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MSME

How new CAMA 2020 will enhance SMEs’ ease of doing business

President Buhari recently assented to the Companies and Allied Matters Bill 2020.

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Development Bank of Nigeria , Companies Allied Matters Act (CAMA)

The new Companies Allied Matters Act (CAMA) 2020 is expected to enhance the ease of doing business in Nigeria. The new document has repealed and replaced the extant CAMA 1990 with key amendments that would remove some bottlenecks from the old act.

The revised Act will make Nigeria’s business environment as competitive as its counterparts around the world.

Back story: Nairametrics had reported when President Muhammadu Buhari assented to the Companies and Allied Matters Bill 2020, which was recently passed by the National Assembly.

READ ALSO: Corporate organisations now pay N200,000 for unsolicited premises inspection in Abuja 

He explained that some innovative processes and procedures were included in the new document to ease the operations of companies. Some of them are the introduction of Statements of Compliance, which replaced “authorised share capital” with minimum share capital to reduce costs of incorporating companies; and providing for electronic filing, electronic share transfers, e-meetings as well as remote general meetings for private companies.

READ ALSO: Prestige Assurance could be a good opportunity if it gets its recapitalization right

Provisions that aid ease of doing business:

* Provision of single-member/shareholder companies- Section 18 (2) of the new CAMA now makes it possible to establish a private company with only one member or shareholders.

* Restriction on multiple directorship in public companies- S.307(1) of the Act frowns at a person from being a director in more than five (5) public companies at a time.

* Appointment of Company Secretary now optional- Going forward, the appointment of company secretary for private company is optional. According to Section 330 (1) of the new CAMA, the appointment is only mandatory for public companies.

* A Director can’t hold the office of a Chairman, CEO – According to Section 265 (6), private firms are now restricted from appointing a director to hold the office of the Chairman and Chief Executive Officer.

* Procurement of Common seal not mandatory – Contrary to the previous document that insisted that every company must procure a Common Seal, CAMA 2020, according to Section 98, states that most jurisdictions around the world have expunged the requirement from their laws.

* Concept of Limited Liability Partnership and Limited Partnership – The new act combines the organisational flexibility and tax status of a partnership with the limited liability of members of a company.

* Virtual AGMs – New act made provision for virtual annual general meetings (AGM), provided that such meetings are conducted in accordance with the Articles of Association of the company. This is expected to facilitate participation from any location at minimal costs.

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* SMEs exempted from appointing auditors – Small companies or any company with a single shareholder are no longer mandated to appoint auditors at the AGM to audit their financial records.

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Why it matters:
Nigeria is largely dominated by Medium and Small-Scale Enterprises (MSMEs). Making registration easier for them brings in more businesses into the formal space. This also enhances tax revenue for the government.

The Companies and Allied Matters Act (CAMA) was promulgated in 1990 to regulate the formation and management of companies in Nigeria

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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]

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Columnists

How MSMEs can get easy access to finance

MSMEs must take the following steps for loan readiness.

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How MSMEs Can Get Easy Access to Finance

MSMEs are considered the backbone of the Nigerian economy. In 2019, they made up 90% of all registered businesses, contributed more than 50% of the country’s nominal GDP, and employ 84% of its labour force. Despite this, MSMEs were the recipients of less than 5% of all credit granted by the banking industry.

One reason for this is self-selection by MSME owners. Many MSMEs refuse to apply for loans from banks due to a fear of rejection and a belief that banks charge exorbitant fees and request hefty collateral before giving loans to MSMEs. Now more than ever, in this era of cashflow-based lending and low-interest rates, this harmful myth is costing businesses access to finance that they need to scale.

Another reason is the MSMEs’ lack of loan readiness. Unlike large companies, small business owners do not prepare themselves before applying for loans. This causes them to make many mistakes that discourage banks from lending to them due to a fear of non-repayment.

