allocation Committee (FAAC) meeting in Abuja that “states are not looking at borrowing to augment the funding gaps.”

    According to him, state governments are now looking at cutting costs and working closely with the federal government to increase non-oil revenue particularly Value Added tax (VAT), withholding tax and stamp duty to make more money.

    Accountant General of the Federation Idris Ahmed said “the total revenue distributable for the month of September including VAT is N558.082 billion.

    From this amount, the federal government took N234.286 billion, states and the Federal Capital Territory (FCT) got N152.739 billion, local government councils received N114.918 billion. Oil mineral producing states got an additional N40.216 billion under the 13 per cent derivation principle.

    Ahmed noted that gross statutory revenue of N423.961 billion received for the month was lower than the N550.992 billion received in the previous month by N127.023 billion.

    The AGF noted that “there was significant increase in revenue from export sales of $176.4 million due to an increase in crude oil production by 4.12 million barrels. However, the average price of crude oil decreased from $50.44 to $46.29 per barrel.”

    Idris Ahmed added that “activities resumed at Forcados Terminal for the first time since February 2016. There were shut-ins and shut-downs at Terminals for maintenance and repairs.”

    Oil royalty, he said recorded significant increase in the month under review but there was considerable decline in revenue from companies Income tax , petroleum profit tax, import duty and VAT.”

    It was also revealed that the balance in the Excess Crude Account (ECA) still stands at $2.309 billion while the balance in the excess Petroleum Profit Tax (PPT) stands at $68 million as at October 20.

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