The Bank of Industry (BoI) has secured a N1 billion syndicated loan to support Micro, Small and Medium Enterprises (MSMEs) in Nigeria.
The facility obtained with the support of the ministry of trade and industry, has a long-term tenor, alongside moratorium benefits.
Mr Adeniyi Adebayo, Minister of Industry, Trade and Investment disclosed this, on Monday, at the Quantum Mechanics Limited MSMEs Survival Fund capacity building programme in Abuja.
Mr Adebayo in a statement by Ifedayo Sayo, his Special Assistant on Media, said the loan would improve the capacity of the bank to effectively support MSMEs across key sectors of the Nigerian economy.
Mr Adebayo said the loan facility, being implemented in conjunction with international partners, had a long-term tenor, alongside moratorium benefits.
According to him, this is part of its efforts toward economic recovery and sustainable growth.
“There is an ongoing discussion with Dunn and Bradstreet to establish an SMEs Ratings Agency of Nigeria (SMERAN) to provide an empirical basis toward analysing the eligibility of SMEs to access credit,” he said.
The minister, who spoke on efforts of the Federal Government to support MSMEs in the country, also reiterated the ministry’s support to MSMEs development as demonstrated by the MSMEs Survival Fund Initiative, launched in the wake of COVID-19 pandemic by the Federal Government as part of its Nigerian Economic Sustainability Plan (NESP).
NESP is aimed at protecting MSMEs businesses from the shocks of the pandemic, he said.
“The fund comprises the Payroll Support Scheme which aims at supporting MSMEs in meeting their payroll obligations and safeguard jobs by paying up to N50,000 to a maximum of 10 employees for three months.
“The Artisan and Transport Grant supports self-employed artisans with a one-off payment of N30,000 targeting 333,000 individuals.
Nigeria’s $1.5 billion budget support loan request is “still in the works”, says Shubham Chaudhuri, World Bank Country Director for Nigeria.
Chaudhuri said in Abuja, at a media conference on the presentation of the World Bank Nigeria Development Update (NDU) for December.
The report titled “Rising to the Challenge: Nigeria’s COVID response” took stock of recently implemented reforms and proposes policy options to mitigate the impact of COVID-19 and foster a resilient, sustainable and inclusive recovery.
Chaudhuri said that the loan request was taking so long because, irrespective of the bold actions taken by the government in the form of reforms to cushion the effects of the pandemic, the bank still had its reservations.
“I think the way that our board and our shareholders have approached this budget support, is really to say has the country that is requesting the support done all it can to help itself?
“Think of it this way, when you have to say a 10 or 15 billion dollar hole, 1.5 billion dollars is just a little bit of that, the question is, how is the rest of that hole being made up?
“What is the sustainability in 2021 and beyond? And that is why we are thinking about the overall prospects going forward, in terms of the macro adequacy and the flexibility and exchange rate management.
“That is why our shareholders and our management are still saying we recognise how much Nigeria has done, but for this 1.5 billion dollars to really be a part of the larger effort to put Nigeria on a sound macro-fiscal footing going forward, there needs to be a little bit more.”
Chaudhuri, however, said that the 1.5 billion dollars slated for presentation to the Bank’s board for approval on Dec. 14 was not the 1.5 billion dollars for budget support, but two separate 750 million dollar credit to support state government efforts.
He added that one of them was for the state’s fiscal resources, but under a performance based mechanism.
“So, one is additional financing for the State’s Fiscal Transparency Accountability and Sustainability (SFTAS) programme for results.
“The other is the Nigeria COVID-19 Action Recovery and Economic Stimulus (CARES) Programme, which is meant to support the states towards protecting livelihoods, enhancing food security and supporting local economic activity.
“So those are the two operations that are being considered by our board on Monday.”
As for the bank’s portfolio investment in Nigeria, he said after the 1.5 billion dollars states support credit, it would amount to 11.5 billion dollars.
