INVESTIGATION: Small businesses, big trouble: CBN’s N220bn small enterprise fund shrouded in secrecy

Four years after the Central Bank of Nigeria launched the N220 billion Micro, Small and Medium Scale Enterprises Development Fund (MSMEDF), disbursement of the fund is still shrouded in secrecy, MICHAEL EBOH of the Vanguard newspaper reports.

Favour Okoro runs a small tailoring and fashion designing shop along Okumagba Avenue, a busy neighbourhood in Warri. She has five sewing machines. It is a small business that employs six tailors and two designers. Her clientele includes the affluent, the average and low-income earners.

Two years ago, when her business came into a boom and there was a rush of clients, she started thinking of expanding by buying more machines, employing more hands and moving into a bigger shop. Then, she heard of the Central Bank of Nigeria’s N220 billion intervention fund for Micro, Small and Medium Scale Enterprises (MSMSEF).

Okoro was hopeful when she heard about the Fund, but her hopes faded after she tried several times, without success, to access it. She had planned to use the fund to buy modern sewing machines, sewing materials and large quantities of fabric, to drive her plans to venture into clothes export. When Vanguard met her last month in Warri, she complained that her business was struggling because of difficulties in accessing funds for the much-needed expansion.

Also, in Warri, a small business owner, who did not want his name mentioned, said he applied to access the funds in the early stages of the programme, filed all the documentation, met all the contents of the checklist, yet could not secure the funds. He said that he gave up after noticing some political undertones in the process and after pushing several times without success.

He said he was into fabrication and needed the fund to upgrade its facilities and also acquire raw materials to meet up with the demands of his customers.

He disclosed that his business was facing tough times, as he was having difficulties paying his staff salaries.

In Aba, the South East’s entrepreneurial capital, many businesses had gone through similar challenges and eventually gave up on the CBN funds.

Chairman, East-End Branch, Association of Tailors and Fashion Designers (ATFAD), Aba Chapter, Innocent Onwukwe, disclosed to Vanguard that thousands of his members had also tried in vain to access the CBN intervention fund in the last three years. He said it was a demoralising experience, frustrating the growth of their businesses and threatening their survival.

He explained that with the failures recorded in the programme, many of its members were finding it difficult to access funds to deploy the latest technology to their business and to the acquisition of raw materials.

The importance of MSMEs in an economy remains very pivotal, especially as evidence abounds that economic growth and development of prosperous and progressing countries all over the world has been driven by MSMES.

According to the National Bureau of Statistics (NBS), Nigeria has about 37 million MSMEs, and if properly financed, it is expected that they would make far-reaching contributions to the country’s quest to rank among the top 20 economies of the world by 2020.

Although the CBN claimed it established the N220 billion MSMEDF in recognition of the significant contributions of the MSME sub-sector to the economy and the existing huge financing gap, investigations have revealed that the fund has remained largely inaccessible, and majority of the MSMEs seem unaware of its existence.

To access the Fund, the CBN had asked MSMEs to apply through Participating Financial Institutions (PFIs), as its statutes do not allow it to deal directly with businesses on such issues.

The criteria, according to the CBN, are that PFIs submit requests from MSMES to the Fund in a format that shall be prescribed by the CBN from time to time.

It also stated that applications would be processed on receipt of complete documentation, while it would communicate the terms and conditions for the approved grant within one month of submission.

While the CBN claimed that about N76 billion has been disbursed to MSMEs, investigations reveal the opposite. Engagement with major MSME associations faulted this claim and revealed that most MSMEs have been unable to access a dime from the Fund.

The complaint of inaccessibility was corroborated by the Bank of Industry (BoI), a major stakeholder in the disbursement of the MSMEDF, which disclosed that it was yet to access the Fund for onward disbursement to MSMEs.

The non-disbursement of the fund, it was discovered, is costing the country a minimum of N1 trillion annually, as the funds would have been utilised by the MSMEs to grow the economy and end the importation of certain commodities, as most of the imported items, mainly by-products of the agricultural sector, leather and clothing, would have been produced in the country.

