Godwin Emefiele, the governor of the Central Bank of Nigeria (CBN) was reported to have said that the Central Bank of Nigeria (CBN) and the Nigeria Export-Import Bank (NEXIM) would provide N500 billion for small manufacturers in the country. The fund is to support the manufacturing and exportation of non-oil products.
This intention or plan of the CBN and NEXIM in making the N500 billion available is not only good but commendable given the dire need for funds to drive manufacturing and exportation of non-oil products to facilitate the needed diversification of the Nigerian economy away from crude oil. If implemented, it will be a boost to the level of available funds to manufacturers for the enhancement and expansion of their businesses, provided the access conditionalities are not onerous. It is the availability, accessibility and effective utilisation of the fund that will bring about the realisation of the benefits intended by the fund providers.
Some of the positive outcomes that should be expected from the realisation of the CBN/NEXIM fund will include, stimulation of economic productivity and growth in gross domestic product (GDP) through increased production and exportation of non-oil goods; earning of foreign exchange and improvement in the country's foreign reserves; appreciation in the exchange rate of the domestic currency, the Naira; creation of jobs or reduction in the level of unemployment and its attendant social ills. There will also be a decline in inflation rate, improvement in household income and an improvement on the welfare of the people.
The companies that will judiciously utilise the credit will report expanded production, increment in revenue, profits and returns to their shareholders. The government will also benefit in terms of enhanced tax income. Manufacturing capacity utilisation will be significantly improved upon. On the whole, the economy will witness greater diversification, more value-added products and less dependence on crude oil for national revenue. An economy with these characteristics, no doubt, promises much to the citizens' well being and happiness.
As the N500 billion is expected to be a real sector development finance, it should, therefore, be of very low interest rate and firms that should be allowed to access it should be those with the capacity to deliver positive results towards a better economic performance of the country.
Given previous experiences, the fund will be dispensed to borrowers through deposit money banks (DMBs). The conditions for the on-lending should be crafted in ways that the development nature of the credit will not be impaired. When on-lending is with recourse to the on-lender, it is the borrowers that suffer the burdensome conditionalities that follow such recourse. Indeed, in many previous cases, the funds provided by the authorities to enhance credit availability in the system ended up not being accessed by the target economic agents because of the attached conditions. Even when efforts were exerted to ensure they were accessed, repayment became herculean, also because of the approval requirements.
This time around, for the CBN/NEXIM fund to meet the expectations of its target small manufacturers and the Nigerian people, there is the need for a thorough assessment of some of the past development finance efforts to determine, first, the causes of their significant non-achievement of the intended purposes or their total failure; and secondly, how such causative factors should have been prevented or resolved. The findings will provide good insights on how the present fund can be positioned and managed to yield bountiful positive gains for the Nigerian economy and all citizens. That way, a sustainable recovery from economic recession can be assured.
The CBN/NEXIM have the capacity to structure the accessibility of the N500 billion fund in ways it will positively impact the small manufacturing enterprises and the over-all macro-economy in Nigeria.As it were, it is not enough to make credit available, serious attention must be paid to its easy accessibility, proper utilisation for intended purposes and ultimately, repayment in line with approved conditions.Thus, right from the on-set, huge responsibilities are not just on the on-lending DMBs but even the providers of the fund, CBN/NEXIM. What with the spate of rising cases of non-performing loans and, in many cases, total defaults.
DMBs, which are the channels through which the fund will be made available to the manufacturers, must appreciate the essence, significance and importance of this and other development finance credits and implement them professionally without putting unnecessary obstacles on the paths of prospective borrowers. This is one major area in which patriotism is required. Consequently, right from the beginning, DMBs must sit down with CBN/NEXIM and where need be, representatives of the target beneficiaries of the fund to consider and determine reasonable and acceptable requirements for accessing the credit. Such a tripartite dialogue will most certainly produce better understanding towards successful implementation of the scheme.