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 coronavirus pandemic on the economy. In March 2020, the N50 billion Targeted Credit Facility (TCF) was introduced as a stimulus package to support households and micro, small and medium enterprises (MSMEs) that have been affected by the coronavirus pandemic.
About the N50 billion Targeted Credit Facility (TCF)
The TCF is designed to cushion the adverse effects of COVID-19 on households and MSME. In its operational guidelines for the facility, the CBN has listed participants who are eligible to apply. They include;
- Households with verifiable evidence of livelihood adversely impacted by the coronavirus outbreak;
- Existing enterprises with verifiable evidence of business activities adversely affected as a result of the coronavirus pandemic (CBN has declared that eligible applicants do not need to have a business plan)
- The 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.
Application Process
The scheme shall be funded from the Micro, Small and Medium Enterprises Development Fund (MSMEDF), and the participating financial institution for the scheme is NIRSAL Microfinance Bank (NMFB). There is no application/processing fee for the facility.
According to the CBN’s circular issued on March 23, 2020, there are two application schemes. They include;
- Households/MSMEs,
- Applications are submitted to NMFB. An application must contain BVN number, business registration (where applicable), and business plan with clear evidence of the opportunity or adverse impact as a result of the COVID-19 pandemic. NMFB shall appraise and conduct due diligence on applications.
- Upon 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.
- Corporate Entities
- Applications are submitted to NMFB with clear evidence of the opportunity or adverse impact as a result of the COVID-19 pandemic.
- NMFB shall appraise and conduct due diligence applications,
- After a satisfactory appraisal of the application, NMFB shall forward the applications to the CBN for final approval.
- CBN reviews applications and gives final approval for disbursement to NMFB.
- Loan Terms
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 the beneficiary subject to a maximum of N25 million for SMEs.
- Households: Households 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 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 acceptable by NIRSAL MFB 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 Guarantors
- 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
Exit Date: The exit date of this intervention is December 31, 2024. It should be noted that this framework from the CBN shall be subject to review as may be deemed necessary.
- Conclusion
In May 2020, the CBN selected 3,256 MSMEs which are among the first batch of the beneficiaries scheduled for disbursement of funds. The NIRSAL Microfinance stated that over 80,000 applications have been received to date; with 40,000 of them coming from households.
References
Central Bank of Nigeria: Guidelines for the N50 billion CBN COVID-19 Intervention Fund
Nairametrics: How to Access the N50 billion CBN COVID-19 Intervention Fund https://nairametrics.com/2020/04/21/how-to-access-the-n50-billion-cbn-covid-19-intervention-fund-for-smes/
Nairametrics: CBN starts Disbursement of N50 billion COVID-19 Intervention Fund https://nairametrics.com/2020/05/02/cbn-starts-disbursement-of-n50-billion-covid-19-intervention-fund/
Disclaimer
This article is written for information purposes only. The Lagos State Employment Trust Fund (LSETF) shall not be liable or subject to any enquiries regarding loan application ad processing.