To buttress the country’s losses due to the poor administration of the Fund, the National Bureau of Statistics (NBS) revealed that Nigeria spent N2.29 trillion on importation in the first quarter of 2017 alone. According to the NBS, Nigeria imported cane sugar worth N38 billion from Brazil; mixtures of odoriferous substances worth N13.2 billion were imported from Ireland; chemical fertilizers with nitrogen worth N7.3 billion were imported from United Arab Emirates; and milk preparations worth N4.6 billion were imported from Ireland.

Today, 80 per cent of Nigeria’s consumption comprises foreign products; and if this money had been properly disbursed to local entrepreneurs, the country’s import rate would have dropped by now — because the local manufacturers would be encouraged to produce.

Also, the inability to access funding is stunting economic growth, while many companies, mostly manufacturers, are dying daily due to lack of access to finance.

Furthermore, the CBN was discovered to be flouting some of the guidelines it put forward in setting up the fund. One critical guideline flouted by the apex bank is its engagement with the steering committee.


Specifically, the Small and Medium Scale Enterprises Development Agency of Nigeria (SMEDAN), a key institution focused on the growth and development of MSMEs in Nigeria, is not being carried along in the scheme and also in the disbursement of the Fund, despite the fact that the guidelines setting up the Fund named SMEDAN as a member of the steering committee for the management of the MSMEDF.

Expressing his disdain for the secrecy surrounding the fund, Director General and Chief Executive Officer of SMEDAN, Mr. Dikko Umar Radda, disclosed that the agency was aware that the CBN had set up the Fund, but it was not involved, neither was it consulted on ensuring the success of the Fund.

He said on his appointment, he asked a lot of questions as regards to the funds; because he believed that it was necessary that if there is such money meant for MSMEs in the country, there should be a kind of collaboration with SMEDAN, being an agency of government that is in charge of MSMEs development in the country.

Radda argued that SMEDAN should have played the role of being a referral body, because it has more knowledge on the MSMEs in all the states of the federation than any other body.

He added that SMEDAN should have played a monitoring role and also provides business development support to the beneficiaries because that is its mandate.

He faulted the CBN for not involving SMEDAN in the programme, while he bemoaned the use of consultants for the programme, a role, which according to him, could have been given to SMEDAN.

Radda also added that it had held several meetings with the CBN, through the Office of the Secretary to the Government of the Federation, which led to the setting up of a committee to work out modalities on how SMEDAN could be included in the programme.

However, he lamented that for over one year since the committee was inaugurated, nothing had been heard from the CBN on the issue, noting that SMEDAN had written several letters to the CBN to that effect, without success.

Moreover, the refusal of the CBN to publish the names of those it claimed were beneficiaries of the Fund had raised further doubts about the integrity of the apex bank and the Fund.

The CBN claimed that information about the beneficiaries would be obtained by sending a mail to its dedicated help desk, ‘’, where it said relevant staff would be available to provide responses.

However, for over two months, the desk did not respond to email enquiry on the issue and also refused to provide the list of beneficiaries. This is despite the fact that publishing the names of beneficiaries would help verify the authenticity of the CBN’s claims that some MSMEs are actually accessing the Fund. The secrecy surrounding the Fund and refusal of the CBN to publish details of beneficiaries, among others, had pitched SMEDAN against the bank.

When contacted, SMEDAN confirmed it had made several calls to the CBN to publish names of beneficiaries, to enable it track the MSMEs and ensure that the loan was being properly utilized. Till date, and despite the fact that SMEDAN is a member of the steering committee of the Fund, the CBN has refused to publish the list.

Also, Vanguard learnt that proper feasibility studies appeared not to have been conducted by the CBN before the rollout of the MSMEDF, as shown by the conditions which MSMEs operators claimed were too stringent.

This also threw up the question whether the Federal Government, as well as the CBN, is well acquainted with the needs of the MSMEs such that they would be able to structure a loan that can really be of assistance to the MSMEs.

Though the CBN insisted that the criteria for accessing the loan were MSME-friendly, it was observed that the conditions given by the PFIs were similar to those given to big enterprises such as Dangote and other big shots.

In particular, the BoI, one of the PFIs, put forward certain conditions, including that for any MSME to access the Fund, it would be required to open an account with 20 per cent of the loan amount, while two staff of the BoI would be the sole signatories to the account after the loan is obtained.

