As part of measures to mitigate the impacts of COVID-19 on businesses, particularly those in the health sector, the Central Bank of Nigeria (CBN) had introduced a N100 billion credit intervention scheme.
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%.
However, the operations of this scheme have not been as smooth as expected, because some operators in the sector have been complaining about not having access to the funds.
In a recent TV interview, the CBN’s Director for Development Finance, Mr. Yusuf Yila, discussed some basic conditions that applicants to the CBN N100 billion credit facility must meet before they qualify to benefit from the facility. On the disbursement of the N100 billion facility, Yila said:
“As at today, we have received applications in excess of N62 billion. These funds are to be disbursed by the banks. When these applications come on, as a Central bank what we are looking at is how many jobs take for example a pharmaceutical company can expand its line or build new capacity, how jobs are going to be created, how many of the raw materials are going to be sourced locally, how much foreign exchange is the country going to be conserving.
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“Those are the things we actually look for in these applications. We are not going to be doling out money for people who are going to be importing or going to source for foreign exchange for materials we can source locally. I can also tell you as at today the central bank has disbursed in excess of N11 billion out of N100 billion and this week we are taking to Governor Emefiele another set of applications in excess of N20 billion from 9 banks.”
The CBN Director also emphasised that there is a process involved in disbursing the loans and that the major idea is to conserve foreign exchange. He also explained that the pharmaceutical industry is worth over $1.3 billion and out of this, about $900 million is imported.
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On the complaints by some applicants about the strenuous processes involved in assessing the loan and the kind of collateral required, Yila said:
“Yes it is a credit support intervention to the sector and it’s not a grant. It’s a loan and anytime the bank gives out a loan, there are certain conditions precedent that must be met. Because of the lockdown, they receive applications by email, we work with the banks to carry out due diligence. Typically, things that take 3, 4 weeks to do, we have cut it down to 2 days.
‘’I tell you that the biggest problem we are having is that most pharmaceutical companies or the hospitals that have submitted applications to access these funds have provided incomplete documentation. That is a source of worry because while we are in an emergency situation, due diligence must be followed.
“I told you this is a loan and not a grant and the central bank has been very favorably disposed of. We tell you what we have also done, if you read the guideline, we are aware that hospitals, it takes a very long time to recoup its investment, so the facility is for a long term up to 10 years.”
On the interest rate, the CBN Director pointed out that the apex bank’s policy response goes beyond the 5% interest rate. He said the beneficiaries are also granted an additional moratorium of 1 year for all the over 26 intervention programmes in the portfolio of the Central Bank. Going further, businesses that are eligible can access the N100 billion fund at 5% till March 1, 2021, he said.