‘We obtained CBN’s MSME Fund from banks at 22%’
Small business owners, who recently accessed the N220 Billion MSME Development Fund from commercial banks, have said that they did so at 22 percent interest rate, rather than nine percent stipulated by the apex bank.
“The commercial banks will not give out this loan at nine percent interest rate,” said Jon Kachikwu, chairman of the SME Group of the Lagos Chamber of Commerce and Industry, (LCCI) and chief executive officer of Jon Tudy Interbiz Nigeria Limited.
“By the time banks put everything together, it will be 22 percent. We got one last year at 22 percent, and we also gave banks some collaterals,” Kachikwu, who also has a business in the United States of America, told Start-Up Digest.
The CBN, had, in 2013, launched the N220 Billion MSME Development Fund, with a view to steering the growth of MSMEs to ensure they create quality jobs and make bigger contribution to the country’s gross domestic product (GDP).
But some small business operators have complained that they cannot access it owing to conditions attached to its access.
“This is why we intend to float a cooperative society. This has been approved by the executive,” said the newly elected chairman of LCCI SME Group.
He said his members were looking forward to obtaining loans from the Bank of Industry (BoI) at a single-digit rate.
“We are looking at single-digit rate. When I went to China in 2000, interest rate was six percent, but I was surprised to learn recently that it has come down to two percent. This is how we know a country that wants to develop through SMEs,” he noted.
Godwin Emefiele, CBN governor, had earlier in Lagos lamented that a meagre 3.5 percent of bank finance flowed to agriculture and 0.2 percent to SMEs, and virtually nothing to exports.
“This is in spite of the fact that agriculture contributes about 22.9 percent to GDP; MSMEs contribute 48.47 percent and 7.27 percent of exports,” Emefiele, who was represented by Olaitan Mudashir Adeola, acting director of development finance, CBN, said in a paper entitled, ‘Accelerating Entreprise Competitiveness and Growth in Nigeria’.
The governor had also, in December 2015, mandated commercial banks to lower their risk rating for SMEs or lose Cash Reserves Ratio (CRR) refunds, which mean a portion of banks’ deposits kept with the CBN as reserves at zero interest rate.
“If they refuse to lower the risk acceptance level for SMEs, we will take the money they should have got through the CRR and lend them out to the SMEs,” Emefiele said at the Seventh Annual Bankers’ Committee Retreat in Lagos.
Nigeria currently has 37 million MSMEs, accounting for 48 percent of GDP while providing 60 million jobs. But manufacturers, especially those in the SME category, obtain loans, on the average, at 22.5 percent interest rate.
“In the first half of 2015, the challenges of dearth of borrowable fund and the high cost of borrowing continued to be daunting to the manufacturers,” said the Manufacturers Association of Nigeria (MAN) in its latest economic review.
“The commercial banks maintained their selective lending behaviour, which often does not favour lending to manufacturers,” MAN added.
In the face of oil market crash, which has brought Nigeria’s revenue and economy to their knees, Africa’s biggest economy needs to fund the ideas of budding entrepreneurs to raise the level of economic activities in the country, reduce unemployment and crime, say analysts.
The say the government must closely look at tenor of available funds to ensure they are long term.
Foreign operators in Nigeria often compete better because they obtain cheaper loans from their countries. The situation is already affecting Nigeria’s exporters as their products are often more expensive than their peers in the global market.
“Entrepreneurship is the only way of tackling unemployment and wealth creation,” Rohan Malik, partner, emerging markets and global deputy leader, government and public sector for Ernst & Young (EY), told Start-Up Digest.
ODINAKA ANUDU