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the funding coming directly from the federal budget. Added to the
₦87.9 billion received by the DBN from international development
finance institutions it meant that the DBN had about ₦128
billion available to lend to MSMEs by the time it started lending
operations in November 2017. Sadly, it was only able to provide
₦182.3 million in loans to MSMEs by the end of 2017. Lending in
2018 is expected to improve significantly as the bank claims to
have provided loans to 35,000 beneficiaries since inception as
at the end of November 2018. The intervention via DBN is more
sustainable, should reach a larger group of MSMEs. Also, the DBN
should become self-funding.
Some other interventions have helped address the problem of
accessing debt financing, but which are not directly funded by
the federal budget, and so are not a function of fiscal policy. The
Bank of Industry and Central Bank of Nigeria provided funding
in some form to MSMEs with financing for the programmes
coming from their balance sheets. These quasi-fiscal programmes
provided about ₦46 billion in funding MSMEs in 2017 with the
BOI’s SME Directorate driving the bulk of the performance by
providing ₦40.9 billion in loans, and CBN’s MSME Development
Fund provided ₦4.2 billion in loans. At the sub-national level,
the LSETF provided ₦5.1 billion in loans, bringing total fiscal and
quasi-fiscal intervention in financing to MSMEs to ₦97.7 billion in
2017. Commercial bank loans to SMEs in 2017 was ₦10.7 billion, so
it is quite clear that SMEs rely heavily on these fiscal interventions
to get vital credit.
Despite these efforts, with a financing gap estimated at ₦9.6
trillion, there is still quite a bit of work to be done. First, this
administration’s interventions to date are focused on unlocking
access to debt. For SMEs, the type of financing usually required
is equity, and there has been no effort to increase the amount
of equity funding available. Also, this can be done either by
directly setting up an MSME growth capital fund, or providing
guarantees that would encourage private investors to make
equity funding available which has not happened. There is also a
place for facilitating the provision of debt to MSMEs by existing
commercial banks through the provision of guarantees or other
risk-mitigating products. The DBN is making an effort in this
regard, but its programme will need significant expansion given
the quantity of financing that needs to be mobilised. Finally, the
current intervention programmes need to be rigorously assessed
for performance so that they can be improved (or terminated)
such that the ultimate aim of enhancing economic outcomes is
achieved.
Keep up with Seun on Twitter and Instagram @seunsmith.
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