We laud the Central Bank of Nigeria (CBN) for the introduction of the National Collateral Registry (NCR), which will enable Micro, Small and Medium Enterprises (MSMEs) to access credit at reasonable interest rates. With NCR, MSMEs can access credit with moveable collateral at reasonable interest rates. We welcome the new initiative, which will encourage the growth of small business enterprises. Statistics from the CBN and the Bank of Industry (BoI) show that less than seven per cent of over 17 million registered MSMEs have access to credit. 

The CBN Governor, Mr. Godwin Emefiele, who announced the boost in credit with moveable collateral during the first national workshop for judicial officers on Secured Transactions in Moveable Assets Act and National Collateral Registry, admitted that small businesses in the country had practically been denied access to credit by banks as well as subjected to high interest charges as a result of their inability to provide acceptable collateral.              

In addition, the CBN Governor observed that given the inherent risks in granting loans to small businesses by banks, that constraint will be reduced through the NCR, which was established in 2015. Hundreds of financial institutions are reported to have been registered by the NCR. The apex bank says it is gradually moving towards the enforcement of the Secured Transactions in Moveable Assets Act. CBN record revealed that lending banks had registered interest on movable assets worth about N1.23trn, $1.14bn and €6.08m through 41,408 financial statements.             

It is heartwarming that the CBN has put measures in place to ensure that small businesses obtain loans with moveable collateral. Currently, banks regard small businesses as risk-laden, plagued with high mortality rate, and often lacking adequate collaterals acceptable for conventional credit.                               

Related News

It is, therefore, high time these constraints of access to credit by MSMEs were overcome. Without access to capital at low interest rate, it will be near impossible for the economy to grow. Last year, a research by Dun Bradstreet Bureaus, a reputed credit rating agency, revealed that the number of Nigerians without access to credit reached an all-time high of 98 per cent. This means that only two per cent of the Nigerian population has access to bank loans. The report also showed that banks are more disposed to lending money to corporate organisations.      

This discourages small businesses from making good impact on the economic development of the country, a drawback recently highlighted by the Manufacturers Association of Nigeria (MAN). Also, the World Bank group last year in one report on Nigerian economy, stated that while small businesses had the potential to contribute up to 60 per cent of employment opportunities and about 40 per cent of the national income or GDP, without access to credit, many of them would stagnate, and eventually collapse within one year of takeoff. This, indeed, reflects the big challenge that MSMEs go through in Nigeria. It is hoped that the latest initiative by the CBN will break the present cycle of poor access to credit.                                     

It is unfortunate that the commercial banks have not made lending easier for small businesses. The CBN should quickly implement the NCR. At present, many MSMEs rely on internal funds from friends and family to be in business. We recall that in 2015, the CBN set up N520bn intervention fund for MSMEs, to be managed by commercial banks. One of the objectives was to make credit accessible at 3 per cent interest charge for banks, which should in turn lend to small businesses at 9 per cent. Sadly, the banks hiked the interest charge far above what the CBN recommended. With Nigerian economy still in negative territory, the effort by the CBN to boost credit with moveable collateral for small businesses is coming at the right time.

However, the cooperation of the commercial banks is so important to deepen credit delivery to small businesses. We recommend the establishment of a special court to ensure that cases arising from moveable assets collateral lending are speedily handled. In the same vein, we advise small business operators to learn some smart business ideas from countries such as Bangladesh, Malaysia, India and others.