How MSMEs are to Benefit from Senator Abiru’s N300m Revolving Loan

In this report, Sunday Ehigiator writes on how Micro, Small and Medium-scale Enterprises (MSMEs) are to benefit from the recently launched N300 million ‘Constituency Intervention Revolving Loan at 6 per cent per annum, by the Chairman, Senate committee on industries and the Senator representing Lagos East Senatorial District, Senator Adetokunbo Abiru, in fulfilment of his promise to MSMEs in his constituent.

Background

According to the 2014 European Journal of Sustainable Development, Micro, Small and Medium-scale Enterprises (MSMEs) are generally regarded as the engine of economic growth and equitable development in developing economies such as Nigeria.

They are labour-intensive, capital saving and capable of helping to create most of the one billion new jobs the world will need by the end of the century. They are also perceived as the key to Nigeria’s economic growth, poverty alleviation and employment generation.

But their unimpressive performance in employment generation in recent years has generated a lot of research interest in their challenges and prospects.

After Nigeria’s independence in 1960, much emphasis has been laid on the growth of micro, small and medium-scale industries as a means of reducing the incidence of poverty and unemployment in the country.

Since the adoption of the economic reform programme in 1986, there has been a decisive shift from grandiose, capital-intensive and large-scale industrial projects based on import substitution to small-scale industries with immense potential for developing domestic linkages for sustainable industrial development.

Apart from MSMEs’ potential for self-reliant industrialization using local raw materials, they are in a better position to boost employment, guarantee even distribution of industrial development and facilitate the growth of non-oil exports.

Data

According to a 2022 survey conducted by the Small and Medium Enterprises Development Agency (SMEDAN) in collaboration with the National Bureau of Statistics (NBS), MSMEs contributed 43.31 per cent to Nigeria’s Gross Domestic Product (GDP) as of June 2022.

The report also estimated 39.65 million MSME businesses in Nigeria “employing 87.9 per cent of the labour force.”

The challenges

Abiru while laying background to the essence of the initiative said Access to finance has been identified by various studies as one of the biggest challenges faced by small businesses in the Nigerian economy.

According to him, many MSMEs, out of desperation, take loans from informal financial markets and finance companies at outrageous interest rates, sometimes as high as between 50 per cent to 120 per cent per annum.

“MSMEs are also subjected to a lot of complex requirements such as loan collaterals, strenuous documentations, and bureaucratic processes which impede access to credit by these small businesses.”

Importance of MSMEs in Nigeria

Abiru said MSMEs play an important role in the economic development process. “This reality is acknowledged globally. They play crucial roles in job creation, income redistribution, and mobilization of small savings, technology adaptation, economic inclusion and many more.”

He said in Nigeria, the MSMEs account for about 50 per cent of our GDP and over 80 per cent of employment, and have footprints across all sectors of our economy; hence, they offer good channels for the realization of development objectives of job creation, economic inclusion and poverty reduction.

About the loan initiative

Giving more insight on the initiative, Abiru said the N300 million loans were at a highly concessional 6 per cent (all-in) single-digit interest rate per annum. He said the loan tenor was between three to 18 months and the limit per beneficiary is pegged from N100,000 to N1 million.

“This Constituency Intervention Revolving Loan for MSMEs will go a long way in bringing succour to our numerous small businesses in the Lagos East Senatorial District,” he said.

Loan requirements

Speaking on the requirement to access the loan, Abiru said the target beneficiaries are micro and small businesses in the Lagos East Senatorial District duly registered with the Corporate Affairs Commission (CAC).

According to him, applicants must provide a recent tax clearance certificate, LASRRA ID, Bank Account Details, BVN, NIN, evidence of training with a recognized enterprise development centre, and ATM card (valid for the next 12 months), to be eligible for the loan.

Sustainability of the initiative

Speaking on the sustainability of the loan initiative, Abiru, a retired bank Chief Executive and former Commissioner for Finance in Lagos State said, “we have developed a risk management framework to make the scheme an enduring and revolving facility that will impact many more people beyond the first round of beneficiaries.

