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Improving access to finance through youth investment fund

In the banking and finance sector of the economy, total staff of Deposit Money Bank ( DMB) decreased by 5.47 percent to 95,888 in the third quarter (Q3) of 2020 from 101,435 in the corresponding period of 2019, according to the National Bureau of Statistics (NBS).

What this implies is that Nigeria needs to close the gap of the 5,547 bank staff that were jobless in one year. The figure added to the already worsened unemployment rate in the country.

The NBS Labour Force Statistics showed that the unemployment rate during the second quarter (Q2), 2020 was 27.1 percent, up from the 23.1 percent recorded in Q3, 2018. The underemployment rate increased from 20.1 percent in Q3, 2018 to 28.6 percent.

For the period of Q2, 2020, the unemployment rate among young people (15-34years) was 34.9 percent, up from 29.7 percent in 2018, while the rate of underemployment for the same age group rose to 28.2 percent from 25.7 percentin Q3, 2018. These rates were the highest when compared to other age groupings.

The COVID- 19 pandemic which resulted in lockdown and restrictions of movements and economic activities heightened the unemployment situation in the country, according to analysts at FSDH research.

Earlier in the year, the NBS released a report that showed that 42 percent of respondents in a survey who were working before the COVID-19 outbreak reported that they were not currently working due to COVID-19.

As a result of the pandemic, workers in labour intensive sectors such as trade, services, agriculture, construction & transport were severely affected.

According to the Federal Government, unemployment rate is expected to rise to 33.6% (or 39.4 million people) at the end of 2020, if urgent steps are not taken.

As part of efforts to address the unemployment problem and to improve access to finance for the teaming Nigerian youth, the Federal Executive Council (FEC) on July 22, 2020 approved the sum of N75 billion for the establishment of the Nigeria Youth Investment Fund ( NYIF) for the period of 2020 – 2023.

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The fund was dedicated to investing in the innovative ideas, skills and talents of Nigerian Youth, and to institutionally provide the youth with a special window for accessing much needed funds, finances, business management skills and other inputs critical for sustainable enterprise development.

On September 2020, the Central Bank of Nigeria ( CBN) released the guidelines for the fund, which targets young people between the ages of 18- 35 years and details the needed actions required to support business establishment, expansion and consequent employment creation for youth in critical economic and social sectors.

The NYIF aims to financially empower Nigeria youth to generate at least 500,000 jobs between 2020 and 2023.

The regulator had funded the NIRSAL Microfinance Bank (MFB) window with an initial take-off seed capital of N12.5 billion.

While many analysts see the fund as a good development, they emphasised on the need for proper implementation.

“The Nigeria Youth Investment Fund is a good programme only if it is well implemented,” said Olalekan Aworinde, Senior Lecturer, department of economics, PanAtlantic University, Lagos.

“The fund is dedicated to investing in the innovative ideas, skills & talents of Nigerian youths aimed at turning them into entrepreneurs, wealth creators and employers of labour, contributing to national development. Looking at the objectives of this fund, if well implemented will achieve the targeted goals,” he said.

He said the CBN can ensure that the set targets are achieved and funds accessed by the target group if there is sincerity on the part of the government.

In addition, the program must be devoid of corruption, embezzlement as well as high handedness of the officials involved, he said. “The program can also achieve the goals if the issues of “man -know- man” is removed from the equation”.

According to Aworinde, it is also important that the grant guidelines and eligibly criteria should be strictly followed, if there are waivers for some certain individuals and not meant for others, it will mar the successful implementation of the program. Thus, there should be fairness and equity.

On the overall, he said there should be adequate monitoring on the program from the part of the government agencies and departments so as to not see the program as part of their own share of the national cake.

In his maiden address on June 5, 2014, Godwin Emefiele, governor of the CBN stated that his vision would be to ensure that the Central Bank of Nigeria is more people focused, as its policies and programs would be geared towards supporting job creation, reducing the high level of Treasury Bill rates, improving access to credit for Micro, Small and Medium Enterprises (MSMES), deepening its intervention program in the Agricultural Sector, building a robust payment system infrastructure that will help drive inclusion, in addition to key macroeconomic concerns such as exchange rate stability, financial system stability and maintaining a strong external reserve.

Many Nigerian youth who have applied for the fund have not received any response from the NIRSAL MFB. Sternly Chukwudi, a Nigerian youth based in Port Harcourt, who recently completed his NYSC, told Busnessday that he applied for the fund about two months ago and has not received anything.

However, Businessday gathered that so far, that an estimated N165.7 billion has been disbursed to 239 beneficiaries from over 3 million applicants in the pilot phase.

The scheme allows applicants to undergo a compulsory entrepreneurship training arranged or approved by the Federal Ministry of Youth and Sports Development.

According to the framework, applicants currently enjoying NIRSAL MFB ( NMFB) loans, including the Targeted Credit Facility (TCF) and Agribusiness/ Small and Medium Enterprises Investment Scheme (AGSMEIS) loans that remain unpaid are not eligible to apply. Beneficiaries of other government loan schemes that remain unpaid are also not eligible to participate.

A huge percentage of youth are engaged in the informal sector. Accordingly, the NYIF will facilitate the transition of informal enterprises owned by youth into the formal mainstream economy where they can be supported comprehensively, build a bankable track record; and be accurately captured as active participants in economic development.

On the type of facilities, the framework stated that individual (Unregistered business) shall be determined based on activity/nature of project subject to the maximum of N250,000, while registered businesses (Business name, Limited Liability, Cooperative, Commodity Association shall be determined by activity/nature of project subject to the maximum of N3.0 million (including working capital).

The tenor of the facility is put at maximum of 5 years depending on the nature of the business and the assets acquired. Moratorium of up to 1 year may be allowed depending on the nature of the business and the assets acquired. Interest rate under the intervention shall be at not more than 5% per annum (all inclusive).

Going forward, Nigeria will need to place more emphasis on ensuring economic growth is inclusive and creates opportunities for many of its citizens. Reviving the major labour intensive sectors with strong forward and backward linkages as well as ensuring massive skills development remains crucial in ensuring economic inclusion, the analysts at the FSDH research said.

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