The Central Bank of Nigeria, over the span of ten years, allocated a mere 6.63% of the total N10.39 trillion loan disbursed to various sectors as intervention programmes, to support Micro, Small, and Medium Enterprises (MSMEs).
A detailed report from the apex bank revealed that a total of N689 billion was allocated to the sector between August 2013 and September 2023.
According to the report, the MSME sector ranks third in terms of the least allocation within the intervention programs, trailing behind the export sector with a meager 2% allocation and the health sector, which barely constitutes 1% of the total intervention programs.
The intervention programmes include the Micro, Small and Medium Enterprises Development Fund (MSMEDF), Agri-business/SME Investment Scheme (AgSMEIS), Nigeria Youth Investment Fund (NYIF) and Tertiary Institutions Entrepreneurship Scheme (TIES), among others.
The report further indicated that the majority of credit facilities allocated to the sector have either been fully paid or are currently in ongoing payment status for the projects, suggesting positive performance indicators within the sector.
Top Five Beneficiaries of the loan programmes for MSME sector
Data from the Central Bank of Nigeria (CBN) indicates that a minimum of eight loan programs were specifically aimed at key players in the MSME sector. Below are the programmes:
- Micro, Small and Medium Enterprises Development Fund (MSMEDF): According to data provided by the Central Bank of Nigeria (CBN), these loans were financed by the CBN in conjunction with Private Finance Initiatives (PFI) to bolster MSMEs in sectors like manufacturing, pharmaceuticals, and cement companies.
- Agri-business/SME Investment Scheme (AgSMEIS): The AgSMEIS loan was funded by the CBN and annual 5% PAT contribution of DMBs. The top beneficiaries include the manufacturing sector, fashion, agriculture and hospitality.
- Targeted Credit Facility (TCF): The Targeted Credit Facility (TCF) was an initiative financed by the CBN as stimulus package to cushion the effects of the COVID-19 pandemic on households and SMEs.
- Creative Industry Financing Initiative (CIFI): The Creative Industry Financing Initiative (CIFI) is a loan facility targeted at the creative industry of the country. The loans, disbursed by the CBN, were allocated through private finance initiatives (PFI) to improve access to low-cost financing to entrepreneurs and investors in the Nigerian creative and information technology (IT) sub-sectors.
- Nigeria Youth Investment Fund (NYIF): The Nigeria Youth Investment Fund (NYIF) was one of the top beneficiaries of the intervention programmes by the CBN. According to the report, the credit facility was given to ameliorate youth unemployment challenge in Nigeria by channeling finance to youth and youth-owned enterprises. The report also noted that the initiative helped create 11,106 direct and indirect jobs 11,106 direct and indirect jobs across the six geopolitical zones.
More Insights
Access to funding remains a major challenge for Micro, Small, and Medium Enterprises (MSMEs), even though 88% of Nigeria’s employment rate, as reported by the National Bureau of Statistics (NBS) are self-employed and mostly work in the informal sector.
- This pattern not only showcases the prevalent entrepreneurial spirit among Nigerians but also emphasizes the necessity for focused support and policies to cultivate and uphold the self-employed sector. This sector holds considerable sway in the nation’s economy.
- Furthermore, high-interest rates exacerbate the financial burden on MSMEs. Even when loans are available, the exorbitant interest rates make repayment challenging, often leading to debt accumulation and financial instability.
- In addition to financial constraints, MSMEs in Nigeria grapple with infrastructural deficits, notably the unreliable power supply. The erratic electricity supply disrupts production schedules, increases operational costs, and reduces overall productivity. MSMEs are forced to resort to expensive alternative power sources, further straining their finances.
- Addressing these challenges is crucial to unleashing the full potential of MSMEs and driving economic growth in Nigeria. Policy interventions aimed at improving access to affordable financing, reducing interest rates, and enhancing infrastructure, particularly power supply, are essential for creating an enabling environment for MSMEs to thrive.