“Let me at this stage acknowledge the cooperation and support of the Bank of Industry (BOI), the Lagos State Employment Trust Fund (LSETF) and the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) for their partnership and contribution to this intervention.

“Their support has broadened the scope of the scheme, and their respective contributions of N100 million each aggregated to the fund size of N300 million.

“Already we have over 500 applicants and my appeal to our constituents is to judiciously make use of this fund and ensure prompt and credible repayment of the amount borrowed so that others can benefit.

“Our hope and belief are that judicious use will encourage our partners to make even more contributions to grow the fund for the benefit of a greater number of our constituents. We aspire to grow the fund from N300 million to N1 billion in the next three to five years.”

Sanwo-Olu, and others, commend the initiative

Commending the Senator for the initiative, the Governor of Lagos State, Babajide Sanwo-Olu, who was represented by his Deputy Chief of Staff, Gboyega Soyonwo said Senator Abiru has continued to keep faith in the people.

The governor said the initiative is “an example of the dividends of democracy our people desire and we will not relent in ensuring that the welfare and wellbeing of our people remain our only priority.”

Also speaking, the Chairman of the Occasion, Mr Olawale Edun, an international Finance expert, who is also the Chairman, ChapelHillDenham Group said the Senator has brought great value into governance as an accomplished professional.

The former Lagos State commissioner of Finance said, “If you want to do anything that will be sustainable, do it the way the Senator has done it, by bringing major institutions that will train and assist people and empower them to do their business.

“It is almost free money considering the 6 per cent interest rate per annum. Take this money, use it well so that another person can benefit.”

Similarly, the Managing Director of Bank of Industries, Mr Olukayode Pitan, in his remarks charged MSMEs to reposition their businesses in line with post-pandemic realities.

He said, “The pandemic taught us many life-changing business lessons. We now know that new business owners’ top priority isn’t only financing but credible business intelligence and knowledge to guide their creation, survival and success strategies.

“The pandemic required resilient entrepreneurs to adapt their businesses to new economic realities, from making and branding their products to reaching customers.”

In his goodwill message, the Director General, of Small and Medium Enterprises Development of Nigeria (SMEDAN), Olawale Fasanya, said he was also a beneficiary of the good deed of Senator Abiru.

“I am not sure the people of Lagos East know the kind of Senator they have. In my 19 years of working at the SMEDAN, I have not seen this kind of Senator. He is very passionate about the wellbeing of his constituents”.

The Executive Secretary, of Lagos State Employment Trust Fund (LSETF), Tejumola Abisoye, who was represented by the Director, of Programmes, LSETF, Omolara Adewunmi, said the agency was pleased to partner with the office of the Senator in implementing the laudable initiative.

She said the 6 per cent interest per annum which was subsidized by the Senator is the lowest MSMEs can get anywhere in the country.

“No financial institution can give you that. Even at LSETF, we do 9 per cent,” Adewunmi disclosed.

Lastly, the Chief Executive Officer, The Centre for the Promotion of Private Enterprise (CPPE), Dr Muda Yusuf commended Senator Abiru for promoting the economic well-being of his constituents.

He said, “This remarkable initiative by distinguished Senator Tokunbo Abiru resonates perfectly with our core mandate as a civil society organization, which is the promotion of private enterprise.

“We believe that to salvage this economy and ensure social stability, we must promote the growth of private enterprises, especially small businesses. And we must do this in a manner that is impactful and sustainable. In light of this, the CPPE believes that this initiative deserves all the necessary support.”

CAPTION:

L-R: Loan Beneficiary, Akinremi Oladele; Loan Beneficiary, Alauru Joan; Senator Mukhail Adetokunbo Abiru; his wife Fayishola Abiru; Loan Beneficiary, Adeniji Anifat; and Loan Beneficiary, Taifa Fajenro during the official launch and presentation of the Lagos East Constituency Revolving 6 per cent Loan to some MSMEs in Lagos State.