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A New Wave: Where to Invest in H2 2020

Some of the industries that are expected to succeed given the changing times are not your usual kinds of investments.

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A New Wave: Where to Invest in H2 2020
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There are two kinds of people in the world: The ‘glass-half-empty’ kind, and the ‘glass-half-full’ people. Where some see problems, others see the opportunities – same glass, but different perspectives. 2020 might have left very little hope to hang on to, but the world is still in motion.

Amidst the chaos, many have found their diamonds in the rubble – and many more will. These people, however, will be those who are willing to adapt to the changing times by repositioning themselves to leverage the opportunities that arise.

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The Covid-19 pandemic has proven to be a holistic challenge, bringing to the fore a myriad of issues. It has caused a dent in the revenue/ disposable income of many businesses and individuals alike, shaken the very balance of the economy with many countries heading for unprecedented recessions, and left everyone with so much uncertainty.

Yet, we are at the cusp of a new dawn. Processes are changing, new industries are emerging, and money is changing hands. Flexibility, automation, and sustainability are just some of the words that will make all the difference in the world of business.

Dr. Ola Orekunrin Brown, the founder of Flying Doctors – a healthcare investment company – had, at the Quarterly Economic Outlook Webinar hosted by Nairametrics, offered insights into some of the industries that are expected to succeed given the changing times, and they have been outlined below. But be warned, a lot of them are not your usual kinds of investments.

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READ ALSO: The week that shook the world: the collapse of the Lehman Brothers and the effect it had on me

Investment opportunities to leverage in H2 2020

Online Events

One of the many trends that emerged in recent times, as a result of the Covid-19 pandemic induced lockdown in many parts of the world, is a huge dependence on internet technology and digital media. Everybody went indoors – and online. The entertainment sector found its home on social media through Instagram Live parties, Tik Tok, and the Houseparty App.

Companies went online as well, leveraging digital technology like Zoom, Microsoft Teams, and Slack. Even the lifestyle industry went online with online gym classes, yoga classes, and even karate classes. Not only have they provided much-needed solutions, they have also come with the additional benefit of convenience.

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A good example of this is Eric Yuan, the founder of Zoom, who joined Forbes’ billionaires’ list for the first time as a result of the increased use of Zoom for work meetings. Apptopia, an App tracking firm, reveals that Zoom was downloaded 2.13 million times around the world on 23 March, the day the lockdown was announced in the UK– up from 56,000 a day and two months earlier.

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Online education

Another feature of the digital economy lies in the education sector. With schools forcefully closed, classes have had to go online. Online courses, training workshops, and even full degrees will become more normal as those who work from home will see these online education courses as an opportunity to develop themselves with little effort.

Investments here will be even more fostered by access to international markets, thereby increasing the market size. ResearchAndMarkets predicts that the online education market is poised to grow by $247.46 billion during 2020-2024, progressing at a CAGR of 18% during the forecast period.

READ ALSO: Stay secure when shopping online – Follow these tips from Visa

Institutions that are too big to fail

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The stock market is expected to be even more volatile, given the overall unfavourable economic terrain and a high level of uncertainty – especially with all the talks of a recession coming. In H1 2020, the more favourable companies to invest in are those that have stood the test of time – the stocks that are too big to fail.

Many of these stocks have been in existence for decades and have been able to attain a level of stability as a result of their large market share and stable structures. You want financially strong companies and the reason is not far-fetched; the goal is to put your money behind the companies that are strong enough to withstand the storm to a good extent.

Telecommunication

Another by-product of the Covid-19 induced lockdown is the increased need for internet services. Dr. Ola explains that the use of the internet as well as the move to work-from-home, are some of the megatrends of the times.

Good internet connectivity has proven to be the lifeblood that keeps digital entertainment trends, digital work trends, digital lifestyle trends, digital entertainment trends, and a huge chunk of the communication we have today. As a result of this, companies in the telecommunication industry have begun experiencing growth in revenue and earnings. Investments in this sector will most probably be worth your while.

