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 Corona Virus pandemic on the economy, Nigerian businesses, and households.
The CBN on its own, through various circulars and pronouncements, has announced some stimulus packages that will impact different sectors like the health sector, Micro Small and Medium Enterprises (MSMEs), manufacturers, households, and so on through the N50Billion CBN COVID-19 Loan.
The apex bank introduced a N50Billion Targeted Credit Facility (TCF) as a stimulus package to support households and micro, small and medium enterprises (MSMEs) that are affected by the Corona Virus pandemic.
Who is Target Credit Facility meant for?
In the operational guideline for the facility, the CBN listed participants who are eligible to apply for credit from this N50Billion CBN COVID-19 Loan. They are as follows;
- Households with verifiable evidence of livelihood adversely impacted by the Corona Virus outbreak
- Existing enterprises with verifiable evidence of business activities adversely affected as a result of the Corona Virus pandemic. Business plan not required
- Firms in agricultural value chain activities
- 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.
The Source of funding
The scheme shall be funded from the Micro, Small and Medium Enterprises Development Fund (MSMEDF) and the eligible participating financial institution for the scheme is NIRSAL Microfinance Bank (NMFB).
This means thats the CBN will be sourcing the fund from its MSME development fund which will be administered through NIRSAL Microfinance Bank. Thus, while the CBN will be providing the funds, applicants will have to apply for the loan through NIRSAL Microfinance Bank branch around your location.
How to Access the N50Billion CBN COVID-19 Loan
There are two modalities here to consider. According to the CBN’s circular issued on March 23, 2020, the modalities are applicable to either Households/MSMEs or Corporate entities.
- The first step is for an eligible household to submit an application to NIRSAL MFB, which 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
- NMFB shall appraise and conduct due diligence applications
- Upon satisfactory appraisal of application, NMFB shall forward the applications to the CBN for final approval,
- Then, CBN reviews applications and gives final approval for disbursement to NMFB.
Applicants must endeavor to provide the documents listed above which are mostly basic. If you do not know how to write a business plan, you can get someone to help you with it.
For corporate entities
- Like their MSMEs counterparts, applications are submitted to NMFB with clear evidence of the opportunity or adverse impact as a result of COVID-19 pandemic
- Also, 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 and Conditions
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 beneficiary subject to a maximum of N25 million for SMEs
- Households – They 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.
The CBN in its circular on the guidelines for the implementation of this facility stated that 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.
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 for CBN Loan
The guideline states that the collateral to be pledged by the beneficiaries under the programme shall be as may be acceptable by NIRSAL Micro Finance Bank, but may 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 Guarantor and 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.
The exit date of this intervention is December 31, 2024. It should be noted that this framework from CBN shall be subject to review from time to time as may be deemed necessary by the apex bank.