The corona virus (COVID-19) pandemic has had far-reaching effects on the global economy ranging from the plummet in the global crude oil prices, imbalance in the stock and financial market across the globe, extensive ban on movements, bans on gatherings, international travel restrictions across the world which without doubt have had adverse and detrimental impact on business activities, livelihood of households.
In a bid to cushion these effects, the Central Bank of Nigeria (CBN) introduced the N50 billion Targeted Credit Facility (TCF) as a stimulus package to support households and micro, small and medium enterprises (MSMEs) affected by the COVID-19 pandemic. In this regard, CBN has issued Guidelines for the implementation.
Worthy of consideration are the following key aspects of the Guidelines.
The Objectives of the Facility
The TCF was established to (i) cushion the adverse effects of COVID-19 on households and MSMEs; (ii) support households and MSMEs whose economic activities have been significantly disrupted by the COVID-19 pandemic; (iii) stimulate credit to MSMEs to expand their productive capacity through equipment upgrade, and research and development.
Households with verifiable evidence of livelihood adversely impacted by COVID-19, existing enterprises with verifiable evidence of business activities adversely affected as a result of the COVID-19 pandemic, enterprises with bankable plans to take advantage of opportunities arising from the COVID-19 pandemic are the entities eligible to benefit from the TCF. The activities covered by the scheme range from agricultural value chain activities, hospitality (accommodation and food services), health (pharmaceuticals and medical supplies), airline service providers, manufacturing/value addition, trading and any other income-generating activities as may be prescribed by the CBN.
The Scheme shall be financed from the Micro, Small and Medium Enterprises Development Fund (MSMEDF) and the eligible participating financial institution for the Scheme is NIRSAL Microfinance Bank (NMFB).
Loan Limit, Interest Rate, Tenor and Repayment
The loan amount for SMEs shall be determined based on the activity, cash flow, and industry/segment size of beneficiary, subject to a maximum of N25 million for SMEs while households can only access a maximum of N3 million. Working capital shall be a maximum of 25% of the average of the previous 3 years’ annual turnover, (where the enterprise is not up to 3 years in operation, 25% of the previous year’s turnover will suffice).
The interest rate under the intervention shall be 5% p.a. (all-inclusive) up to 28th February 2021 and thereafter, the interest on the TCF shall revert to 9% p.a. (all-inclusive) as from 1st March 2021.
Term loans shall have a maximum tenor of not more than 3 years with, at least, one-year moratorium while working capital shall be for a maximum period of one year, with no option for rollover.
Repayment shall be made on an installment basis by the beneficiaries to the NMFB according to the nature of the enterprise and the repayment schedule/work plan provided at the application stage.
Eligible households/SMEs applying for the loan shall submit their applications directly to NIRSAL Microfinance Bank (NMFB). The application 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.
Upon the receipt of the application, the NMFB shall appraise the application and conduct due diligence on it. If the NMFB is satisfied upon appraisal shall forward the applications to the CBN for final approval who will in turn review the application and give final approval for disbursement to the NMFB.
The same application process applies to a corporate entity.
Beneficiaries of the scheme are required to pledge collaterals, but such collaterals must be acceptable by the NMFB which include any one or more of these; moveable asset(s) duly registered on the National Collateral Registry (NCR); simple deposit of title documents, in perfectible state; deed of debenture (for stocks) in perfectible state; irrevocable domiciliation of proceeds; two (2) acceptable guarantors; personal guarantee of the promoter of the business; life insurance of the key-man, with NMFB noted as the first loss payee; and comprehensive insurance over the asset.
The intervention will come to an end on 31 December 2024.
Eligible borrowers should apply as soon as possible. If you are in need of any assistance in this regard, Sefton Fross has set up a COVID-19 emergency team and is readily available to help. As part of our Corporate Social Responsibility initiatives, Sefton Fross will assist 20 eligible borrowers who would otherwise not be able to take advantage of this intervention by providing our services pro bono. To take advantage of this opportunity please email [email protected]