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COVID-19: How to access the N50bn CBN intervention fund

COVID-19: How to access the N50bn CBN intervention fund

The novel corona virus outbreak has  had a severe impact on the livelihood of households and business activities resulting to drop in global demand for goods and services, declined consumer confidence and slowdown in production among others.

The Federal Government through the Central Bank of Nigeria (CBN) and the Federal Ministry of Finance, Budget and National Planning have announced some monetary and fiscal measures to help mitigate the impact of the corona virus pandemic on the economy, Nigerian businesses and households.

The CBN on its own, through various circulars and pronouncements, has announced some stimulus packages that will impact on different sectors like the health sector, Micro Small and Medium Enterprises (MSMEs), manufacturers, households and so on.  NAIRAMETRICS reports.

The apex bank introduced an N50 billion Targeted Credit Facility (TCF) as a stimulus package to support households and micro, small and medium enterprises (MSMEs) that are affected by the corona virus pandemic

Why it matters: The TCF was designed to cushion the adverse effects of COVID-19 on households and MSMEs; support households and MSMEs whose economic activities have been significantly disrupted by the COVID-19 pandemic, and to stimulate credit to MSMEs to expand their productive capacity through equipment upgrade and research and development.

Who is TCF meant for?: In the operational guideline for the facility, the CBN listed participants who are eligible to apply for credit from this facility. They are Households with verifiable evidence of livelihood adversely impacted by the corona virus outbreak; existing enterprises with verifiable evidence of business activities adversely affected as a result of the corona virus pandemic (as part of its consistent review, CBN has declared that eligible applicant does not need to have a business plan), and firms in agricultural value chain activities.

Others are hospitality industry (accommodation and food services), Airline service providers, Health (pharmaceuticals and medical supplies), Manufacturing/value addition, Trading and other income-generating activities as may be prescribed by the CBN.

Source of fund:  The scheme shall be funded from the Micro, Small and Medium Enterprises Development Fund (MSMEDF) and the eligible participating financial institution for the scheme is NIRSAL Microfinance Bank (NMFB).

How to access the fund: There are two modalities here to consider. According to the CBN’s circular issued on March 23, 2020, either Households/MSMEs or Corporate entity.

For Households/MSMEs,

The first step is for an eligible household to submit an application to NIRSAL MFB, which must, among others, contain BVN number, business registration (where applicable) and business plan with clear evidence of the opportunity or adverse impact as a result of COVID-19 pandemic

NMFB shall appraise and conduct due diligence applications

Upon satisfactory appraisal of application, NMFB shall forward the applications to the CBN for final approval,

Then, CBN reviews applications and gives final approval for disbursement to NMFB.

For corporate entities,

Like their MSMEs counterparts, applications are submitted to NMFB with clear evidence of the opportunity or adverse impact as a result of COVID-19 pandemic.

Also, NMFB shall appraise and conduct due diligence applications,

After satisfactory appraisal of application, NMFB shall forward the applications to the CBN for final approval.

CBN reviews applications and gives final approval for disbursement to NMFB.

Loan Limit: There are different criteria used to determine the loan amount that is disbursed to different eligible participants and segments. They are:

SMEs- The loan amount shall be determined based on the activity, cash flow and industry/segment size of beneficiary subject to a maximum of N25 million for SMEs

Households- They can access a maximum of N3 million. Working capital shall be a maximum of 25% of the average of the previous 3 years’ annual turnover. But where the enterprise is not up to 3 years in operation, 25% of the previous year’s turnover will suffice.

Interest Rate: The CBN in its circular on the guidelines for the implementation of this facility stated that 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 from March 1, 2021.

Loan Tenor: The guideline states that the loan for working capital shall be for a maximum of one year, with no option for rollover. As for the term loan, a maximum tenor of not more than 3 years with, at least, one-year moratorium.

Collateral Requirement: The guideline states that the collateral to be pledged by the beneficiaries under the programme shall be as may be acceptable by NIRSAL MFB, but may include

Moveable asset(s) that is duly registered on the National Collateral Registry (NCR);

Simple deposit of title documents, in perfect state

Irrevocable domiciliation of proceeds;

Two acceptable Guarantor and

Personal Guarantee of the promoter of the business

Life insurance of the Key Man, with NMFB noted as the First Loss Payee

Comprehensive insurance over the asset

Responsibilities of Stakeholders

The CBN shall;

Provide the seed fund for the scheme.

Release funds to NIRSAL MFB for disbursement to successful applicants

Review the guidelines of the facility as may be necessary

Receive and process periodic returns from NIRSAL MFB

Monitor and evaluate the implementation of the scheme by NIRSAL MFB.

As for NIRSAL MFB, they have the following responsibilities,

Validate the status and BVN of the applicants

Process and disburse funds to approved beneficiaries

Maintain records of all beneficiaries and disbursements

Forward periodic returns on the prescribed format on the scheme to CBN

Comply with the guidelines

Carry out any other duties as the CBN may prescribe from time to time.

Exit date: The exit date of this intervention is December 31, 2024. It should be noted that this framework from CBN shall be subject to review from time to time as may be deemed necessary by the apex bank.

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