Home Economy COVID-19: How CBN powers economic recovery through 8 credit facilities

COVID-19: How CBN powers economic recovery through 8 credit facilities

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by UCHE USIM, The Sun

With the COVID-19 pandemic ravaging the Nigerian economy, the Central Bank of Nigeria (CBN) has unveiled a plethora of intervention programmes that touch all sectors and value chains.

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Aside from the existing interventions like the Anchor Borrowers’ Programme in production of rice and other crops, the CBN recently launched about seven intervention schemes to boost access to finance by non-interest financial institutions, revive ailing businesses, boost job creation and ultimately grow the economy.

A recent circular by the apex bank’s director, Financial Policy and Regulation Department, Kevin Amugo, said the overall objective of these interventions was to promote financial inclusion in the country. He enjoined Nigerians to explore the many opportunities unveiled by the bank to resuscitate their businesses.

At the peak of COVID-19-induced lockdown, the bank introduced the N50 billion Targeted Credit Facility as a stimulus package to support households and micro, small and medium enterprises affected by the pestilence. The intervention is financed from the Micro, Small and Medium Enterprises Development Fund. The loan amount is determined based on the activity, cash flow and industry size of the beneficiary, subject to a maximum of N25 million for SMEs. Households with verifiable evidence of livelihood adversely impacted by COVID-19 can access the loan to a maximum of N3 million. About 100,000 beneficiaries got a slice of the loan.

According to Professor Uche Uwaleke, Nigeria’s first professor of the capital market, the overall objective of these interventions is to promote financial inclusion in the country, tackle unemployment, insecurity and other social challenges.

Some of the intervention schemes are; Non-Interest Guidelines for Accelerated Agriculture Development Scheme (AADS); Non-Interest Guidelines for Intervention in Textile Sector; Guidelines for the operation of the Agri-business, Small and Medium Enterprise Investment Scheme (AGSMEIS) for Non-Interest Financial Institutions; Non-interest Guidelines for Non-oil Export Stimulation Facility; Non-interest Guidelines for Anchor Borrowers’ Programme; and Non-interest Guidelines for the operation of the Credit Support for the Healthcare Sector, among others.

Interestingly, the intervention schemes were designed with specific targets and purposes. The AADS, for instance, is aimed at reducing unemployment in Nigeria by funding agriculture production initiatives that will engage as many as 370,000 youths over the next three years. The Non-Interest Guidelines for Intervention in Textile Sector is intended to resuscitate Nigeria’s textile industry by providing a N50 billion special mechanism for restructuring existing facilities and provision of further facilities for textile companies.

On cotton production, 256,000 farmers had been engaged for the 2020 planting season through the CBN Anchor Borrowers Programme (ABP).

The CBN also said it was working hard to revive the Cotton Textile and Garment (CTG) industry to create jobs and boost the economy of the country.

Some of the eligibility criteria for accessing these non-interest schemes are that beneficiaries must be Nigerian youths within the ages of 18 to 35 years.

They are to sign an undertaking to abide by the terms of agreement of the scheme and meet other documentation requirements.

More so, any textile company with an existing facility in the books of Bank Of Industry (BOI) under the CTG scheme is eligible to apply. Again, textile companies with existing facilities in DMBs/NIFIs can apply. Textile companies that are not participating under the SME/RRF can also apply.

Other non-interest guidelines issued by the CBN were for the ABP: the Credit Support for the Health Sector;  Intervention in the Textile Sector; the Real Sector Support Facility (RSSF) revised guidelines (V3); the RSSF through CRR; Non-Oil Export Stimulation Facility (ESF) and the Creative Industry Financing Initiative (CIFI).

Some beneficiaries of the facility who spoke with Daily Sun hailed the apex bank for its numerous interventions.

Ugo Chinenye, a young graduate, said she was a beneficiary of the CBN household loan under the Targeted Credit Facility (TCF) meant to cushion the effect of the COVID-19 pandemic.

