How SMEs in Nigeria can Access the CBN COVID-19 Intervention Fund
By now you must have heard about the CBN COVID-19 Intervention Fund. It’s been all over the news and on social media. The CBN is making N50 billion Targeted Credit Facility available to SMEs and households hit by COVID-19.
Evidently, the new coronavirus has hit all businesses and crippled several SMEs worldwide. This is largely because of the reduction in the demand for products and services and hindered production.
It is clear that SMEs in Nigeria need help and the CBN has come to your aid. However, many business owners don’t have the slightest clue on how to access these funds. If you fall into this category, this post was written for you.
Why the CBN COVID-19 Intervention Fund?
Before the CBN made this announcement via its circular, many Nigerians had begun clamoring for Government support. This is because of the crippling effects of the virus on individuals and SMEs in the country.
It is no news that there are over 41.5 million registered MSMEs in Nigeria. This number could easily be higher if you consider the ones not registered. To cushion the effects of the new coronavirus, the CBN announced its targeted credit facility. This facility will provide support to different sectors including SMEs.
As a result, such businesses that have suffered setbacks resulting from the pandemic can get back on their feet. They’ll access funds to purchase new equipment, increase production, and improve research and development.
Who can benefit from the CBN COVID-19 Intervention Fund?
When the CBN released its circular, it provided a list of participants that will be eligible for the TCF. Check out the list below:
a. Households who have proof that the pandemic had affected their means of livelihood.
b. SMEs in Nigeria with evidence that the pandemic crippled their business operations.
c. Agricultural value chains.
d. Hospitality industry.
e. Airline service providers.
f. Health (medical supplies and pharmaceuticals)
g. Manufacturing and value addition.
h. Trading and any other activity that generates income as described by the CBN.
What is the Source of the Targeted Credit Facility?
This scheme will receive funds from the Micro, Small, and Medium Enterprises Development Fund (MSMEDF). As a result, NIRSAL Microfinance Bank (NMFB) is the eligible financial institution to handle the funds.
What this means is that the CBN will administer these funds via the NFMB. Therefore, applicants have to submit their application through this bank to be considered for the loan.
Accessing the CBN COVID-19 Intervention Fund
To make the process of application and disbursement more organized, the CBN has split the modalities of the process. They now apply to SMEs and Households or Corporate Entities. Let’s take a brief look at both below:
SMEs and Households
a. Submission of loan application to NFMB. This must contain business registration details and business plans (where applicable), BVN numbers, and clear evidence of the effect of the pandemic on the business.
b. NFMB appraises the application and conducts due diligence.
c. NFMB forwards the application to the CBN upon satisfactory appraisal.
d. CBN reviews the application and provides a final verdict for loan disbursement.
It is the same process for Corporate Entities, however, applicants may have a few issues with the NFMB regarding communication gaps. Nevertheless, the process shouldn’t be cumbersome. You can begin your application here.
It is important to find about loan terms before applying for any loan. In this section, we will discuss the loan terms of the CBN COVID-19 Intervention Fund for SMEs in Nigeria.
The CBN measures limits based on certain criteria. As a result, not everyone will get the same amount. Let’s look at the criteria for SMEs.
The amount an SME can access is a function of the business activities or operations, segment/industry size, and cash flow. However, SMEs can get up to N25 million. Households only have access to at most N3 million.
According to its circular, the CBN states that the interest rate for the first year, until February 28, 2021, will be 5% per annum. This rate is all-inclusive however, it will revert to the regular 9% for government loans from March 1, 2021.
The guideline for the CBN COVID-19 Intervention Fund states that working capital has a maximum of a one-year tenor. There is no roll-over option for this loan. On the other hand, the term loan extends to 3-years maximum. This loan has a moratorium period of 1-year, at least.
This is another important aspect SMEs in Nigeria should consider before submitting the loan application. According to the guidelines, these are the classes of collateral that may be acceptable by the NFMB.
a. Moveable assets registered with the National Collateral Registry.
b. Title documents in their perfect state.
c. Domiciliation of proceeds (irrevocable).
d. Two Guarantors along with a personal guarantee of the business promoter.
e. Life assurance policy of the First Loss Payee (key man).
f. Comprehensive insurance over submitted assets.
Now that you know the role you’ll play in accessing the CBN COVID-19 Intervention Fund, let’s ee the role of other stakeholders. The two main stakeholders asides SMEs in Nigeria are the CBN and the NFMB.
a. Provides seed fund.
b. Releases funds to NFMB for disbursement.
c. Reviews guidelines where necessary.
d. Receives and processes returns from NFMB.
e. Monitors and evaluates the implementation of the scheme.
a. Validates BVN and other documents of all applicants.
b. Processes and disburses funds to successful beneficiaries.
c. Safeguards records of all the disbursements and beneficiaries.
d. Processes and forwards returns to the CBN.
e. Complies with guidelines of the scheme.
f. Handle any other duties prescribed by the CBN.
This intervention will cease to exist on December 31, 2024. However, the CBN reserves the rights to review this framework as it deems necessary.
The CBN COVID-19 Intervention Fund is one of the greatest things to happen to SMEs in Nigeria. Now that you know how to access these funds, you should take advantage of the offer for your business. If you have any questions, you can drop them in the comments section, we’d be glad to help.