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MSME

CBN reserves 60% of N220 billion MSMEs fund for women

The sub-sector is characterised by huge financing gap, which hinders the development of MSMEs.

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CBN reserves 60% of N220 billion MSMEs fund for women, Women empowerment: Nigeria missing among World Bank's best 40 nations

The Central Bank of Nigeria (CBN) said it reserves 60% of its N220 billion Micro, Small and Medium Enterprises Development Fund for women entrepreneurs.

The apex bank added that 2% of the wholesale component of the fund would be given to economically active persons that are living with disabilities, as 10% is meant for start-up businesses.

This was disclosed by the bank in the guidelines it issued for micro, small and medium enterprises development fund for non-interest financial institutions.

READ: Bank loans not main funding option for Nigerian MSMEs -PwC

Back story: Last June, the Federal Government of Nigeria had announced it would roll out palliatives to assist women-owned medium and small businesses (MSME’s) recover from the impact of the pandemic.

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Minister of Women Affairs, Mrs. Pauline Tallen, explained that the National Survey on the impact of COVID-19 on women-owned businesses in Nigeria captured trends and patterns of the losses caused by the pandemic on women-owned businesses, and will now guide the government’s move to revive the affected businesses.

She said, “The impact of the pandemic on micro, small and medium enterprises (MSMEs) has been quite massive, and resulted in unforeseen losses for business owners.”

READ ALSO: CBN’s decision to establish NMB is counter-productive -NAMB

Why it matters: The sub-sector is characterised by huge financing gap, which hinders the development of MSMEs.

“Section 6.10 of the Revised Microfinance Policy, Regulatory and Supervisory Framework for Nigeria, stipulates that ‘a Microfinance Development Fund shall be set up, primarily to provide for the wholesale funding requirements of MFBs/MFIs’.

“To fulfil the provisions of section 4.2 (iv) of the policy, which stipulates that women’s access to financial services to increase by at least 15% annually to eliminate gender disparity, 60% of the Fund has been earmarked for providing financial services to women.”

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It added that this informed the decision of the CBN to establish the MSMEDF, which has a take-off seed capital of N220bn.

What it means: The fund prescribes 50:50 ratio for on-financing to micro enterprises and SMEs respectively by Participating Financial Institutions.

The commercial component will constitute 90% of the Fund which to be disbursed in the form of wholesale funding to the PFIs.

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Abiola has spent about 14 years in journalism. His career has covered some top local print media like TELL Magazine, Broad Street Journal, The Point Newspaper. The Bloomberg MEI alumni has interviewed some of the most influential figures of the IMF, G-20 Summit, Pre-G20 Central Bank Governors and Finance Ministers, Critical Communication World Conference. The multiple award winner is variously trained in business and markets journalism at Lagos Business School, and Pan-Atlantic University. You may contact him via email - [email protected]

5 Comments

5 Comments

  1. Babsnoble

    July 19, 2020 at 6:21 pm

    Hi, how can I go about the loan pls

  2. Juliet Akhimien

    July 20, 2020 at 12:51 pm

    Hello sir thanks for this update how can one apply for the loan pls.

    • Comfort

      July 20, 2020 at 6:00 pm

      Thanks sir please how do I apply for the loan I need update

  3. Monfadventures

    July 20, 2020 at 4:14 pm

    I’m a business woman, how do I access the loan

  4. Abigail Nyong

    July 20, 2020 at 5:35 pm

    Good day sir how can I apply for the loan.

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FEATURED

What policy changes, other challenges hold for MSMEs in 2020 – Chief Economist, PwC

The startup companies are valued at over $1 billion because the uncertainties of doing business in Nigeria are quite high.

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Andrew Nevin

It is a given that 2020 has been one of the most trying years for business owners and entrepreneurs. Some businesses have been crushed completely, with some left barely breathing.

The year started with the announcement of the increased VAT rates, moved on to the coronavirus pandemic and its attendant challenges, the global oil crisis and its implications on national revenue, and just after the easing of the lockdown, the recent increase in fuel price. What do all these connote for Micro, Small, and Medium Enterprises that were already groaning under stiff economic policies and trying to survive the hard days? Your guess is as good as mine.

Taxation in the middle of a pandemic

Amid all of these challenges, the government (through its agencies) trying to widen its tax net and improve revenue, with more duties and tax options being imposed on Nigerians. Just recently, as courier and logistics business operators were still trying to grapple with the implications of the increased NIPOST license fees, when NIPOST and FIRS went on a social media war of words over which agency is constitutionally justified to collect the Stamp Duties.

