February 10, 2022/United Capital Research
On Monday, the management of Nigeria Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL) Microfinance Bank, through its official social media handles called for the repayment of the disbursed Central Bank of Nigeria’s (CBN) Targeted Credit Facility (TCF) Covid-19 loans worth N50.0bn obtained by several entrepreneurs and households across the nation during the Covid- 19 pandemic. This follows the rising cases of failure of CBN’s intervention beneficiaries to repay the loans received under various schemes.
Following the outbreak of Covid-19 in Nigeria in Mar-2020, wreaking havoc to households, business and economic activities in general, the CBN introduced the N50.0bn targeted credit facility as part of its stimulus package to help mitigate the impact of the pandemic on the economy, and to support households, micro, small and medium enterprises (MSMEs) that were affected by the pandemic. The loans were disbursed by the CBN through NIRSAL Microfinance Bank, with the facility receiving over 80,000 applications. In structuring the facility, it was expected to run for a maximum of 3 years and repayment would be made on an installment basis with interest rates varying between 5.0% and 9.0% depending on the loan purpose. Also, in a bid to avoid some of the ills of previous intervention facilities, beneficiaries were required to post collateral with other strict terms aimed at ensuring repayment.
In our view, while we expect these loans may be recouped via collaterals posted, we retain reservations towards existing structures of monetary interventions. We believe SME and household creditworthiness remains a critical pain point for the Nigerian banking industry. Unsurprisingly, many individuals view such intervention funds as “free money” with no obligation to pay back. Thus, we believe the CBN may need to focus efforts on targeting more organized and formal borrowers with its intervention schemes. That said, we retain the view that the Nigerian economy needs more than monetary interventions to return back to years of accelerated growth rates.
