The novel coronavirus outbreak has a severe impact on the livelihood of households and business activities resulting to drop in global demand for goods and services, declined consumer confidence, and a slowdown in production among others.
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 coronavirus 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.
The apex bank introduced an N50 billion Targeted Credit Facility (TCF) as a stimulus package to support households and micro, small and medium enterprises (MSMEs) that are affected by the coronavirus pandemic
Why it matters: The TCF was designed to cushion the adverse effects of COVID-19 on households and MSMEs; support households and MSMEs whose economic activities have been significantly disrupted by the COVID-19 pandemic, and to stimulate credit to MSMEs to expand their productive capacity through equipment upgrade and research and development.
A. Who is TCF meant for?:
In the operational guideline for the facility, the CBN listed participants who are eligible to apply for credit from this facility. They are as follows;
- Households with verifiable evidence of livelihood adversely impacted by the coronavirus outbreak;
- Existing enterprises with verifiable evidence of business activities adversely affected as a result of the coronavirus pandemic (as part of its consistent review, CBN has declared that eligible applicant does not need to have a business plan),
- and 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.
B. Source of fund
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 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.
C. How to access the fund
There are two modalities here to consider. According to the CBN’s circular issued on March 23, 2020, the modalities apply to either Households/MSMEs or Corporate entity.
- 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.
Thus, 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.
Though, applicants may suffer certain setbacks due to communication gaps on the part of NMFB. For instance, one of the potential applicants, Kolade Emmanuel took to Twitter to make an enquiry about the loan that has not received feedback from the bank after one month. When Nairametrics contacted him, he said, “I have not heard from the bank in about one month after I have followed all necessary processes.”
D. Loan Terms
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.
The guideline states that the collateral to be pledged by the beneficiaries under the programme shall be as may be acceptable by NIRSAL MFB, 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
E. Responsibilities of Stakeholders
Responsibility of the CBN
- Provide the seed fund for the scheme.
- Release funds to NIRSAL MFB for disbursement to successful applicants
- Review the guidelines of the facility as may be necessary
- Receive and process periodic returns from NIRSAL MFB
- Monitor and evaluate the implementation of the scheme by NIRSAL MFB.
Responsibility of NIRSAL MFB
they have the following responsibilities,
- Validate the status and BVN of the applicants
- Process and disburse funds to approved beneficiaries
- Maintain records of all beneficiaries and disbursements
- Forward periodic returns on the prescribed format on the scheme to CBN
- Comply with the guidelines
- Carry out any other duties as the CBN may prescribe from time to time.
F. Exit date:
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.
Brent crude surges past $36, as major oil producers stick to their pledges on oil output cuts
Note that crude oil prices are still down by 45% since the beginning of 2020, a situation that had forced oil-dependent Nigeria to revise/readjust her 2020 national budget, as Nairametrics reported.
Brent crude gained on Tuesday’s London trading session, upon clear signs that major oil producers are sticking to commitments to reduce crude supply, even as more automobiles get back on the road following the lifting of COVID-19 lockdowns around the world.
Brent crude futures gained about 0.7%, to trade at $36.25, 6.50 am Nigerian time adding to a 1.1% gain on Monday in thin holiday trading. Commenting on this, Will Sungchil Yun, a commodities analyst at VI Investment Corp., said the following to Bloomberg news from Seoul:
“The market is starting to witness the effect of output cuts along with a reduction in inventories, while the global economy is on its path to recovery. Still, there’s caution with the absence of a cure for the pandemic as well as the possibility of a second wave of infections.”
The energy market’s bullish run was boosted by comments from Russia which reported that its oil output had nearly plunged to its target of 8.5 million barrels per day for May and June. Daniel Hynes, a senior commodity strategist at Australia and New Zealand Banking Group, told CNBC that “there’s definitely a feeling those cuts have come through as well as you could expect. “With economies restarting, the focus definitely is on the improvement in the fundamentals, rather than what seemed like a complete collapse in demand only a few weeks ago.”
Meanwhile, Russia’s energy minister, Alexander Novak, explained that a surge in fuel demand should help reduce the present global surplus of around 7-12 million barrels per day by June or July.
Early next month, OPEC+ members are expected to meet to discuss whether to maintain their supply cuts which are intended at shoring prices. Note that crude oil prices are still down by 45% since the beginning of 2020, a situation that had forced oil-dependent Nigeria to revise/readjust her 2020 national budget, as Nairametrics reported.