READ ALSO: Banking related phishing up 9% in 2019, e-stores down 10%

Distribution & E-commerce

When the Okada ban took place, several motorcycle companies that were affected were forced to pivot from transporting people to moving items as full-scale delivery businesses. While many might have thought that a bad idea, the lockdown has undoubtedly contributed to the development of this industry.

The e-commerce industry is also expected to thrive with trade moving predominantly to the internet. Investments in distribution companies and e-commerce businesses are also expected to be worth your while.

Stronger currencies

One of the major hits of the pandemic is the Nigerian foreign exchange market which has now become highly volatile. The demand for the dollar far outweighs the available supply and this has forced importers and speculators alike to scramble for what is available in circulation.

Given the challenges with the FX market, international spending on foreign denominated expenses like tuition fees or international loans will come at an increased cost. To mitigate foreign exchange loss challenges, investments in USD denominated equities, and Eurobond funds will help you withstand the storm. While gains here could have you betting against the Naira, having foreign investments in your investment portfolio will come in handy.

READ MORE: Edtech redefines learning during Coronavirus pandemic

Agriculture

The Agricultural industry is an expected gainer. One of the reasons for this is that local supply chains will expand, given the restrictions on the global supply chain as a result of the lockdown and the border closure. While this will also thrive, Dr. Ola Brown, explains that jobs will only be created in the short term.

This is because fewer hands will be required as productivity, better processes, and mechanization systems increase. An example of this is the new trend of robot herders in the United States. This is even more so as we compete with the rest of the world in production. Needless to say, Agriculture will always exist, given the need for food, as well as the rising global population.

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Healthcare

While the Covid-19 pandemic has a direct impact on the healthcare industry, the industry is a complex one. The first reason for this is that, with the healthcare infrastructure deficit in Nigeria, the government will need to invest in it to provide wide access.

With subsidies on healthcare, the free market in terms of investments might not be as lucrative with more people opting for government healthcare. However, given increased investments in the sector and the move to preventive health practices, the industry remains attractive.

For more detailed investment opportunities with specific stocks in the Nigerian Stock Market, sign up for the Nairametrics Stock Select Newsletter.

1 Comment

1 Comment

  1. Adegbemile Tolu

    May 20, 2020 at 1:12 pm

    Indeed they’re myriads of opportunities shrouded in the problems around us.

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Coronavirus

Covid-19: Timeline of every pronouncement made by Nigeria to support the economy.

Timeline of every action announced since the outbreak hit Nigeria.

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IMF, COVID-19, CBN OMO ban could give stocks a much-needed boost , CBN’s N132.56 billion T-bills auction records oversubscription by 327% , Nigeria pays $1.09 billion to service external debt in 9 months , Implications of the new CBN stance on treasury bill sale to individuals, Digital technology and blockchain altering conventional banking models - Emefiele  , Increasing food prices might erase chances of CBN cutting interest rate   , Customer complaint against excess/unauthorized charges hits 1, 612 - CBN , CBN moves to reduce cassava derivatives import worth $600 million  , Invest in infrastructural development - CBN Governor admonishes investors , Credit to government declines, as Credit to private sector hits N25.8 trillion, CBN sets N10 billion minimum capital for Mortgage firms, CBN sets N10 billion minimum capital for Mortgage firms , Why you should be worried about the latest drop in external reserves, CBN, Alert: CBN issues N847.4 billion treasury bills for Q1 2020 , PMI: Nigeria’s manufacturing sector gains momentum in November, CBN warns high foreign credits could collapse Nigeria’s economy, predicts high poverty, MPC Member, BVN, Fitch, Foreign excchange (Forex), Overnight rates crash after CBN’s N1.4 trillion deduction
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The number of people living with the Coronavirus Disease (COVID-19) and deaths from it have been on the increase daily.