There is also the recent rental tax announced by the government, a move still being protested by unions who have argued that this pandemic period is a time for the government to give out palliatives, not widen its tax net.

What do the multiple changes and challenges in 2020 mean for MSMEs?

In a recent tweet on his handle, Partner & Chief Economist at PwC Nigeria, Andrew Nevin (Ph.D.) noted that the current circumstances will stifle the entire economy and constrain MSMEs from growing, as it is quite difficult to grow in an economy that is not growing.

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“… The complexity and cost of governance and the fiscal crisis is leading to a situation where successful companies in the tax net are subject to more and more taxes, which means they cannot grow and some companies in the formal economy will try to move back to the informal economy, further compounding the issue,” Nevin tweeted.

(READ MORE: CBN lists major constraints affecting businesses, as borrowing rates projected to rise )

Nevin also noted that even though the SMEs employ over 80% of the country’s workforce, the startups in Nigeria hardly get to the point where they are valued at over $1 billion. And this is because the uncertainties of doing business in Nigeria are quite high. Gokada, for instance, had a thriving business environment and was set to break even when the new policy was introduced banning motorcycles across major routes in Lagos. This, he said, shows the uncertainty of the business environment in Nigeria.

In addition, attracting global capital to scale a unicorn requires more money than are readily available for risky companies in Nigeria. The challenging business environment and the ‘reputation’ associated with the Nigerian flag makes it very hard to get sufficient external capital.

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According to him, SMEs entering the formal sector means higher productivity and monitored payment of taxes. Yet, entry into the formal sector is still a choice most small businesses do not want to embrace due to the economic environment.

“… if the cost and complexity of entering the formal sector is too high, then the SME will elect to stay in the informal sector with all the attendant issues, including that they can be subject to harassment by the authorities,” he said.

(READ MORE:Innocent Chukwuma: From selling spare parts to manufacturing an indigenous automobile brand)

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He noted that the large SME sector arises partly from unemployment and people rushing into entrepreneurship as a means of livelihood; as well as the difficulties to grow a large and strong business.

“These type of statistics always tell us the sector is huge but it is huge because it is too difficult to grow big companies, so this is not a sign of strength. The best structure for the economy is to have strong large companies that then create room for SMEs to be part of their ecosystem.

“Large companies raise standards (look at quality of Dangote companies for example) and raise productivity and create opportunities for others so large SME sector is sign that business is too difficult because if Nigeria was functioning correctly, we would have 100+ Dangotes in the Economy,” Nevin tweeted.

Explaining the challenges of MSMEs in Nigeria, Chairman and Managing Partner at Ofuani Maidoh & Co, Clement Ofuani, noted that small businesses in Nigeria have more pressing challenges to deal with than the government-imposed fiscal burdens.

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Ofuani told Nairametrics in an interview, that the harsh and hostile operating environment makes for a more serious challenge for small businesses.

“Epileptic electricity power supply, inefficient transportation system and insecurity impose more operating costs on MSMEs than the fiscal taxes listed,” he stated.

Ofuani, who served as Senior Special Assistant to President Umaru Musa Yar’Adua on Policy, explained that the Finance Act waives income tax for companies with turnover below N25 million, thus granting fiscal reliefs to most small businesses.

(READ MORE: Nigerian firms expect to start employing again in August – CBN survey)

“The stamp duty on rental agreements and other agreements are additional burdens as is the increase of VAT to 7.5% but the below-the-table taxes paid by MSMEs in form of unreceipted ‘taxes’ to the security personnel along the transportation corridors, and to bureaucrats for normal government services are the greatest frustrations that make Nigeria uncompetitive in global commerce and as an investment destination,” Ofuani stated.

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Amid all of these formal and informal challenges, it becomes very difficult for the small start-up to grow beyond its startup stage and become a big company.

The on-going pandemic and recent policies have done little or nothing to address these challenges and despite the palliatives, loans, and support schemes being launched by the government at various levels, most of these small businesses will still find their growth stunted by some of these “unreceipted taxes”.

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MSME

GEEP provides COVID-19 palliative microloans to 87,614 traders

The loans were in line with the government’s policies to reduce poverty and boost productivity.

