The Central Bank of Nigeria (CBN) has reviewed the guidelines for the N220 billion Micro, Small, and Medium Enterprises (MSME) Fund to allow new businesses (start-ups) borrow from the fund.
The CBN also said that banks and other finance institutions that lends to business start-ups under the fund will be allowed to access the fund at zero interest rate.
This was contained in the Revised Micro, Small and Medium Enterprises Development Fund (MSMEDF) Guidelines issued yesterday by the Development Finance department of the CBN.
Previously, only existing businesses can borrow from the fund through their banks. The new guidelines however removed this limitation stating, “Participating Financial Institutions (PFIs) are required to fund start-up projects under the MSMEDF. To encourage Deposit Money Banks (DMBs) and Development Finance Institutions (DFIs), some incentives shall apply.
“PFIs are expected to accept charge on fixed and floating assets of the financed projects as collateral for start-ups. Collateral requirement from start-ups by PFIs (DMBs and DFIs) shall be educational certificates such as SSCE, National Diploma (ND), National Certificate of Education (NCE), National Business and Technical Examination Board (NABTEB), Higher National Diploma (HND), University degree (NYSC Certificate where applicable) and a guarantor.
“The start-ups to access the MSMEDF must present their Bank Verification Number (BVN). Venture Capital Firms (VCFs) that wish to finance start-ups in form of equity participation shall be eligible to access the MSMEDF at 2.0 percent for investment in start-up projects. The collateral for such facility to the VCF shall be bank guarantee.
“Incentive shall be offered to PFIs that repay loans as at when due. a) Start-Ups (i) DMBs/DFIs playing in this space, shall access MSMEDF facility at zero percent interest for on-lending at 9.0 percent (all-inclusive) to start-ups. (ii) The PFIs shall qualify for a 50 percent risk shared on the net outstanding balance in the case of default. b) Other Incentives Microfinance Banks with PAR of 10 percent and below shall be exempted from providing financial assets as collateral to access facility under the MSMEDF.”
In addition to the above, the CBN also reduced interest rate it charges PFIs accessing the loan from 3.0 percent to 2.0 percent. It stated, “Interest Rates All PFIs shall access funds at an interest rate of 2.0 percent per annum and on lend at 9.0 percent per annum inclusive of all charges. The interest rate chargeable under the MSMEDF may be reviewed by the Central Bank of Nigeria from time to time.”
The decision to allow business start-ups borrow from the fund is aimed at boosting graduate employment by encouraging banks to lend to graduates intending to set up businesses.
Recall that the CBN Governor, Mr. Godwin Emefiele while addressing the just concluded 7th annual Banker Committee Retreat had announced that the apex bank would soon introduce measures to generate one million graduate employments.
He said, “In 2016, the CBN is contemplating a programme that would support SMEs at concessionary pricing to our young graduates. We need to get more people to be employed. The central bank would over the next few weeks work out the initiative to create employment for at least one million graduates in Nigeria in 2016. That would entail the support from Nigerian banks and our development partners.”
First Bank, GTBank, UBA, Others Generate N133.92 Billion from Electronic Payment in Nine Months
Rising investment in financial technologies and the growing adoption of electronic payments have earned 12 Nigerian banks a total sum of N133.92 billion in the first nine months of the year.
Billions spent in ensuring that bank customers have access to their funds and can perform financial transactions 24 hours a day paid off during the COVID-19 lockdown as many customers were able to maintain social distancing by carrying out financial transactions on numerous digital platforms.
Some of the electronic platforms banks generated revenue from in the first nine months were Automated Teller Machine transactions, USSD, online transfer, electronic bills payments, Remita, Point of Sale payments and agency banking, among others.
While some of the twelve banks were Access Bank Plc, First Bank of Nigeria Plc, First City Monument Bank Plc, Fidelity Bank Plc, Guaranty Trust Bank Plc, United Bank for Africa Plc and Sterling Bank Plc.
The other five were Jaiz Bank Plc, Union Bank of Nigeria Plc, Wema Bank Plc, Unity Bank Plc and Stanbic IBTC Plc.
A breakdown of the banks’ unaudited financial statements showed Access Bank’s revenue from electronic payments rose by 105 percent to N38.80 billion in the period under review, up from N18.96 billion posted in the same period of 2019.
First Bank’s electronic payment revenue stood at N34.59 billion, representing an increase of 0.5 percent over the N34.42 billion recorded in the corresponding period of 2019.
Similarly, fees and commissions FCMB earned from digital payments in the first nine months amounted to N6.62 billion, a 17 percent contraction from the N7.98 billion earned in the same period of 2019.
