With stringent conditions for accessing funds from banks, the recent assurances by the Central Bank of Nigeria (CBN) to unfold more monetary policies to ease the current hardship being experienced by small business, is a welcome development. Speaking on behalf of the apex bank at a business fair in Enugu organised for SMEs, Acting Director, Corporate Communication, Mr Issac Okoroafor, said the CBN and the Federal Government are working hand in gloves to reduce the hardship caused by the economic recession.
The CBN said that access to the N220bn intervention fund for SMEs would be made easier. The Federal Government had under the immediate past administration set up the fund to be administered by the CBN through Commercial banks in the country. But many SMEs complained of difficulty in accessing the funds, mainly because of high interest rates and other stringent conditions attached.
But CBN says it has modified some of the conditions as well as target beneficiaries. Artisans, farmers, shoemakers and other small business owners have been factored into the value chain. About 60 percent of the funds is meant for women and women-owned enterprises. Some start-ups are said to have benefited from the fund to the tune of N2bn.
While we commend the CBN for this effort, a lot more should to be done to improve access to credit for SMEs in the country. It is estimated that there are over 17 million registered SMEs, and many of them with good business proposals do not have access to bankable loans because of high interest rates and other administrative charges.
Due to these constraints, intervention fund has remained idle at the banks, thereby defeating the objective of the fund, which is to provide wholesale credit to medium and small enterprises at low interest rates. We believe that one of the ways to overcome the current economic recession is to ease the financial constraints facing small businesses and stimulate the economy since many of them in the informal sector are involved in the production of goods and services. In fact, small and medium scale enterprises need safety nets to stay afloat rather than go under, as has been the case of many businesses in recent times.
Unfortunately, many of them, including some manufacturing firms, have shut down operation as a result of lack of access to funds, high interest rates, suffocating business environment like energy crisis and flip-flop government policies.
No doubt, small businesses and blue chip companies need encouragement to enable them navigate through the present economic recession and play a role in the government diversification drive. Available statistics revealed that the contribution of small and medium scale enterprises to the Gross Domestic Product is put at 60 percent.
This is why the reluctance of banks to give credit to businesses at low interest rates has become a disincentive to economic growth. It will be recalled that two years ago, the Bankers Committee pledged to make huge funds available to small businesses. But that pledge remains within the realm of promise yet to be fulfilled.
Many banks are currently facing tough times following last year’s implementation of the Treasury Single Account (TSA) policy, which saw the withdrawal of funds of government agencies from the commercial banks to the CBN.
For the N220bn intervention fund to achieve its laudable objectives, its disbursement should be transparent and monitored closely by the relevant department of the CBN. Besides, it is important to know what has happened to the $500 million intervention fund from the World Bank in 2014 for small and medium enterprises operating in Nigeria. This amount is huge to meet some of the problems hampering the success of entrepreneurs in the country.
Although, the N220bn fund may not be enough, it is still a good step in the right direction. Government needs to do more, especially in creating an enabling environment such as infrastructure development and other enablers that will rev up the economy.
We hope that government’s review of its fiscal plan ahead of the 2017 budget will take into consideration measures that will ease access to credit for small and medium size enterprises. In this connection, the CBN needs to retool some of its monetary policies. Of particular concern is the foreign exchange scarcity that is stifling business operations in the country.