Small and medium-sized enterprises, also called SMEs are perceived as an integral part of any economy. It is easy to see why as many Fortune 500 companies today started as SMEs. One of the major challenges SME s face is accessing capital for expansion or survival. Lenders tend to provide high lending rates due to the risk level SME s are associated with. Hence, the Nigerian government, through the Central Bank of Nigeria (CBN) steps in to alleviate this financing challenge for SMEs. The CBN has established several funds targeted at certain industries in the economy. Individuals and businesses do not have direct access to the CBN therefore, they are to make an application through their preferred commercial bank. The performance of these funds also depends on the performance of prior beneficiaries of the facility. In summary, these facilities perform best when beneficiaries pay back their loans. Some of the available funds are:
Guarantee Facility: The Nigerian government through Nigeria Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL Plc.), a non-bank financial institution wholly owned by the CBN provides guarantee facilities for SMEs in the agricultural sector as the Nigerian government is looking to expand the industry. Access to their facility cuts across the entire agricultural value chain with beneficiaries being able to access up to ₦2 Billion Naira long-term loans. Typically, application for a NIRSAL facility can be concluded in 6 stages, starting with an application through your bank. Look up the NIRSAL website for more information (https://nirsal.com/).
Micro, Small and Medium Size Enterprise Development Fund (MSMEDF): This fund was created by the CBN in 2013. Applicants are eligible for a maximum of ₦50 million at a 9% interest rate. The MSMEDF caters for the Agriculture, Real and Service Industries. The loan will be paid back in four years.
Creative Industry Financing Initiative (CIFI): The government recognised the economic potential of the Nigerian creative industry due to the success of Mavin records, Mo Abudu, Deola Sagoe, etc. They have proven that this industry can contribute substantially to the nation’s Gross Domestic Product hence, the drive to grow the industry. SMEs involved in fashion, movie or music production or distribution, software development and information technology are eligible, though with varying limits. The tenor for this CBN financing is capped to a maximum of 10 years. However, moratorium can be applied for up to 36 months.
Real Sector Support Financing (RSSF): This facility is available for businesses involved in manufacturing and construction activities. The maximum tenor for this facility is 15 years and a loan limit of ₦10 billion at an interest rate of 9%.
Anchor Borrower Programme (ABP): Businesses eligible for this fund are those who use agricultural products as their raw material. The loan limits, interest rates, repayment terms and loan tenor are determined shall be determined per eligible farmer.
Development Bank of Nigeria (DBN): The DBN is a SMEs driven organisation with the objective of “alleviating objective is to alleviate financing constraints faced by MSMEs and small Corporates in Nigeria”. Applications can be made through all financial institutions (Commercial Banks, Microfinance Banks, etc.). All MSMEs are eligible, both start ups or existing businesses. However, they must be customers of eligible financial institutions.
We hope this article has at least pointed you in the right direction as regards sourcing finances for your MSME. Stay tuned for more articles like this one.
CENTRAL BANK OF NIGERIA. (2019, July 1). Modalities for the Implementation of the Creative Industry Financing Initiative [Press release]. https://www.cbn.gov.ng/out/2019/ccd/creative%20industry%20financing.pdf
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Nigeria, D. B. O. (n.d.). Development Bank of Nigeria PLC. Development Bank of Nigeria. Retrieved March 15, 2022, from https://www.devbankng.com/get-a-loan
NIRSAL. (n.d.). NIRSAL Credit Risk Guarantee. NIRSAL: Building Nigeria’s Agribusiness Niche. Retrieved March 19, 2022, from https://nirsal.com/credit-risk-guarantee/
SMEDAN. (n.d.). SMEDAN – Small and Medium Enterprises Development Agency of Nigeria. Retrieved March 15, 2022, from https://smedan.gov.ng/
UNION BANK OF NIGERIA. (2020, April 24). SME Intervention Funds. Retrieved March 15, 2022, from https://www.unionbankng.com/business/sme-banking/intervention-funds/#development-bank-nigeria-dbn