The new coronavirus outbreak has a significant influence on household and corporate operations, causing, among other things, a reduction in consumer confidence, a halt in production, and a dip in global demand for goods and services.
The Federal Ministry of Finance, Budget, and National Planning, along with the Central Bank of Nigeria (CBN), has announced certain monetary and fiscal measures to help lessen the effects of the coronavirus pandemic on the economy, Nigerian businesses, and households.
The CBN has independently announced some stimulus packages that will have an effect on a variety of industries, including the health sector, Micro Small, and Medium Enterprises (MSMEs), manufacturers, households, and so on.
To aid households and micro, small, and medium-sized businesses (MSMEs) affected by the coronavirus pandemic, the apex bank created an N50 billion Targeted Credit Facility (TCF).
Why it’s important The TCF was created to mitigate the negative effects of the COVID-19 pandemic on households and MSMEs, support households and MSMEs whose economic activities have been significantly disrupted, and encourage lending to MSMEs to increase their productive capacity through equipment upgrades and research and development.
A. For whom is TCF intended?
Participants who are qualified to apply for credit from this facility are listed by the CBN in the operational guidelines for the facility. The list is as follows:
households with verifiable proof that their way of life has been negatively impacted by the coronavirus outbreak; existing businesses with verifiable proof that their commercial operations have been negatively impacted by the coronavirus pandemic (as part of its consistent review, CBN has declared that eligible applicants do not need to have a business plan); and companies engaged in activities related to the agricultural value chain.
the hospitality sector (accommodation and food services)
service providers for airlines
Health (pharmaceuticals and medical supplies) (pharmaceuticals and medical supplies)
Trading and other revenue-generating activities that the CBN may specify
B. The money’s source
The Micro, Small, and Medium Enterprises Development Fund (MSMEDF) will be used to support the program, and NIRSAL Microfinance Bank is a qualified financial institution to participate in the program (NMFB).
This indicates that the CBN will draw the money from its MSME development fund, which will be managed by NIRSAL Microfinance Bank. As a result, although the CBN will provide the funding, borrowers must apply for the loan through NIRSAL Microfinance Bank.
C. How to use the money
Here, there are two modes to take into account. The procedures apply to either households/MSMEs or corporate entities, according to the CBN’s circular published on March 23, 2020.
For families and MSMEs,
An eligible household must submit an application to NIRSAL MFB in the first step, which includes providing information such as their BVN number, proof of business registration (if necessary), and a business plan that clearly demonstrates how the COVID-19 pandemic will either present an opportunity or have a negative impact.
NMFB must evaluate and carry out applications for due diligence.
The CBN will analyze the applications and issue final permission for payout to NMFB once NMFB has determined that the application has been evaluated satisfactorily.
Therefore, applicants must make an effort to submit the most fundamental documents indicated above. You can hire someone to assist you if you do not know how to build a business plan.
pertaining to businesses
Applications are submitted to NMFB, just like those from MSMEs, with convincing proof of the opportunity or negative impact brought on by the COVID-19 epidemic.
Additionally, NMFB must evaluate and carry out applications for due diligence.
The NMFB must evaluate the application satisfactorily before sending it to the CBN for final approval.
After reviewing all applications, CBN grants final clearance for NMFB to be paid.
However, candidates might experience some setbacks as a result of NMFB’s communication shortcomings. For instance, one of the potential applicants, Kolade Emmanuel, used Twitter to inquire about the loan after a month passed with no response from the bank. He stated, “I have not heard from the bank in around one month after I have followed all essential formalities,” when Nairametrics called him.
Loan Conditions Loan Amount
The loan amount that is granted to various sectors and eligible participants is determined using several criteria. As follows:
SMEs: The maximum loan amount for SMEs is N25 million and is based on the beneficiary’s activity, cash flow, and industry/segment size. For households, the maximum credit amount is N3 million. A maximum of 25% of the yearly turnover average over the preceding three years may be used as working capital. However, 25% of the previous year’s revenue will do in cases where the business has not yet been in existence for three years.
The interest rate under the intervention shall be 5% per annum (all-inclusive) up to February 28, 2021, and thereafter, the interest on the facility shall revert to 9% per annum (all-inclusive) as of March 1, 2021, according to the CBN’s circular on the guidelines for the implementation of this facility.
The rule specifies that the working capital loan may only be taken out for a period of one year, with no possibility of extension. A maximum duration of three years for the term loan, with a moratorium of at least one year.
Demand for Collateral
According to the policy, the recipients of the program must pledge collateral that NIRSAL MFB deems appropriate, which may include the following:
- the proper registration of the movable asset(s) in the National Collateral Registry (NCR);
- simple and flawless title paperwork deposit
- unchangeable domicile of proceeds;
- Acceptable personal guarantees from the business’s promoter and two guarantors
- Key Man’s life insurance with NMFB is listed as the First Loss Payee
- complete coverage for the asset
E. Stakeholder Responsibilities
The CBN’s obligation
- Provide the project’s initial funding.
- Release monies to the NIRSAL MFB for the selected applicants’ distribution.
- Whenever necessary, review the facility’s rules.
- receive and handle NIRSAL MFB’s recurring returns
- The scheme’s implementation is being tracked and evaluated by NIRSAL MFB.
- Responsibility of NIRSAL MFB They are responsible for:
- Verify the candidates’ status and BVN
- Process and distribute money to authorized recipients
- Keep track of all recipients and payments in your records.
- Send periodic returns on the scheme’s prescribed format to CBN.
- Keep the rules in mind
- to perform any additional tasks that the CBN may from time to time specify.
F. Exit date:
This intervention will end on December 31, 2024. It should be emphasized that the top bank reserves the right to periodically review this CBN framework if it so determines.