The Federal Government and its relevant agencies, especially the Central Bank of Nigeria, have responded with policies to cushion the economy, restore investors’ confidence, and support Small and Medium Enterprises (SMEs) and households.

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A look at some of the initiatives:

MAY 28. 2020

Central Bank of Nigeria has approved and disbursed N10.5 billion out of the N100 billion credit intervention on the healthcare industry to cushion the impact of the Coronavirus on the operators in the sector.

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The apex bank disbursed the fund for the establishment of advanced diagnostic and health centres and the expansion of some pharmaceutical plants for essential drugs and intravenous fluids

According to the CBN boss, the apex bank had stipulated the requirements to access the funds. Part of it is that a corporate entity must submit its application to a participating financial institution (PFI) which could be either a Deposit Money Bank or a Development Finance Institution of its choice with a bankable business plan.

 

The Monetary Policy Committee of the Central Bank of Nigeria decided by a unanimous vote to reduce the Monetary Policy Rate (MPR) from 13.5% to 12.5% and to hold all other policy parameters constant. Seven (7) members voted for a reduction of the policy rate by 100 basis points, two (2) members by 150 basis points and one (1) member by 200 basis points.

Highlights of the MPC’s decisions:

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I. Reduce the MPR to 12.5 per cent;

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II. Retain the Asymmetric Corridor of +200/-500 basis points around the MPR;

III. Retain the CRR at 27.5 per cent; and

IV. Retain the Liquidity Ratio at 30 per cent.

The Committee maintained that although a sharp decline in output growth is expected in Q2 2020 and maybe the third quarter if the current stimulus initiatives are properly implemented, the economy would reverse to positive growth by the fourth quarter.

 

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MAY 27, 2020

Central Bank of Nigeria (CBN), approved regulatory forbearance to restructure credit facilities in the Other Financial Institution (OFI) sub-sector.

The apex bank reduced the interest rates on its facilities through participating financial institutions from 9% to 5% per annum for a year with effect from March 1, 2020.

 


 

MAY 21, 2020

CBN introduced N100 billion credit intervention scheme to mitigate the impacts of COVID-19 on businesses, particularly those in the health sector. The scheme, which was planned to be funded from the Real Sector Support Facility – Differentiated Cash Reserves Requirement, is to have an interest rate of 5% per annum until March 1, 2021, when it will revert back to 9%.

The apex bank insisted that the money would be given to people that would import or source for foreign exchange for materials that can be source locally

CBN also postponed the much-awaited  May 2020 Monetary Policy Commission (MPC) meeting. The meeting that was earlier scheduled for Monday and Tuesday, May 25 and 26, 2020,  was shifted to Thursday, May 28, 2020. This is as a result of the
declaration of Monday and Tuesday, May 25 and 26, 2020, as Eid-el Fitr holidays.

The apex bank assured that it has put in place all necessary machinery for the meeting to now hold for only one day on account of the on-going COVID-19 national lockdown and to align this meeting with extant rules of the Presidential Task Force (PTF) on COVID-19 and advisories from other relevant agencies.

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MAY 19, 2020

The Central Bank of Nigeria (CBN) tasked industrial conglomerates operating in the country to support efforts of the government to grow the nation’s economy and return it to its green days. CBN Governor, Godwin Emefiele, warned that the apex bank would not support the importation of items that could be produced in Nigeria.

In a virtual meeting with Chief Executive Officers (CEOs) of conglomerates in Nigeria, Emefiele explained that the CBN, in line with President Muhammadu Buhari’s desire, was determined to return the Nigerian economy to the period when the manufacturing and agricultural sectors formed the base of the economy.

READ ALSO: Central banks digital currencies pose a threat against the U.S dollar

 


MAY 18, 2020

The Central Bank of Nigeria (CBN) tasked industrial conglomerates operating in the country to support efforts of the government to grow the nation’s economy and return it to its green days. CBN Governor, Godwin Emefiele, warned that the apex bank would not support the importation of items that could be produced in Nigeria.