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GEEP provides COVID-19 palliative microloans to 87,614 traders, Nigeria SME, LAPO, More than 40 SMEs in Lagos shut down due to economic crisis

The Federal Government of Nigeria, through the Government Enterprise and Empowerment Programme (GEEP), has provided a COVID-19 palliative relief loans to about 87,614 traders across twenty states. This was disclosed earlier today through a brief press statement that was made available via the government’s official Twitter handle.

According to the disclosure, the microloans have helped to reduce extreme poverty and encouraged productivity following the easing of the lockdown. Part of the statement said:

In line with the vision of the Nigeria Government to curb poverty and boost productivity in different parts of Nigeria, GEEP has provided palliative microloans to 87,614 petty traders hit by COVID19 pandemic in 20 states of the country in the first phase of disbursement.

These palliative microloans have helped petty traders revive their businesses, as the government eases lockdown measures nationwide. The second phase of the disbursement will target 412,386 petty traders across the country.”

READ ALSO: How Nike rejection birthed sportswear industry in Nigeria

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READ MORE: Alcohol Taxes: Heineken may need to shelve plan to increase beer prices

The Federal Government also announced that the second phase of the loans would be disbursed to a 412,368 trader across the country in a bid to restart economic productivity as the government eases the economic lockdowns that have heavily affected the informal and formal sectors.

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The palliative schemes under the GEEP scheme include FarmerMoni, TraderMoni, and MarketMoni.

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FEATURED

FG releases new details on MSMEs support scheme, budgets N200 billion for loans

The Bank of Industry will also join to coordinate the implementation of the scheme.

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FG releases new details on MSMEs support scheme, budgets N200 billion for loans

The Federal Government has released new details on the Micro Small and Medium Enterprises (MSMEs) support scheme being rolled out under the National Economic Sustainability Programme.

According to estimates provided, the sum of N50 billion will be used to provide payroll support, N200 billion for loans to artisans, and N10 billion support to private transport companies and workers

The government disclosed in a tweet on the official handle of the government, the support scheme will include a Guaranteed Off-take Scheme for priority products, and an MSMEs Survival Fund.

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

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Modalities for the take-off scheme

The first track is a Guaranteed Off-take Scheme which will ensure continued local production and safeguard 100,000 existing small businesses to save 300,000 jobs.

Priority products include processed foods, personal protective equipment, hand sanitizers, face-masks, face-shield, shoe-covers and pharmaceuticals.

The implementation committee chaired by Ambassador Mariam Katagum, Minister of the Federal Ministry of Industry Trade and Investment, will collaborate with private sector MSME associations to verify and screen applications from bidding MSMEs, define quantity and price of products required, and also get participants to join in the procurements.

READ MORE: How to access new N75 billion Nigerian Youth Investment Fund

SME survival fund

With a budget of N15 billion, the SME survival fund is expected to sustain 500,000 jobs in 50,000 SMEs.

Major sectors to benefit from the SME survival fund include hotels, restaurants, creative industries, road transport, tourism, private schools and export-related businesses.

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The committee will identify eligible SMEs and screening and verification for this fund will be based on company registration, and tax registration. The implementation committee will approve disbursements through microfinance banks and fin-tech credit providers.

MSMEs that are unregistered will receive support to complete registration with the Corporate Affairs Commission (CAC), and all participants will be expected to make payments based on signed agreements.

The Bank of Industry will also join to coordinate the implementation of the scheme.

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The scheme will last 3 months with Ambassador Mariam Katagum as Chairman, while Ibukun Awosika, Founder of The Chair Centre Limited (TCCL), and First Bank Nigeria will serve as the Vice Chairman.

More details are to be released subsequently from the Implementation Committee.

The Backstory

In July 2020, the Federal Government announced plans to roll out a N2.3 trillion stimulus package and survival fund for Micro Small and Medium Enterprises (MSMEs) to stay afloat amid the economic challenges imposed by the pandemic.

The Vice President Yemi Osinbajo, who also heads the Economic Sustainability Committee, announced it at the 2020 edition of the Micro MSMEs Awards held virtually in July.

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To benefit from the scheme, MSMEs would have to go through a rigorous and painstaking verification process which will be based on certain criteria.

MSMEs that have between 10 to 50 staffs are qualified for this fund. The businesses must make their payroll available to the government for verification while applying for the fund. Once qualified, the MSMEs will be eligible to have their staff salary paid directly from the fund for 3 months.

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