Giving a breakdown, he said there were three different ways of measuring the size of the bank’s portfolio, first was how much concessional financing was being provided.
“Yes, we are providing credits and not grants to support the government’s budget, but it is highly concessional, usually 20-30 years maturities, 10 years grace period and at highly concessional rates of about 1 to 2 per cent.
“So if you look at how much of that the board has approved, in terms of this financing, the board has as of July 2018 approved seven billion and in the last two years up to now, it has approved another three billion in financing so that brings us to 10 billion dollars and then the 1.5 billion dollars that is being considered in December that will bring us to 11.5 billion dollars the board has approved.”
The World Bank chief said that in active disbursements, the bank had disbursed seven billion dollars as at July 2018.
He added the bank’s board, in July, also approved 500 million dollars for the Adult and Girls Initiative for Learning and Empowerment (AGILE) programme, under the Global Financing Facility.
The attention of the Debt Management Office (DMO), has been drawn to statements and reports credited to several persons on the subject of Loans obtained from China and has considered it necessary to provide a sequel to its Press Release on the same subject dated September 11, 2018.
The general public is encouraged to be guided by the facts in this Press Release.
How Much Loan has Nigeria Taken from China?
As at March 31, 2020, the Total Borrowing by Nigeria from China was USD3.121 billion. This amount represents only 3.94% of Nigeria’s Total
Public Debt of USD79.303 billion as at March 31, 2020. Similarly, in terms of external sources of funds, Loans from China accounted for 11.28%
of the External Debt Stock of USD27.67 billion at the same date. These data, show that China is not a major source of funding for the Nigerian
What are the Terms of the Loans from China?
The Total Borrowing from China of USD3.121 billion as at March 31, 2020, are concessional Loans with Interest Rates of 2.50% p.a., Tenor of Twenty (20) years and Grace Period (Moratorium) of Seven (7) years. The Terms and other details of the Loan are available at http://www.dmo.gov.ng./
These Terms are compliant with the provisions of Section 41 (1a) of the Fiscal Responsibility Act, 2007. In addition, the low interest rate reduces the Interest Cost to Government while the long tenor enables the repayment of the principal sum of the Loans over many years. These two benefits, make the provisions for Debt Service in the
Annual Budget lower than they would otherwise have been if the Loans were on commercial terms.
*What Were the Loans Used For?
The USD3.121 billion Loans are project-tied Loans. The projects, (eleven – 11 in number as at March 31, 2020), include: Nigerian Railway Modernization Project (Idu-Kaduna section), Abuja Light Rail Project, Nigerian Four Airport Terminals Expansion Project
2(Abuja, Kano, Lagos and Port Harcourt), Nigerian Railway Modernization Project (Lagos-Ibadan section) and Rehabilitation and Upgrading of Abuja – Keffi- Makurdi Road Project.
See a Full List of the Projects at http://www.dmo.gov.ng./
The impact of these Loans is not only evident but visible.
For instance, the Idu – Kaduna Rail Line has become a major source of transportation between Abuja and Kaduna. Also, the new International Airport in Abuja, has improved air transportation for the populace,
while the Lagos – Ibadan rail line when completed, will ease traffic on the busy Lagos -Ibadan Expressway.
The projects also have the added benefits of job creation, not only by themselves but through direct and indirect service providers, a number of which are Small and Medium Enterprises. It is widely accepted that investment in infrastructure is one of the most effective tools for countries to achieve economic growth and development. Using Loans from China to finance infrastructure is thus in alignment with this position.
What Is the Process by which the Loans were Obtained?
The principal process and requirements for borrowing by the Government are expressly stated in the Debt Management Office Establishment (ETC) Act, 2003 (DMO Act) and the Fiscal Responsibility Act, 2007. Section 21 (1) of the DMO Act, “No External loan shall be approved or obtained by the Minister unless its terms and conditions shall have been laid before the National Assembly and approved by its resolution” and Section 41 (1a) of the FRA, “Government at all tiers shall only borrow for capital expenditure and human development, provided that, such borrowing shall be on concessional terms with low interest rate and with a reasonable long amortization period subject to the approval of the appropriate legislative body where necessary”, are instructive in this regard.
