Transparency issues trail FG’s N1tr COVID-19 palliative to private sector - THE GUARDIAN
By Gloria Nwafor
• Pharm sector of MAN claimed it accessed N100b
• N50b to NASME grossly inadequate
• Conditions too cumbersome to access fund
• No verifiable statistics from govt on businesses’ access to fund
• Govt should fund in dollars and not naira over high FX
Accountability and transparency issues continue to trail Federal Government’s N1.1 trillion COVID-19 intervention fund to the private sector as an assessment conducted by The Guardian showed that most businesses are yet to access the fund initiated over a year ago.
Members of the Organised Private Sector of Nigeria (OPSN) revealed that very few operators were able to access the fund. The reason according to the OPSN, was primarily due to bureaucratic bottlenecks and conditions given before funds are disbursed.
The OPSN members comprise Nigeria Employers’ Consultative Association (NECA), Manufacturers Association of Nigeria (MAN), Nigeria Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), Nigeria Association of Small Scale Industries (NASSI) and Nigeria Association of Small and Medium Enterprises (NASME).
In 2020, during the peak of the pandemic, the Central Bank of Nigeria (CBN) set out a number of measures to cushion the impact of the lockdown, including establishing an N1.1 trillion fund, equivalent to $3 billion at the time, into critical sectors of the economy to stimulate and revamp the production activities through structured refinancing and loans.
CBN Governor, Godwin Emefiele, during the period had said that the stimulus package was in addition to the regime of incentives contained in a six-point palliative to ameliorate the impact of the COVID-19 pandemic on the Nigerian economy.
He challenged Nigerians to take advantage of what appears to be adversity into an opportunity for development and growth in the economy.
When contacted, Director, Corporate Communications, CBN, Osita Nwanisobi, confirmed that approximately N1.1 trillion has been disbursed for the intervention fund as follows: Manufacturing sector got 151 projects summing up to N475.57 billion; agriculture sector got 73 projects summing up to N218.30 billion; services sector had 53 projects summing up to N406.31 billion and mining sector got 11 projects summing up to N83.50 billion.
“The funds were disbursed via the Participating Financial Institutions (PFIs). Conditions were given by the PFIs, like for maximum tenor of seven years with a two-year moratorium at an initial interest rate of five per cent per year, which is to be reverted to nine per cent come March 1, 2022.”
HOWEVER, the OPS, during a media briefing in June on the state of the economy, alleged that credible information from their members and many businesses across the country had shown very low access to various intervention funds by the apex bank.
The group at the meeting berated the CBN over cumbersome processes hindering businesses in accessing the fund.
MONTHS later, the private sector operators stated that while it was yet to conduct a comprehensive survey, reports from members still indicated that very few of them were able to access the funds due to bureaucratic bottlenecks.
Specifically, stakeholders in the pharmaceutical sector of the Manufacturing Association of Nigeria (MAN) confirmed that their members were able to access the N100 billion loans set aside for the sector.
The Nigeria Association of Small and Medium Enterprises (NASME) confirmed it received N50 billion, which it said was grossly inadequate compared to the large number of members in the sector.
Executive Secretary of NASME, Eke Ubiji, said the disbursement didn’t activate capacity as the funds had to be spread thin among members.
He said only about 60 members received the disbursements, with each receiving between N200,000 and N500,000, while none got the N25 million in bulk as promised to be disbursed to each business organisation.
“We expected that over 250 of our members would benefit from the intervention but just a little above 60 members benefitted. This is the accurate information from NASSI, our sister body. Our membership runs into thousands across the country, so it is just a tip of the iceberg. We are also expecting intervention from the Micro, Small and Medium Enterprises’ (MSMEs) survival funds housed by the Federal Ministry of Industry, Trade and Investment.”
Organisations, particularly MSMEs, who were able to access the interventions, got them in the form of loans, grants and payroll and equipment support.
When The Guardian reached out to the Director General of NACCIMA, Ayoola Olukanni, he was silent on how much was disbursed to the sector or if members were able to access the fund.
However, findings by The Guardian showed that there are no current verifiable statistics from the government on the number of organisations who have been able to access the loans.
President of OPSN, Taiwo Adeniyi, told The Guardian that financial institutions who are supposed to be the disbursement entities estimated the level of disbursement at about 10 per cent of the aggregate funds.
He said the requirement that deposit money banks (DMBs) bear all the credit risks associated with disbursement of the funds has been the major drawback in banks’ active participation.
According to him, most banks are reluctant to play an active role in the disbursement of the funds because of what they perceive as an unattractive interest rate in addition to the risk burden, which is completely on the banks.
He said banks charge as high as 25 per cent interest rate on commercial loans while they earn as low as one per cent from the intervention funds.
He advised that the CBN should review its strategies and reduce the bureaucratic bottleneck currently associated with accessing the funds.
He urged that the CBN partners with private sector bodies to ensure that credible and genuine businesses actually benefit from the fund, noting that this would further facilitate regular impact assessment of the fund.
He suggested deliberate support for organised businesses through the provision of grants and infrastructure development, adding that the loans should be structured in a way to allow the government to bear the bulk of the risk.
While seeking access to required forex at CBN rates for organisations that need to import machinery for production, he added that the government should diversify the economy, support the real sector and long term projects as the banks cannot bear the entire credit risks of this lending.
An economist, Jide Ojo, challenged the CBN to give accurate statistics on how the N1 trillion COVID-19 funds were disbursed to businesses when the key beneficiaries are not carried along.
He said the OPS should have been in the sub-committee involved in the fund disbursement to ameliorate the bottlenecks for members in accessing the fund.
“That is the same scenario Anchor Borrowers experienced, as many people could not access the fund and those who did could not pay back because of the natural disasters that happened like insecurity and COVID-19.
“There was no proper accountability for Nigerians to know how the fund was disbursed. There are a lot associated with such loans if it is not a grant. All of these should have been explained to the OPS including labour, whose members are supposed to be beneficiaries. They are one pillar that could have attested to such benefits from the government,” he said.