In a virtual meeting with Chief Executive Officers (CEOs) of conglomerates in Nigeria, Emefiele explained that the CBN, in line with President Muhammadu Buhari’s desire, was determined to return the Nigerian economy to the period when the manufacturing and agricultural sectors formed the base of the economy.

 

 


MAY 18, 2020

The Federal Government of Nigeria extended the gradual easing of the COVID-19 lockdown across the country by two weeks.

Chairman of the Presidential Task Force (PTF) on COVID-19, Boss Mustapha, stated that in spite of the modest progress made, the country is still not yet ready for full reopening of the economy and said that tough decisions have to be taken for the good of the greater majority.

Central Bank of Nigeria (CBN) also signed an agreement with the Nigerian National Petroleum Corporation (NNPC) to spend as much as N1 billion as quarantine costs for about 3,000 Nigerian returnees.

The decision by the duo regulator was disclosed by Nigeria’s Foreign Affairs’ Minister, Geoffrey Onyeama. According to Onyema, this is a CSR gesture by the CBN and the NNPC. The N1 billion is expected to cover the costs of hotel accommodation and the feeding of the returnees

READ ALSO: Covid-19: CBN wants to fund research for Nigerian Made vaccines

 

 


MAY 16, 2020

Federal Government announced that new Micro Small and Medium Enterprises (MSMEs) will access National Agency for Food and Drugs Administration and Control (NAFDAC) registration of their products at an 80% discount, over the next 6 months.

This concession covers MSMEs that are into production of foods, drugs, and related consumables. As an added incentive, the first 200 micro and small businesses to register on the e-platforms will be allowed to do it at no cost – zero tariffs.

In view of current economic challenges faced by businesses due to the pandemic, the government has also authorised NAFDAC to grant a waiver on administrative charges for overdue/late renewal of expired licenses of products for a period 90 days.

 

 


MAY 12, 2020

CBN disclosed that it was developing a framework to provide financial support to aid the fight against Coronavirus Disease in the country. According to Emefiele, the fund would be released as soon as the vaccine was validated by health authorities.

 


MAY 10, 2020

CBN assured foreign investors that repatriating their funds from the country was secured despite forex related revenue shortages due to the drop from the sale of crude oil globally.

The apex bank had put in place policies to ensure an orderly exit for those that might be interested in doing so and also urged investors to be patient as such repatriations were being processed, owing to the Bank’s policy of orderly exit of investments.

 

 


MAY 3, 2020

CBN and the Bankers’ Committee ordered all banks in the country not to retrench or lay-off any staff of any cadre (either full-time or part-time). The apex bank also said that its approval must be sought if it became absolutely necessary to lay-off any such staff.

 


MAY 2, 2020

The Nigeria Incentive-based Risk Sharing System for Agricultural Lending (NIRSAL) Microfinance bank, on behalf of the Central Bank of Nigeria (CBN), started the disbursement of the N50 billion Targeted Credit Facility (TCF) to beneficiaries.

The facility is a stimulus package which was introduced by CBN, to help mitigate the impact of the coronavirus pandemic on households and MSMEs.

 


APRIL 30, 2020

CBN extended the deadlines issued to Microfinance banks (MFB) to comply with its revised minimum capital requirements.

 

 


APRIL 29, 2020

CBN resumed the sales of dollars to SMEs who need foreign exchange for essential imports, as well as Nigerian students in foreign schools who need to pay their school fees.

This comes as the world-wide COVID-19 lockdown begins to ease up, even as business activities are expected to gradually return to normal. In view of the gradual easing of the COVID-19 lockdown both globally and in Nigeria.