“I saw the news in the media and I applied online. I was called for an interview and, eventually, I got N400,000. I’ve started a small food business in a makeshift place close to my house. I’m likely to pay back this loan in 18 months. I’m excited,” she said.

Another beneficiary, John Amos, said he got N350,000 TCF loan last month with which he bought additional tools for his automobile repair business.

“I added money and bought a diagnosing machine for the latest model of cars. It’s scarce in Dutse. I can now diagnose vehicles and make money from it. If the owner wants, I’ll repair the vehicle after the diagnosis but diagnosing alone is N10,000.”

For Magdalene Abe, the N180,000 she got from TCF came in handy to pay her rent.

“We were almost thrown out. My husband lost his job and rent became an issue. But the loan came and we’ve settled it. It’s N150,000. I’m a hairstylist and, gradually, we’ll pay back the loan.”

Also hailing the apex bank for its interventions, Presidents of the Rice Farmers Association of Nigeria (RIFAN), Alhaji Alhaji Aminu Goronyo; National Cotton Association of Nigeria (NACOTAN), Mr. Anibe Achimugu; Maize Association of Nigeria, Alhaji Bello Abubakar; and the Maize Growers, Processors, and Marketers Association of Nigeria (MAGPMAN), Dr. Edwin Uche, attested to the success of the CBN ABP, which they noted had enhanced the value chains of their respective commodities.

Speaking on the guidelines issued by the bank, the Director, Corporate Communications Department, Isaac Okorafor, said the establishment of the non-interest windows had opened more opportunities for eligible beneficiaries to be considered for funding under all the bank’s initiatives.

The guidelines stipulate that each Non-Interest Deposit Bank (full-fledged or window) is to set aside 5 per cent of its profit after tax annually as contribution to the Fund. It added that each Non-Interest Deposit Bank is also to transfer its contribution to the CBN not later than 10 working days after the Annual General Meeting of the participating bank.

Eligible activities under the scheme are businesses across the agricultural value chain, covering production, inputs supply, storage, processing, logistics and marketing; MSMEs in the real sector including manufacturing, mining and petrochemicals; MSMEs in the service sector including information and communication technology and the creative industry as well as other activities as the Central Bank of Nigeria may determine from time to time.

According to the guidelines, financing under the scheme will be for start-ups, business expansion or revival of ailing companies and shall be in compliance with provisions of BOFIA (1991) as amended and the principles underpinning operations of NIFIs.

The CBN, using various monetary policy levers, pooled huge funds to prosecute the war against COVID-19 and cushion its scathing economic impact on Nigerians.

On March 21, when Nigeria went into total lockdown with 22 confirmed COVID-19 cases, the apex bank responded by scaling up the economic stimulus package from N1.1 trillion to N3.5 trillion to ameliorate the pains of the scourge.

In the same vein, the CBN created a special purpose vehicle called Coalition Against COVID-19 (COCAVID) to help pool funds from private sector players.

As at April 27, the money in the fund stood at N27,160,109,011.94.

This was in addition to the N100 billion loan already earmarked in 2020 to support the health authorities to ensure laboratories, researchers and innovators work with global scientists to patent and or produce vaccines and test kits in Nigeria to prepare for future health challenges.

There was also the reduction on interest rate on its N3 trillion multi-sector intervention packages from 9 per cent to 5 per cent.

The apex bank has also extended its moratorium on various loans for one year, effective March 1, 2020, to guarantee easier repayment plan since the revenue of most businesses has drastically reduced as a result of the coronavirus pandemic.

Accordingly, it directed participating financial institutions to provide new amortization schedules for all beneficiaries.

The apex bank also said it would increase the N50 billion earmarked for soft loans to small businesses by another N100 billion in loan this year to support the health authorities to ensure laboratories, researchers and innovators work with global scientists to patent and/or produce vaccines and test kits in Nigeria to prepare for any crises ahead.

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