Jaiz Bank posted a 24 percent contraction on its electronic payment earnings from N406.65 million in 2019 to N309.55 million in the same period in 2020.
Also, Stanbic IBTC’s electronic earnings dropped by 15 percent from N2.49 billion posted in 2019 to N2.12 billion in 2020.
Fidelity Bank’s e-payments revenue contracted by 34 percent in the first nine months of the year to N1.74 billion, down from N2.63 billion in 2019. While GTBank posted a 26 percent decline in electronic banking income to N8.21 billion in the period under review, below N11.04 billion earned in the same period of 2019.
Union Bank Plc realised N5.34 billion from electronic payments charges in the first three quarters of the year. Meaning, the bank’s electronic payments decline by 5 percent to N5.6 billion.
For Sterling Bank Plc, electronic products earned the bank N4.31 billion in the very first nine months of 2020, again a reduction of 16 percent from N5.11 billion posted in the same period of 2019.
UBA Plc, Unity Bank and Wema Bank Plc generated N26.71 billion, N1.74 billion and N2.02 billion from electronic payment income, respectively.
Ghana/Kenya: Eurobonds to Decouple as Fiscal Challenges Come to Fore
Ghana and Kenya, two of the sub-Saharan African sovereigns with the highest amount of outstanding Eurobonds, could see a widening of their risk premiums over 2021, according to a Senior Credit Analyst at Redd Intelligence, Mark Bohlund.
Faced with fiscal challenges, the two African nations are expected to return to the Eurobond market in the first quarter of 2021, but this time with bigger risk premiums as investors are expected to incorporate a higher likelihood of frontier-market issuers being pushed into debt restructuring.
Mark Bohlund said, “Ghana and Kenya are likely to return to the Eurobond market in 1Q21 but see a widening of their risk premiums over 2021 as investors incorporate a higher likelihood of frontier-market issuers being pushed into debt restructuring.”
With Ghana’s outstanding Eurobonds presently estimated at US$10.3 billion and Kenya’s outstanding Eurobonds put at US$6.1 billion, spreads on Ghana’s Eurobonds will increase over those of Kenya in 2021.
“It is likely that spreads on Ghana’s eurobonds over those of Kenya will increase over 2021 as concerns rise over its weak fiscal position and high reliance on commercial overseas financing,” Bohlund stated.
Commenting on the countries’ fiscal positions, Bohlund said both countries are likely to post double-digit fiscal deficits this year, as contracting economies add to already faltering government revenue.
“With interest costs absorbing close to 50% of government revenue, Ghana will struggle to find sufficient cost- savings in other areas to reduce the fiscal deficit substantially in 2021.”
“In contrast to Kenya, Ghana has already cut back its capital expenditure to a bare minimum. The Bank of Ghana stepped up its purchases of government bonds sharply in September and we expect this to continue during 2021.
“In Kenya, part of the solution should be to encourage county governments to raise more revenue, but this will be challenging to implement before the August 2022 elections.
“Having shied away from bi- and multilateral creditors in favor of commercial borrowing, Ghana is likely to struggle to secure sufficient external financing in 2021. This makes increased central bank financing likely and poses downside risks to the cedi.
“Neither Ghana nor Kenya is likely to seek DSSI participation in 1H21 even if they deem that international bond issuance will not be possible.
“We have changed our view and now expect both Ghana and Kenya to issue Eurobonds in 1H21.
“Kenya is likely to continue to draw on funding from the IMF, the World Bank and other multilateral creditors, as well as bilateral financial support from China as the Standard Gauge Railway, continues to bleed funds.”
Bohlund added that the spreads between Ghana and Kenya Eurobonds are likely to widen further as a higher risk of a debt restructuring is priced into Ghanaian assets.
Insider Dealing: Paul Miyonmide Gbededo Adds Another 612,326 Shares of Flour Mills to His Stake
Paul Miyonmide Gbededo, the Group Managing Director, Flour Mills of Nigeria Plc bought an additional 612,326 shares of the company.
The management stated this in a disclosure statement sent to the Nigerian Stock Exchange on Monday.
The managing director purchased the shares at N27.75 per share on November 20, 2020 at the Nigerian Stock Exchange in Lagos, Nigeria. Meaning, Gbededo has invested another N16,992,046.5 into the company.
This was in addition to the 3,284,867 shares valued at N91,642,269 and 4,200,852 shares worth N117.62 million purchased by Gbededo earlier in the month of November. Bringing his recent purchases to 8,098,045 million shares worth N226,254,315.5. See the details of the latest transaction below.
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