 

 


 

APRIL 28. 2020

The apex bank lifted the temporary suspension placed on cheque clearing in the country with effect from Tuesday, April 28, 2020.
In the circular, it explained that it lifted the suspension in furtherance of its efforts in the development of a safe and efficient payment system in the country.

IMF loan
The executive board of the International Monetary Fund (IMF), approved $3.4 billion as Rapid Financing Instrument (RFI) as fiscal support to Nigeria during this period of coronavirus pandemic.

The fund that was requested by Nigeria is to be used to mitigate the impact of the coronavirus pandemic on Nigeria’s economy as the country grapples with dwindling government revenue and an economic crisis following the crash of crude oil prices globally.

READ ALSO: CBN discloses conditions for assessing N100 billion credit facility, addresses ‘process problems’


APRIL 14, 2020

In preparation for post-COVID-19, CBN announced four major areas of focus. They are:

Provision of affordable housing: Here the CBN will create an intervention fund which will target housing construction by developers who provide proof of profiled off-takers with the capacity to repay the loan.

The BVN will be used to verify the information given by the off-takers before the developers can access the facility. The CBN will also assist the mortgage finance sub-sector, assist land administration agencies at the states to build capacity for prompt processing and issuance of land titles.

Renewable energy: The CBN, over the next three years, will be providing financial support to environmentally friendly energy production, as this has tangential long term health benefits.

Cutting edge research: Also, the bank will be providing funding and encouraging efforts aimed at driving innovation and research in every sector through our universities, research institutions, creative industry initiatives and so on.

Light manufacturing: The apex bank plans to set up a N500 billion intervention fund over a medium, and targeted at manufacturing firms for the procurement of state of the art machinery and equipment and automated manufacturing models that would fast track local production. It will also help increase the patronage of locally processed products.

CBN intends to close the funding gap needed for the replacement of machinery and equipment in order to enhance local production.

 

 


MARCH 30, 2020

* The Federal Government also gave a directive that all economic and social activities in Ogun, Lagos States and Federal Capital Territory should be suspended for two weeks. The lockdown affected the movement of people across the states, except for people in the essential services sectors.

• CBN suspended the clearing of all cheque instruments in the Nigerian Clearing System. According to the bank, the directive was intended to “ensure hitch-free clearing and settlement activities” during the previous 14-day lockdown.

CBN’s suspension was based on the earlier envisaged two-weeks lockdown which was later extended to about 5 weeks.

 

 


MARCH 27, 2020

CBN and the Banker’s Committee formed the Nigerian Private Sector Coalition Against COVID-19. The apex bank explained that the coalition was in partnership with the private sector, led by Aliko Dangote Foundation and Access Bank.

 


MARCH 25, 2020

Following the request of the Association of Bureau de Change Operators of Nigeria (ABCON) to declare market holiday on its members’ weekly bidding, the CBN suspended the sales of foreign exchange to operators of Bureau de Change.

 


MARCH 24, 2020

The Monetary policy committee unanimously voted to:
• Retain the MPR (Monetary policy Rate) at 14%.
• Retain the asymmetric corridor at +200/-500 basis points.
• Retain the CRR (Cash Reserve ratio) at 27.5% and retain liquidity ratio at 30%.

 


MARCH 20, 2020

• The CBN officially devalued the naira by 15% moving from N307/$1 to N360/$1. Depreciation at the “market-determined” I&E window is 5%, having moved from N360/$1 to N380/$1.

• CBN sold dollars to banks at N380/$1 in a move signifying a devaluation of the currency. Banks trading at the Investor and Exporter (I&E) window bought dollars at N360/$1 from the CBN on Friday, March 20, 2020. The I&E window is the official market where forex is traded between banks, the CBN, foreign investors, and businesses

 

 

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Coronavirus

CBN disburses N10.5 billion out of N100 billion credit to healthcare industry

The bank has approved and disbursed N10.15billion for some projects for the establishment of advanced diagnostic and health centres and the expansion of some pharmaceutical plants for essential drugs and intravenous fluids.”

