Nigeria’s small businesses suffer N48 trillion funding gap

CBN sensitises judicial officers on collateral registry

The numerous intervention schemes notwithstanding, the Central Bank of Nigeria (CBN) has put the existing financing gap in the small business segment of the economy at $158 billion (N48 trillion).According to the apex bank, the quest for inclusive economic growth and development would remain elusive if the ease of access to finance by this key industry is not given prominence, as its dilemma was already translating to weaker results.

CBN Governor Godwin Emefiele made the disclosure yesterday in Abuja while opening a workshop for judicial officers on the Secured Transaction in Movable Assets (STMA) Act to acquaint them with the workings of collateral registry.The top banker observed that the event could not have come at a better time given the critical role the judiciary plays in promoting public confidence in the financial system.

The more than 17.5 million micro, small and medium enterprises (MSMEs), adjudged vulnerable today, remain the catalyst of the nation’s economic growth, but are faced with the most commonly cited challenge of financing bottlenecks. Emefiele said: “Support for MSMEs’ financing is more critical now than ever given the need to boost Nigeria’s long-term growth trajectory since exiting recession in the second quarter of 2017.

“In real terms, our GDP grew by 1.8 per cent in the third quarter of 2018 compared with 1.2 per cent in the corresponding period of 2017. The observed growth was largely driven by continued improvements in non-oil sector activities such as agriculture, information technology, manufacturing, transportation and storage, trade and other services.

“About 96 per cent of enterprises operating within these sectors are MSMEs. These enterprises account for an estimated 48 per cent of Nigeria’s nominal GDP, seven per cent of export and about 84 per cent of workforce. “Despite these contributions, however, MSMEs across the country continue to face structural drawbacks particularly due to their peculiar nature. Poor access to finance, high cost of borrowing, inadequate infrastructure, non-conducive business environment and weak capacity are some of the stylised challenges constraining their growth.”

The CBN boss noted that their situation is compounded by the lack of acceptable collateral, inherent information asymmetries among others.He said the N48 trillion shortfall was a reflection of the risk-driven apathy of financial institutions to lend to the sub-sector, adding that the statistics bring to the fore the urgent need for stakeholders to synergise, support and promote the development of MSMEs through improved access to affordable finance.

The country’s lender of last resort had collaborated with the International Finance Corporation (IFC) and the World Bank Group to establish the Secured Transactions and National Collateral Registry which allows Nigerians, particularly MSMEs seeking to access credit, to use their movable assets as collateral.

To legalise and institutionalise the authority and power of the registry, the Act was signed into law on May 30, 2017 while the CBN, had earlier in February 2015, issued and gazetted the Registration of Security Interest in Movable Property by Banks and Other Financial Institutions in Nigeria Regulations (No.1, 2015) to facilitate the seamless operation of the collateral registry. Emefiele urged entrepreneurs to leverage their movable assets such as motorcycles, jewelries and sewing machines as collateral for start-up businesses or expansion of existing ones.