The COVID-19 Pandemic has not only affected the health of millions of people in several countries, it has also adversely affected their economies. In Nigeria, the Central Bank of Nigeria (CBN) has established two funds to assist households, micro, small and medium enterprises (MSMEs) and participants in the health sector.
The funds are:
- Fifty Billion Naira (N50,000,000,000.00) Targeted Credit Facility (TCF) - stimulus package to support households and micro, small and medium enterprises (MSMEs) affected by the COVID-19 pandemic; and
- One Hundred Billion Naira (N100,000,000,000.00) Credit Support Intervention (CSI) - for the Healthcare Sector.
From the obvious and far-reaching impact of the pandemic on so many people and their businesses, we can expect that there would be quite an avalanche of applications. For this reason, the funds (as earmarked at present) are bound to be insufficient. “Competition” to access the facilities would expectedly be high and applicants will be wise to use legal and professional guidance to improve their chances of meeting the requirements to access the funds.
1. The Fifty Billion Naira (N50,000,000,000.00) Targeted Credit Facility (TCF)
The Participating Financial Institution (PFI) under this scheme is the NIRSAL Microfinance Bank (NMFB) locatedin Abuja. Interested persons can forward their application to the PFI online through the following website link: https://nmfb.com.ng/covid-19-support/
- Households with verifiable evidence of livelihood adversely impacted by COVID-19,
- Existing enterprises with verifiable evidence of business activities adversely affected by the COVID-19 pandemic, and
- Enterprises with bankable plans to take advantage of opportunities arising from the COVID-19 pandemic.
- Agricultural value chain activities,
- Hospitality (accommodation and food services),
- Health (pharmaceuticals and medical supplies),
- Airline Service Providers,
- Trading, and
- Any other income generating activities as may be prescribed by the CBN.
- SMEs: The loan amount shall be determined based on the activity, cash flow and industry/segment size of beneficiary, subject to a maximum of Twenty-Five Million Naira (N25,000,000.00) for SMEs.
- Households: Can access a maximum of Three Million Naira (N3,000,000.00).
- Working capital shall be a maximum of 25% of the average of the previous three (3) years’ annual turnover (where the enterprise is not up to three (3) years in operation, 25% of the previous year’s turnover will suffice).
Interest rate under the intervention shall be 5% p.a. (all-inclusive) up to 28th February 2021 and thereafter, the interest on the facility shall revert to 9% p.a. (all- inclusive) as from 1st March 2021.
Working capital shall be for a maximum period of one year, with no option for rollover. Term loan shall have a maximum tenor of not more than three (3) years with, at least, one-year (12 months) moratorium.
The CBN Guidelines expressly state that the collateral to be pledged by qualified beneficiaries shall be as may be acceptable to NIRSAL MFB. The Microfinance Bank has released guidelines for loan application for SMEs as follows:
Mini SME: Three to Ten Million Naira
- Any describable movable asset with a serial number that can be used for registration at the National Collateral Registry worth 70% of the loan amount.This is in line with the innovation in the Secured Transaction in Movable Assets Act passed by the National Assembly in 2017, that established the legal framework for movable assets to be used as security/collateral for credit transactions. The National Collateral Registry can be accessed via https://www.ncr.gov.ng.
- Comprehensive insurance over the asset with NMFB as first loss payee
- Personal guarantee of business promoter
- Irrevocable domiciliation of proceeds
- (1) Acceptable Guarantor
SME: Ten to Fifteen Million Naira
- Either (a) and (b) above or Simple Deposit of title Documents in Perfectible state (search will be conducted at customer’s cost, ground rent must be up to date and all perfection letters to be executed)
- Personal guarantee of business promoter
- Irrevocable domiciliation of proceeds
- (2) Acceptable Guarantors
SME Plus: Fifteen to Twenty Five Million Naira
Same collateral requirements as those above, without the option of movable asset and comprehensive insurance of the asset
Repayment shall be made on installment basis by the beneficiaries to the NMFB according to the nature of enterprise and the repayment schedule/work plan provided at the application stage.
Terms and Conditions:
- Flexible and movable collateral options shall be admitted and registered under the Collateral Registry.
- Forfeiture undertaking and Power of Attorney agreement to be signed by the customer giving NMFB rights to take over pledged assets in instance of loan default.
- Insurance Cover on the asset financed or asset availed as flexible collateral, with the NFMB noted as the first loss payee.
- Customer must have a verifiable supplier(s) who he/she must have had business relationship with for a minimum of 6 months.
- Eligible households or MSMEs shall submit applications directly to NIRSAL Microfinance Bank (NMFB) with the following documents:
- Loan Application letter,
- Duly completed application form,
- Guarantor form,
- Valid means of identification (National ID, Driver’s License, Voter’s Card or International Passport),
- Current utility bill (Applicant and Guarantor), and
- 2 recent Passport Photographs.
- The application must, among others, contain BVN number, business registration (where applicable) and business plan with clear evidence of the opportunity or adverse impact related to COVID-19 pandemic. NMFB has since relaxed business plan as a mandatory requirement however it is recommended that businesses should provide a standard business plan which demonstrates how the loan will be repaid thereby improving their chances of success.
