N220 billion MSME Fund: Whose benefit?

The president has launched the disbursement of the N220 billion Micro, Small and Medium Enterprises Development Fund (MSMEDF) initiated by the Central Bank of Nigeria (CBN). The question in the minds of most Nigerians is; how many Nigerians would benefit from this fund. The FG has had a lot of intervention in major sectors of the economy in line with its transformation agenda. The focus of the government is to transform the Nigerian economy into a real sector based economy.

Out of the 220Billion MSME Fund, Non-economic activities such as grants to MFBs, training of MSME’s, Research, monitoring and evaluation and capacity building would get N22billion which is 10% of this fund. While 90% which amounts to N198billion would go for economic activities. One fundamental advantage of this fund is that 60% of the the economic fund would go to women in MSME’s. Another vital characteristic of this fund is that 90% of it would go to the real sector viz; manufacturing and production, and 10% for the services sector. A special purpose vehicle (SPV) consisting of the federal government and the Central bank would be created to manage the fund, they would lend this fund to the Micro finance banks and finance houses at the rate of 9% and the Micro finance bank has a margin of 5% lending.

The economic question to be asked is: would the goal of this fund be achieved given our current economic atmosphere? We would answer this question from two perspectives viz; Rate of lending and output prospects. The government has celebrated a single digit fund to the SME’s and MSME’s, but this has not been achieved before and it’s clear that this might not be achieved in the nearest future.

An intervention fund that can’t be accessed at a single digit posse a strong challenge to the payback period. You would agree with me that the growth path of MSME’s in Nigeria can be best enhanced with a single digit lending. One would have expected that the CBN would have perfected the modalities for the fund in order to make it possible for the MSME’e to get this fund at a single digit interest rate.

Secondly, the output prospects of our GDP have exhibited that the services sector is structurally positioned to transform our economy, going by its 53% contribution to our GDP growth in the last rebasing. One would have expected that this fund would have taken advantage of our strong services sector rather than investing heavily on a sector that contributes less than 8% to our GDP. We all hope that in the days to come, the CBN would learn from their challenges and perfect their subsequent intervention funds.

SANNI MUHAMMED OZOVEHE