CBN says Nigeria Needs N9.6trn To Bridge MSME Funding

The Central Bank of Nigeria’s (CBN) assistant director, Development Fund Department, Jonathan Tobin, said N9.6 trillion was needed to adequately fund Micro, Small and Medium Enterprises (MSMEs) in Nigeria.

Tobin said this on Tuesday in Abuja at a workshop on Micro, Small, Medium Enterprise Development Fund (MSMEDF) organised by the Banker’s Committee of the CBN.

He said banks and other lending institutions’ aversion to lending to small businesses in the informal sector caused the financing gap, saying, “Nigeria, banks are averse to taking risk. They like to play safe. The economy is virtually collapsing yet banks keep declaring huge profits.

“There are currently 17.3 million MSMEs in Nigeria that employ about 33 million people. Yet, only 4.2 million of these have access to finance. From 2002 till date, lending by Money Deposit Banks to the sector has reduced significantly. Now, N9.6 trillion is needed to bridge the financing gap in the sector.’’

He said lack of entrepreneurial skills by MSME operators, adoption of “one size fits all products’’ strategies for loans by banks and poor governance structure were some of the challenges faced by sector.

“Banks and other lending institutions should offer tailor-made solutions to lending for MSMEs instead of the current one size fit all approach.

Customised risk management lending method in place of collateral driven lending currently employed by banks should be developed.

“We strongly recommend that banks start lending from their balance sheet. There is need for collaboration between CBN and other government agencies on the implementation of various initiatives geared towards de-risking the sector and making finance available to MSMEs,’’ he said.

He listed policies introduced by the CBN to boost MSME to include Agriculture Credit Support Scheme, N200 billion Commercial Agricultural Credit Scheme and the Nigeria Incentive Based Risk Sharing System for Agricultural Lending.

Others are the N220 billion MSME Development Fund, SME Credit Guarantee Scheme and the National Secured Transaction Collateral Registry.

He urged the banks not only to patronise the CBN schemes but also invest their monies in MSME.

Mudashiru Olaitan, director, Finance Development, CBN, said inflation would reduce if MSMEs were properly supported and financed, noting, “the country needs a strong financial system that is capable of providing innovative, dynamic and wide rage of financial services.

“We must support MSME to grow because if they grow, the country will be better for it. The sector is already employing a lot of people but an additional 18 million people can be employed if properly funded.’’Ahmed Badawi, First Bank area manager, Kano, said banks were hindered from accessing CBN support schemes for MSMEs due to ‘long bureaucracy,’ saying that the CBN was slow in disbursing funds thereby making it difficult for banks to attend to customers who applied for the loans.