- 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 the applications and gives final approval for disbursement to NMFB.
For a Corporate Entity:
- A corporate entity shall submit application(with the relevant documents as listed in ”a” above) to NMFB with clear evidence of the opportunity or adverse impact attributable to 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;
- CBN reviews applications and gives final approval for disbursement to NMFB.
2. The One Hundred Billion Naira (N100,000,000,000.00) Credit Support Intervention (CSI) for the Healthcare Sector:
The Participating Financial Institutions (PFIs) are: Deposit Money Banks (DMBs) and Development Finance Institutions (DFIs).
- Healthcare product manufacturers – pharmaceutical drugs and medical equipment,
- Healthcare service providers/medical facilities hospitals/clinics, diagnostic centres/laboratories, fitness and wellness centres, rehabilitation centres, dialysis centres, blood banks, etc.,
- Pharmaceutical/medical products distribution and logistics services,
- Other human healthcare service providers as may be determined by the CBN from time to time.
- Manufacturing of pharmaceutical drugs and medical equipment,
- Establishment/expansion/upgrade of basic and specialized healthcare facilities (as in 3 (ii and iii) above),
- Medical/pharmaceutical supplies,
- Medical/pharmaceutical Research and
- Development (R&D),
- Distribution of
- medical/pharmaceutical drugs and supplies,
- Manufacturing of medical/pharmaceutical drugs distribution technology, and
- Any other healthcare value chain activity as may be prescribed by the CBN from time to time.
- Working Capital: 20% of the average of three (3) years of the Company’s turnover subject to a maximum of Five Hundred Million Naira (N500,000,000.00) per obligor (where the enterprise is not up to three (3) years in operation, 20% of the previous year’s turnover will suffice).
- Term Loan: Maximum of Two Billion Naira (N2,000,000,000.00) per obligor.
Interest rate under the intervention shall be at not more than 5.0% p.a. (all- inclusive) up to 28th February 2021 and thereafter, interest on the facility shall revert back to 9% p.a. (all-inclusive) as from 1st March 2021.
- Working capital shall be for a maximum period of one (1) year, with provision for rollover not more than three (3) years.
- Term loan shall have a maximum tenor of not more than ten (10) years with a maximum of one (1) year moratorium on repayment. However, in case of construction, the tenor shall be determined by the completion date.
The collateral to be pledged by borrowers under the program shall be as may be required under the Real Sector Support Facility-Differentiated Cash Reserves Requirement (RSSF-DCRR). Considering the volume of the transaction, it is expected that PFIs will require deposit of title documents of property with commensurate value to the sum required. Movable assets of high worth may also be considered.
Interest and Principal Repayment:
Interest and principal repayment shall be made on installment basis by the borrowers to the PFIs (Participating Financial Institution) according to the approved repayment schedule. The PFI shall remit interests and principal repayments received to the Scheme on quarterly basis.
- A corporate entity shall submit its application to a PFI of its choice with a bankable business plan.
- PFI shall appraise and conduct due diligence on the application.
- PFI’s Credit Committee shall approve.
- The application shall be submitted to CBN with the following documents attached: Business Plan, Audited Accounts (3) years (for existing companies) or Statement of Affairs for Start Ups and companies with less than 3 years of existence, copies of duly executed offer documents between the PFI and the Loan Applicants, Certificate of Incorporation, brief on directors, at least 2 Credit Report of the company and Proposed Schedule of Fund Disbursement.
- CBN will process and disburse funds to the PFI for onward release to the project.
With the African Union’s projection that the continent’s economy will contract by 0.8% in 2020, and sub-saharan Africa projected to enter its first recession in 25 years by the World Bank owing to the disruption in trade and commerce occasioned by the Covid-19 pandemic, the intervention of the Federal Government to cushion the effect on MSMEs which account for 60% of Nigeria’s economy could not have been more timely.
While the somewhat insufficiency of the funds is obvious, regard being had to the number of Covid-19 impacted businesses, the prospects of additional funds to meet the stated objective by the government is foreseeable.
In the meantime, the single digit interest rate facility guarantees should excite individuals and businesses to explore opportunities under offered by the scheme as the world prepare for the harsh realities of a post Covid-19 economy.
Operators in the targeted sector of the economy must seize the moment to take the benefit of the facility as it is veritable window of stability and recovery for
households and businesses greatly impacted by the pandemic.
You are welcome to direct questions and clarifications to:
Phone: +234 802 290 5559, +234 808 313 0255
Address: The Juweirat, No. 12, Wede Obahor Street, Atlantic View Estate, Off Alpha Beach Road, Igbo- Efon, Lekki - Lagos State.
While Synergy Attornies has taken the trouble to avoid any deliberate misstatement or errors in this informational bulletin, it expressly disclaims any representation that the opinions contained in it may be relied upon as legal or professional advice.Trusted independent counsel and direct engagement with entities charged with processing the facility is the prudent course to follow by interested applicants which we encourage.