The coronavirus pandemic has resulted in unprecedented disruption of global supply chains, dramatic fall in global crude oil prices, instability in global stock and financial markets, significant movement restrictions among others.
The effects of these disruptions prompted the Federal Government of Nigeria (“FGN”) to introduce fiscal and economic stimulatory measures to ameliorate the impact on businesses and save the economy from collapse.
One of such stimulus packages is the Central Bank of Nigeria (CBN) N50 billion Targeted Credit Facility aimed at providing succour to households and MSMEs that have been adversely affected by COVID-19 pandemic.
The Q&As below covers some of the most essential facets of the scheme.
What are the objectives of the Scheme?
With the introduction of the Scheme, the CBN intends to:
i. Cushion the adverse effects of COVID-19 on households and MSMEs;
ii. Support households and MSMEs whose economic activities have been significantly disrupted by COVID-19; and
iii. Stimulate credit to MSMEs to expand their productive capacity through equipment upgrade, and research and development.
Which commercial activities will be regarded as being eligible for the loan?
The following activities will be regarded as eligible opportunities in taking advantage of the crises;
(a) Agricultural value chain activities;
(b) Hospitality (accommodation and food supply services)
(c) Health (pharmaceuticals and medical supplies)
(d) Airline service providers;
(e) Manufacturing/ Value Addition Services;
(e) Trading, as well as any other income generating activities as may be prescribed by the CBN.
Who is eligible to participate under the Scheme?
Eligible participants under the Scheme include households (with verifiable evidence of livelihood adversely impacted by COVID-19), existing enterprises (with verifiable evidence of business activities adversely affected as a result of COVID-19) and enterprises with bankable plans to take advantage of opportunities arising from COVID-19.
How is the Scheme funded/financed?
The Scheme is financed from the Federal Government’s Micro, Small and Medium Enterprises Development Fund (MSMEDF).
Who are the Stakeholders under the Scheme?
The CBN, a Participating Financial Institution (PFI) and the borrowers/beneficiaries are the major stakeholders under the Scheme.
Who is the Participating Financial Institution under the Scheme?
The Nigeria Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL) Microfinance Bank is the only PFI under the Scheme.
How much of this N50 billion can I access?
The CBN through guidelines, particularly the CBN’s Guidelines for the Implementation of the N50billion Targeted Credit Facility has stipulated the following threshold as the maximum loan amount to be accessed by an individual borrower:
(a) Households can access a maximum of N3 million.
(b) SME’s can access a maximum of N25 million. This will however be dependent on the proposed activity, cashflow and industry size of the borrower.
What is the interest rate applicable to a loan under the Scheme?
The applicable interest rate is 5.0% p.a (all inclusive) up to 28th February 2021. Interest shall thereafter revert back to 9% p.a (all inclusive) as from 1st March 2021.
What is the Tenor of the Loan?
Working capital shall be for a maximum period of one year, with no option of rollover while the term loan shall have a maximum tenor of not more than 3 years with at least, one-year moratorium.
Is any collateral required to obtain the facility?
The collateral to be pledged by borrowers/beneficiaries under the Scheme shall be as may be acceptable by NIRSAL Microfinance Bank and may include one or more of the following:
i. Moveable asset(s) duly registered on the National Collateral Registry (NCR);
ii. Simple deposit of title documents, in perfectible state;
iii. Irrevocable domiciliation of proceeds;
iv. Two (2) acceptable guarantors;
v. Personal guarantee of the promoter of the business;
vi. Life insurance of the key-man, with NIRSAL Microfinance Bank noted as First Loss Payee;
vii. Comprehensive Insurance over the asset.
What does the application process involve?
The application process is straightforward and simple to enable quick resolution of applications in these difficult times:
(a) Applications are submitted online, directly to NISRAL Microfinance Bank.
(b) Applications are accompanied by the following:
– borrowing entity’s BVN;
– business registration number (if applicable);
– business plan with clear evidence of the opportunity or adverse impact caused by the pandemic. (optional)
(c) After documents are submitted, NISRAL shall appraise and conduct due diligence.
(d) If the applicant’s documents are found satisfactory, NISRAL shall forward to the CBN for final approval.
(e) CBN will review and revert to NISRAL with final approval for disbursement.
Is my business required to pay any fees in applying for this loan?
No. Neither the CBN nor NISRAL charge any fees as processing fees in applying for this loan. In furtherance of this, the CBN issued a disclaimer on the 13th of April, 2020 asking members of the public to disregard requests for payment of any amount as processing fees for this loan.
When should applicants expect NISRAL to begin disbursements?
NISRAL released a statement on 15/04/2020 to the effect that disbursements to successful applicants for the TCF loan will begin in the week of 20/04/2020.
How long is the application process expected to take?
The CBN and NISRAL have communicated that applications are to be swiftly dealt with and applicants are to expect a decision on their applications in a timely manner. We will assume that timelines will vary based on several factors including completeness of documentation and others.
How soon will I receive the approved funds?
NISRAL indicated an intention to begin disbursements in the week of 20/04/2020. Successful applicants should begin to receive approved funds then.
Is the requirement to provide a business plan in the application process compulsory?
No. The requirement for a business plan is no longer compulsory and the requirement for payment of between N5,000 and N10,000 for a bank approved business plan has been dispensed with. Applicants may now submit loan applications without a business plan. NISRAL however noted that the inclusion of a business plan in an application will make the application process faster for beneficiaries.
Will applicants be required to provide a collateral for the loan?
Yes. The collateral to be pledged by the beneficiaries under the program may include the following:
(a) moveable assets duly registered on the National Collateral Registry; The National Collateral Registry of Nigeria is an initiative of the Central Bank of Nigeriato improve access to finance particularly for Micro, Small and Medium Enterprises (MSMEs). The Collateral Registry is pursuant to Part III of the Central Bank of Nigeria’s Regulations on Registration of Security Interests in Movable Property by Banks and other Financial Institutions (Regulations No, 1, 2015). It is currently operational and being used by borrowers and lenders alike. Simply put, the Collateral Registry is a web-based system that allows lenders to determine any prior security interests, as well as to register their security interests over movable assets provided as collateral.It facilitates the use of movable / personal assets as collateral that remain in possession or control of the borrowers and thereby improves access to secured finance. The registry can be accessed via ncr.gov.ng.
(b) simple deposit of title documents, in perfectible state;
(c) deed of debenture (for stocks), in perfectible state.
(d) an irrevocable domiciliation of proceeds;
(e) two acceptable guarantors;
(f) personal guarantee of the promoter of the business;
(g) life insurance of the key-man, with NMFB noted as the first loss payee;
(h) and comprehensive insurance over the asset
What is the deadline for the availability of the Scheme?
The Scheme shall be available until 31 December 2024.