MSMEs: A Path to Recovery


Monday, March 22, 2021 / 11:35 AM / By CSL Research / Header Image Credit: Tech Central

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A Punch report says the Central Bank of Nigeria (CBN) has moved to increase the existing fund under the Targeted Credit Facility (TCF) for households and Micro, Small and Medium Enterprises (MSMEs) from N150bn to N300bn to accommodate more affected individuals and businesses in the economy. Currently, a total of N149.21bn has been disbursed to 316,869 beneficiaries through the NIRSAL Microfinance Bank. The Apex bank noted the need to increase consumer expenditure which ultimately should drive output growth following the impact of the pandemic.


In March 2020, the CBN introduced the N50 billion Targeted Credit Facility as a stimulus package to reduce the adverse effects of Covid-19 on households and MSMEs. The scheme financed from the Micro, Small and Medium Enterprises Development Fund (MSMEDF) attracted a rate of 5% per annum till 28 February 2021, after which the interest was to be increased to 9% per annum. Currently, in a bid to sustain economic recovery, the apex bank has extended the period for an additional one year to 28 February 2022, after which the interest rate of 9% per annum will be effected.


Several schemes aimed at providing finance at low interest rates have been established by the federal government. These include a special intervention fund managed by the Bank of Industry (BOI) to provide subsidized loans to MSMEs at a rate of 9% per annum. Agri- Business/Small and Medium Enterprise Investment Scheme (AGSMEIS) is another intervention funding scheme anchored by the CBN specifically for enhancing small agricultural businesses of MSMEs. Another such scheme is the MSMEs Guaranteed Offtake Simulation Scheme geared at providing bridge financing to support the payroll costs of MSMEs that are grappling with severe cash flow problems due to the Covid-19 disruptions.


Given the importance of the MSMEs to the country's economic affairs, being the biggest employer of labour, an additional N150bn at this time to support households and MSMEs is a significant boost to the nation's economic recovery process. Before the onset of the pandemic, many households and businesses faced many setbacks arising from the shocks caused by the 2016 recession. The onset of the Covid-19 pandemic further worsened the situation. We believe this additional credit stimulus will assist to mitigate the adverse effects of the pandemic on already pressured households and MSMEs.


Although, the GDP Q4 2020 showed the economy has slipped out of the recession, however, the unemployment rate reported at 33.3% by the end of Q4 2020 shows the country is still in the woods. In our view, resolving the unemployment situation in Nigeria will be largely dependent upon the efficacy of government policies in stimulating private sector investment particularly in the real sector of the economy and the role of MSME's cannot be overemphasized. That said, there is the need to ensure proper disbursement and management of these funds to ensure proper use where most needed.

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