N75bn loans to MSMEs: Leaving beneficiaries without monitoring poses risk of bad loans

After much resistance greeted the discontinuation of subsidy payment on premium motor spirit (PMS) by the present administration, President Bola Tinubu had in response to outcries that greeted the development announced palliative measures. The development had posed strains to businesses with small enterprises being threatened with the new realities. Holding the larger part of contributions to the Gross Domestic Product, the President had declared support measures for micro, small, and medium businesses in the Country.

Notice of disbursement by the Federal Government of soft loans to these fractions of businesses have begun to surface. Recently, the Office of the Vice President disclosed it would commence the disbursement of loans to Micro Small and Medium Enterprises (MSMEs) in collaboration with the Bank of Industry (BOI) in January 2024. According to a statement by the Senior Special Assistant to the President on Job Creation & MSMEs, in the Office of the Vice President, Temitola Adekunle-Johnson, “the loans totaling about N75bn will be given to small businesses nationwide at an interest rate of 9 per cent.”

The statement titled ‘BOI-FG single digit loans for MSMEs to commence Jan 2024’ mentioned that the Federal Government and the Bank will leverage existing platforms to provide loans to small businesses, targeting women and youths. It added that the Tinubu-led government has collaborated with stakeholders across the public and private sectors to provide massive support for MSMEs both in grants and loans in the past.

The statement cited the recent upward review of the Access Bank loan scheme for MSMEs from N30 billion to N50 billion. “The upward review, according to the bank, is to increase the number of beneficiaries of the bank’s loan scheme and impact more livelihoods,” the statement partly read.

The announcement of the Federal Government came six months after Vice President Kashim Shettima assured Nigerian small business owners that the Tinubu-led administration would hasten access to single-digit loans for them within the shortest time feasible.

“The government is working urgently to ensure quick access to single-digit loans for Nigerian small businesses within the shortest time possible,” Shettima had said in his message to mark the 2023 World Micro Small and Medium Enterprises Day on June 27, 2023. The VP had affirmed that the FG recognises the vital role that Micro, Small, and Medium Enterprises play in driving economic growth, creating jobs, and promoting innovation.

He had said that the administration would provide support, foster an enabling environment and improve access to finance for MSMEs. Therefore, Shettima urged “all stakeholders to come together to champion the growth and success of MSMEs to achieve sustainable development for all, while we also recognize the plethora of issues that face MSMEs as a result of the subsidy removal.”

“However, the government is working urgently to ensure quick access to single-digit loans for Nigerian small businesses within the shortest time possible,” he had mentioned.

While the announcement of the Federal Government disclosing the imminent commencement of disbursement of the loans totaling about N75 billion to small businesses nationwide at an interest rate of 9 per cent is a welcome development to MSMEs, particularly at a time the economy is posing harsh strains threatening small businesses, it is however important that the Government do not only stop at mere disbursement of loans, but must make the process systemic to yield expected positive outcomes.

In as much as such loans would not be first of its kind, it is important that the Government in collaboration with all relevant stakeholders drive the process intensively to ensure strategic follow up with the beneficiaries. In this light, small businesses that would be beneficiaries must be well accessed, and detailed engagement must be given to ensure the investment for which the loans are acquired are prudently channelled and managed.

Hence, also important is proper orientation and financial capacity enlightenment programmes for the stakeholders to which the loans would be disbursed. This is essential not only to ensure the loans do not become barred, but also critical to provide the stakeholders with enough skills needed to grow their businesses for the benefit the loan would afford. This remains important because it is when these are achieved that the benefits of the programme can boost the economy on the macro scale.

While leveraging existing platforms to provide loans to small businesses, targeting women and youths, it is therefore essential that capacity building programmes be set up to acquaint the beneficiaries with the managerial and financial discipline essential to make maximum output from the loans obtained. Leaving the beneficiaries without such knowledge and requisite monitoring pose a risk of the loans losing the value of its essence.