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COVID-19: NCDC equips testing centres in Ibadan, Abakaliki as figures continue to rise, CBN discloses conditions to assess N100b facility, identifies problems in processing facility
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Out of the N100 billion credit intervention meant for the healthcare industry, the Central Bank of Nigeria (CBN) has disbursed N10.5billion to cushion the impact of the Coronavirus on the sector.

This was disclosed by the CBN Governor, Godwin Emefiele, in Abuja at the end of the MPC 273rd meeting held virtually.

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According to the CBN boss, the apex bank had stipulated the requirements to access the funds. Part of it is that a corporate entity must submit its application to a participating financial institution (PFI) which could be either a Deposit Money Bank or a Development Finance Institution of its choice with a bankable business plan.

The guidelines stated that the PFI must appraise and conduct due diligence on the application; and upon approval by the PFI’s credit committee, the application would be submitted to the apex bank with relevant documents attached.

The CBN would process and disburse funds to the PFI for onward release to the project. It stated that the PFI must receive and review applications submitted by its customers; undertake due diligence based on normal business considerations, and bear the credit risk.

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They must also issue offer letters and forward qualified applications to the CBN; disburse the released funds to successful applicants; monitor the project and recover the loans from the beneficiaries, and maintain adequate records of all beneficiaries and facilities.

Emefiele said, “The committee recognised that under the N100bn healthcare sector intervention fund, the bank has approved and disbursed N10.15bn for some projects for the establishment of advanced diagnostic and health centres and the expansion of some pharmaceutical plants for essential drugs and intravenous fluids.”

 

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Coronavirus

CBN disburses N50 billion loans through MFBs’ IT platform

It aims to enhance financial access, inclusion and sustainability of the microfinance institutions on value chain financing and ensure the growth of the small and medium scale enterprises.

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The Central Bank of Nigeria (CBN) is disbursing the N50billion COVID-19 Targeted Credit Facility meant for Households and Micro, Small and Medium Enterprises (MSME) that are affected by the killer disease via the Integrated National Association of Microfinance Banks Unified IT Platform (NAMBUIT) deployed by Inlaks.

NAMBUIT is a unified information technology built by Inlaks to service Microfinance banks on behalf of CBN and NAMBs. The innovation was designed to boost financial access, inclusion and sustainability of the microfinance institutions on value chain financing and ensure the growth of the small and medium scale enterprises. The NAMBUIT Platform, according to the Inlaks, is powered with a sophisticated Loan module for the management of the total life cycle of the over 80,000 loans that will be disbursed for this scheme.

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Chief Executive Officer, African Operations, Inlaks. Femi Adeoti, explained that the platform runs on Temenos T24 Inclusive Banking Suite (IBS), and implementation is being managed by Inlaks, a system integrator in Sub-Saharan Africa, in line with global best practices, with support from the CBN.

“NAMBUIT is Software as a Service (SaaS) platform that reduces operational costs as well as improves the bank’s ability to provide necessary information to agencies such as CBN and NDIC. The unified platform comprises a core banking system and sub-systems for agent banking, non-interest banking, and mobile payment among other services.

“A core benefit of the NAMBUIT platform is the smooth on-boarding of the microfinance banks (MFBs) into the national payment system lowering the operating costs of MFBs significantly. This has been significant, especially in the context of developing economies, where many low-income households and micro-enterprises do not have ready access to financial services.”

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The CBN had introduced the N50bn Targeted Credit Facility as a stimulus package to support households and Micro, Small and Medium Enterprises affected by the COVID-19 pandemic. The N50bn intervention is financed from the Micro, Small and Medium Enterprises Development Fund. The loan amount is determined based on the activity, cash flow and industry size of the beneficiary, subject to a maximum of N25m for SMEs. Households with verifiable evidence of livelihood adversely impacted by COVID-19 can access the loan to a maximum of N3m.

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