For detailed information on the borrowing process and required approvals please go to “External and Domestic Borrowing Guidelines for Federal Government, State
Government and the Federal Capital Territory and their Agencies” at
To summarise, the Federal Ministry of Finance, Budget and National Planning works with the MDAs under whose portfolio a proposed loan falls and also with the DMO. Thereafter, the approval of the Federal Executive Council (FEC) is sought.
It is only after the approval by FEC that His Excellency requests for the approval of the National Assembly (NASS) as required by Section 41 of the Fiscal responsibility Act, 2007.
More importantly, it is only after the approval of NASS that the Loans are taken and Nigeria begins to drawdown on the Loans.
In summary, Borrowing is a joint activity between the Executive (FEC) and the Legislative (NASS) Arms of Government.
3. How Rigorous is the Loan Documentation?
The Loan Agreements are reviewed by legal officers of the Federal Ministry of Justice and the Legal Opinion of the Honourable Attorney General of the Federation and Minister of Justice is obtained before any External Loan Agreement is signed.
Can China Take Possession of the Projects Financed by them if Nigeria Defaults in the Servicing of the Loan?
Firstly, Nigeria explicitly provides for Debt Service on its External and Domestic Debt in its Annual Budgets. In effect, this means that Debt Service is recognised and payment is planned for.
In addition, a number of the projects being (and to be) financed by the
Loans are either revenue generating or have the potential to generate revenue.
Nigeria has earmarked N600 billion as loan to enhance farmers’ access to agricultural financing, Minister of Agriculture and Rural Development, Mr Sabo Nanono, has said.
Nanono said that about 2.4 million farmers were targeted to benefit from the interest free facility, designed to encourage application of modern technologies in rice and cash crop cultivation.
He unveiled the plan at the inauguration of the 2020 wet season rice cultivation support programme at Tofai community in Gabasawa Local Government Area of Kano State.
The programme is being implemented under the Agro Processing Productivity Enhancement and Livelihood Improvement Support Project (APPEALS).
Nanono said the initiative would support farmers to achieve improved productivity, enhance self -sufficiency and food security in the country.
He said: “We have commenced farmer registration exercise to capture their information, number of farmlands and locations.
“Also, the beneficiaries will be monitor to ensure effective utilisation of the facility, and mobilise participation in subsequent programmes.”
Nanono commended the APPEALS project for supporting rice farmers in the state, noting that the gesture would go a long way to encourage agricultural activities in the country.
The minister urged the beneficiaries to make good use of the of fertiliser, seeds and inputs given to them to boost their production capacity.
“If you make proper use of the inputs, you could employ other people and it will enable you to participate in subsequent programmes.”
Also speaking, the Coordinator, APPEALS Project in the state, Hassan Ibrahim, said the project was being executed in a joint collaboration between the World Bank, Federal Government and the six participating states.
Ibrahim listed the participating states to include Kano; Kaduna, Cross Rivers, Enugu, Lagos and Kogi.
He said that about 100 farmers drawn from six rice farmer groups participated in the programme in Gabasawa, Kano.
The coordinator noted that the gesture was to augment the Federal Government’s policy on agriculture, designed to encourage productivity, enhance farmer enterprising skills, food security and value addition as well as promote export.
“The APPEALS Project in Nigeria is to enhance agricultural productivity of small and medium holder farmers, to improve value chains in the six participating states.” he said.
He added that 480 tons of rice were expected to be produced by the selected farmers in Kano State.
On his part, Alhaji Zubairu Ibrahim, Chairman, All Farmers Association of Nigeria (AFAN) in the state, lauded the Federal Government’s agriculture transformation programmes.
Ibrahim said the association would adopt proactive measures to assist its members benefit from viable agriculture development programmes and farmer support services initiated by the government.