Multiple demands from Nigerian banks are hindering easy access to credit schemes deployed to drive growth of the real sector, Manufacturers Association of Nigeria (MAN) has said
“The problem is that credit schemes are being processed like normal loans using the same requirements. Banks ask for as many as 12 different documents and several other things not easy to get, which eventually would not guarantee getting the credit because the banks continue asking for other documents until you get frustrated,” said Micheal Adebayo, director at Haffar Industrial Company Limited.
Adebayo, who is also the chairman, Gas Users Group, MAN said for the intervention funds, manufacturers negotiated a five percent interest rate with the Central Bank of Nigeria (CBN), but banks are giving it out at nine percent.
Finance experts say most banks are reluctant to play an active role in the disbursement of the funds due to the unattractive interest rate as well as the risk burden which the banks have to bear alone.
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The CBN deployed series of intervention funds such as N1trillion manufacturing and import substitution facility, N220 billion Micro, Small and Medium Enterprises Development Fund (MSMED), the N100 billion Health Care and Pharmaceuticals Support Funds, and N300 billion Real Sector Support Facility (RSSF) to help boost activities and recovery in local manufacturing
Consequently, these interventions of over N1 trillion and the increase of the minimum loan to deposit ratio (LDR) to 65 percent are yet to make the desired impact on the country’s manufacturing sector.
Adebayo added that manufacturers are still sceptical about asking for loans or funds because tough macroeconomic conditions and the unfriendly business climate cannot guarantee returns that will help pay off the loans.
Segun Ajayi-Kadir, director-general of MAN said in a statement that accessing the N1 trillion COVID-19 stimulus for manufacturing required a maximum working capital of N2 billion per obligator, with a refinancing facility of N15 billion per obligator.
“Generally, MAN observed through feedback from members and interaction with the CBN on several occasions that these facilities and funds have not been adequately accessible to manufacturers due mainly to the prevarication of the PFIs and MDBs,” he explained.
The DG also stated that most of the association members who applied for the loan could not get it as only N300 billion (30 percent of the loan) was disbursed in one year to 76 companies, according to the financial regulator.
According to the MAN’s CEOs Confidence Index (MCCI) for the second quarter of 2021, 304 chief executive officers of MAN member companies agreed that the rate at which commercial banks lend to manufacturers discouraged productivity in the sector.
In addition to this, the available loans come with a double-digit interest rate and tough requirements to access which worsens the plight of manufacturers who need funds for improved productivity and business expansion.
The CBN pegged its Monetary Policy Rate (MPR) at a double-digit of 11.50 percent leaving deposit money banks to lend as high as 25 to 30 percent interest loans while other countries like Kenya and Ethiopia have an MPR of 7 percent. Rwanda has 4.5 percent; South Africa, 3.5 percent and Namibia, 3.75 percent interest rate.
“Usually, successfully accessing credit from banks is dependent on a number of factors, including the obligor’s relationship with the bank, the bank’s policies, the size of the loan and a number of other factors,” Justin Nwaogwugwu, CEO, Macjames Global Resources Limited located in Port Harcourt, Nigeria said.
MAN recommends that the apex bank improve and sustain policies aimed at increasing loans to boost the sector’s productivity, especially the loan to deposit ratio policy which should be monitored closely to ensure effective implementation.
“Recapitalisation of Bank of Industry (BOI) and Bank of Agriculture (BOA) is necessary to adequately meet the industry credit need at a single-digit interest rate, furthermore a credit guarantee for industrial loans from commercial banks should be provided,” MAN said.