Africa day 2020: Buhari urges economic groups, CSOs and private sectors to drive peace for economic development
President Muhammadu Buhari has urged economic groups, CSOs and private sectors in Africa to strengthen collaborative efforts of the AU.
As Nigeria continues to battle the rising insecurity fuelled by the COVID-19 pandemic, President Muhammadu Buhari has urged regional economic groups, civil society organisations and the private sector in Africa to strengthen collaborative efforts among member-countries of the African Union.
He added that stakeholders must take full ownership of the theme of this year’s celebration to ‘silence the guns’, and allow for economic development in the continent.
”Peace, security, unity, and harmony are prerequisites for development in Africa,” Buhari said, stressing the need for all economic groups to work together to achieve the peace required for economic growth.
This was part of the President’s message to African leaders to mark the celebration of the ”Africa Day 2020,” by the African Union Commission and the World Health Organization (WHO).
President Buhari said Africa has given the world a new hope by choosing the theme ''Silencing the Guns in the context of the COVID-19'' for this year’s Africa Day.
— Garba Shehu (@GarShehu) May 25, 2020
He noted that the selected theme for the year 2020, ”Silencing the Guns in the context of the COVID-19” provides a ray of hope in the seemingly bleak situation caused by the pandemic across the globe.
He stressed the need for African leaders to ensure that every effort is made to ensure the success of silencing the guns in the continent, emphasizing the need to sensitize Africans about the inseparable connection between peace and development.
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About the Africa Day
Africa Day is observed annually on 25 May, in commemoration of the founding of the Organization of African Unity (OAU), which was founded on 25 May 1963 in Addis Ababa, Ethiopia and is now known as the African Union.
Nigeria’s external reserves up by 7% in 21 days, currency speculators to lose over N10 billion
It should be noted that Nigeria’s external reserves went on a downward slide last year, having lost $11.75 billion within a space of 10 months.
The continuous increase in Nigeria’s external reserves appears to have been sustained as it recorded a third consecutive week of growth at the end of last week. Available data from the Central Bank of Nigeria (CBN) show that the country’s external reserve had risen to about $35.77 billion as of May 21, 2020.
Despite the volatility of the foreign exchange market due to decline in crude oil export earnings, the external reserves increased sharply by almost $1 billion in just 9 days, rising from the $34.78 billion that it recorded on May 12, 2020, to about $35.77 billion that it ended with on May 21, 2020.
Nigeria’s external reserves have been on a steady increase since April 29, 2020, when it stood at $33.42 billion. This represents an increase of about $2.35 billion or 7% in 21 days.
It should be noted that Nigeria’s external reserves went on a downward slide last year, after hitting a peak of $45.17 billion on June 11, 2019, thereby losing $11.75 billion within a space of 10 months.
The recent gradual increase of the external reserves and improved liquidity in the foreign exchange market, thanks to the CBN, have helped to strengthen the naira at the Investors and Exporters (I&E) window. This was especially the case last week when the naira exchanged at N385.94 to a dollar from N386 to a dollar.
Note that the improved liquidity in the foreign exchange market and the continuous increase in the country’s external reserves were also made possible by the recent disbursement of $3.4 billion emergency facility by the International Monetary Fund (IMF) to the CBN on May 6, 2020. The money was intended to help Nigeria mitigate the impact of the coronavirus pandemic.
Recall that the naira has been under pressure against other major currencies, particularly the dollar, even as currency speculators have been making a lot of demands for dollars so as to make profits on future sales.
Just last week, the CBN Governor, Godwin Emefiele, had to warn speculators and businesses to stop patronizing the parallel market operators. According to him, the rates they are buying dollar now are unrealistic and possibilities abound that they will lose their money if they continue to do so. It has been estimated that speculators could incur over N10 billion losses.
In the meantime, Governor Emefiele had promised more liquidity in the forex market, assuring that all genuine dollar demands by businesses and individuals will be met. This is coming against the backdrop of the planned resumption of dollar sales to the Bureau De Change Operators (BDC) by the CBN after almost 6 weeks that was suspended due to the lockdown occasioned by the coronavirus pandemic. The President of Association of Bureau De Change Operators (ABCON), Aminu Gwadebe, had pointed out that the return of the BDCs to the forex market will help chase away speculators, curb rising inflation, boost productivity and employment, enhance price discovery, enhance market transparency and competitiveness.