February 15, 2022/CSL Research
Recent reports reveal that the Nigeria Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL) Microfinance Bank is struggling to recoup part of the Covid-19 loans given to households and businesses under the CBN’s Targeted Credit Facility (TCF). Specifically, the lender, through its official social media handles, pointed out that it had played its part, leaving the stage for borrowers to do the same. While no data is available to ascertain the non performing loan rate, we believe the numbers may be rising.
At the heat of the pandemic, the CBN, in partnership with NIRSAL, launched a targeted credit scheme to mitigate the adverse effects of the C0vid-19 outbreak on the already pressured households and SMEs. Initially, the credit facility started with N50bn, however, due to the growing interest, the apex bank raised the initial funding from N50bn to N100bn, N150bn, then N300bn and finally, N400bn. The loans attracted an initial interest rate of 5% per annum till 28 February 2021, after which the interest rate was to be increased to 9% per annum. To put the economic growth on a sustainable path, the apex bank has extended the deadline two times to 1 March 2023. According to the statement released at the last MPC meeting held in January 2022, the apex bank had disbursed a total of N369.78bn to 777,666 beneficiaries, comprising 648,052 households and 129,614 small businesses.
We believe the intervention was really needed as the need to stay afloat was imperative, especially for those who used the credit facility for the intended purpose. Despite the proactive guidelines put in place to reduce the loan default rates to the barest minimum, such as introducing collateral requirements, identifying verifiable evidence of livelihood, it appears loan repayment is becoming a major problem. From media reports, many of the people who received these loans submitted false documents through the help of “middlemen agents” and allegedly siphoned some of these funds for other uses. This questions the availability of the funds to the target businesses and individuals.