In order to overcome this hurdle and join large businesses in taking advantage of the low-interest climate, MSMEs must take the following steps for loan readiness:

1. Maintain financial records – Research shows that 69% of MSMEs in Nigeria do not keep detailed financial records. As a business owner, you must ensure that funds pass through your business account. Your business’s financial records as reflected in your bank statement will help your bank determine your repayment capacity. This is important, whether you want a collateral-free or collateral-based loan.

2. Use narrations for transfer into personal accounts – Again, always use your business account for business funds. However, if funds must be paid into your personal account for any reason, then ensure that those payments have a narration that reflects the purpose of the payment. For example, Two shirts purchased. This helps isolate business funds from personal when computing your turnover in order to determine your loan amount and repayment capacity.

3. Know what you want – Always know exactly how much you want and what you want it for. If your account officer asks you how much you want and you say “any amount you can give me”, they automatically assume you have no plan for the money or a plan for repayment. Before approaching your bank, determine how much you need and how much you can repay per month, using your monthly income.

4. Have a repayment plan – Always have a plan for repayment. Know how much you can afford to part with per month. Note however that your repayment plan might not align with that of the bank. Banks prefer not to take more than 33% of your monthly income in loan repayments, so your loan repayment period will probably be dependent on how much you can pay per month. Regardless, a well-thought-out repayment plan will build confidence in your repayment ability.

5. Engage your account officer– It is important to have an engagement with your account officer before applying for the loan. Instead of just writing a loan application letter to the bank and waiting for a response. Armed with your financial statement and your knowledge of how much you need and for how long, visit your account officer and have them work with you in getting your loan.


Ese Atakpu is a writer and banker.

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Commodities

AFEX raises $50 million to Finance Agri-SMEs in Nigeria

The $50 million Agri-SMEs fund is expected to bridge the funding gap between lenders and borrowers in the agric sector.

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AFEX to partner with FMDQ and Dubai Commodities Exchange, 50,000 farmers to benefit from AFEX Commodities agric funding initiative

AFEX Commodities Exchange Limited (AFEX), a private commodities exchange company, has announced the first Warehouse Receipt Backed Commercial Paper in Africa. The paper has tech-enabled operations and a 24-hour fast cash turnaround for borrowers.

This was disclosed by AFEX in a statement issued and seen by Nairametrics on Thursday.

The $50 million Agri-SMEs fund is expected to bridge the funding gap between lenders and borrowers in the Nigerian agricultural sector with a commodity-backed instrument – for the first time.

READ: AFEX partners FMDQ, Dubai Commodities Exchange to deepen markets opportunities

Ayodeji Balogun, CEO, AFEX, stated, “The AFEX financing deal will help eradicate the high cost of procurement incurred by processors by deploying a discounted value of a warehouse receipt distributed among five leading players in the Food and Beverage, Trading Poultry and Animal Feed segments in Nigeria.

“The receiving companies are top 10 players in their respective segments. They have now been enabled access to a tool for managing price volatility, enabling up to 30% direct savings on prices.

“With our vision to reach a cumulative total of over $5 Billion in investment to the agriculture sector over the next five years, this financing deal is right on track to achieve this goal.’’

He added that as AFEX move towards building a derivatives market in Africa, “we want to be able to reduce exposure to price risk for stakeholders, by enabling them to hedge their positions and trade in commodity derivatives.”

READ: CBN to increase loans to agricultural sector to 10% of total bank credit

Why it matters

  • The warehouse receipts, which can then be transferred from commodities to a financial asset and listed under the borrower’s portfolio on the AFEX trading platform, will create a sustainable funding structure and address underfunding in the Nigerian agricultural sector.
  • With the warehouse receipt system linked to financiers, the system allows financiers value and marks the commodities’ price to market on a real-time basis.

What you should know

  • AFEX’s mission is to provide low-risk working capital facility for stakeholders in the Agro sector, in a way that is transparent and has a very high viable investment return.
  • As a licensed commodities exchange and warehouse receipt system operator, it deploys a warehouse receipt system and collateral management infrastructure to increase market confidence for both lenders and borrower.

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