Another condition is that if an MSME is seeking to borrow more than N500,000, for instance, it must have a guarantor and must own a property with a Certificate of Occupancy (COO).  The BoI would not accept title of a property owned by siblings of the person seeking to borrow the fund.

It was also observed that the checklist for the programme was initially 32, but was later reduced to 18 — still too long — while the approval period seems to be unending.


If the MSMEs, which the fund was designed for, say they have not accessed it, the question is: “Who are the people that have accessed the N76 billion the CBN claimed it had disbursed, and where is the remainder of the Fund, put at about N144 billion?”

As it is, investigations revealed that CBN is the ultimate beneficiary of the secrecy and non-disbursement of the Fund, while the biggest losers are the MSMEs in particular and the country in general.

Investigations show that since the advent of the CBN Fund, not more than three business owners out of millions had been able to access it in Aba, Abia State, which is a critically important town to Nigeria’s quest for economic growth.

Director-General of the Aba Chamber of Commerce, Industries, Mines and Agriculture, ABACCIMA, Mr. Henry Nduka, confirmed that with millions of MSMEs in Aba, only three persons have been able to access the Fund.

He noted that funding is a critical component in MSMEs growth and survival, adding that lack of access to funding was making it difficult for them to develop their businesses and acquire better technologies for production, thereby stifling competitiveness.

“Specifically, we have well over 300,000 registered tailors and fashion designers in Aba, and more than 100,000 finished leather products producers in Aba. There are not more than three persons that have been able to access the MSME fund,” he said.

Noting that most of its members were not aware of the N220 billion MSMEDF, he lamented that with its huge membership base, the CBN had not deemed it necessary to approach it on how its members can benefit.

He said in most cases, officials of the CBN, BoI and other PFIs prefer to deal with the businesses directly — a situation that had further made the funds inaccessible to the small business owners.

According to Nduka, most of the owners of the businesses are not properly educated and normally rely on the assistance, advice and services of the Chamber in order to provide the necessary documentation to access such funds.

Also speaking, Mr. Innocent Onwukwe, Chairman, East-End Branch, Association of Tailors and Fashion Designers (ATFAD), Aba Chapter, stated that among its over 100,000 members, he was the only one who had accessed the facility.

Onwukwe said he was able to access a loan of N4.6 million in July from the Fund two years after his loan application, noting that the facility, which would run for three years, had already been deployed in acquiring a number of machines for the running of his business, and had helped in its expansion as he now supplies clothes across Nigeria, Ghana, London and the United States.

Despite successfully accessing the loan, he lamented that the criteria were stringent and difficult for most small business owners to meet. He said he had in his employ, two graduates, his elder and younger brothers, both graduates who were instrumental to his ability to access the loan.

He appealed to the Federal Government, the CBN, SMEDAN, BoI and other agencies to reduce the number of guarantors to one, and step up sensitisation, as most of the MSMEs are unaware of the availability of such funds.

He said from his experience with the programme, most tailors were not properly educated and would therefore not be able to meet the conditions for accessing the loan.  He said the criterion asking for wealthy guarantors had also disqualified many prospects, as most of them hail from poor backgrounds and are unable to secure such guarantors.

He added that Vice President Yemi Osinbajo visited Aba on one occasion and promised to make a certain fund available for MSMEs in the city, with each getting about N100,000. Three months after, he said nothing had been heard of that promise and that most business owners had opened an account with the partnering bank, Fidelity Bank, and paid the N5,000 processing fee as required, but had not yet heard from the government.


Investigations revealed cases of irregularities as it was observed that state governors and some politicians are subverting the programme, disbursing their own portion of the Fund, which is N2 billion for each of the 36 states and the Federal capital Territory (FCT), to their political associates, relatives and party members.

Many of these beneficiaries, it was observed, were not qualified to access the fund, mainly by the fact that they are not MSMEs or business owners.

Specifically, sources told Vanguard that politicians are setting up proxy companies to access the funds, while some of the politicians are seeking to know what is in it for them before they make any genuine effort to push for the success of the policy.

In some cases, it was discovered that some individuals who are not into any business were able to access some of these intervention funds, just because their political benefactors used their powers to access the funds for them.

Innocent Onwukwe confirmed that there were cases of people without businesses getting the fund. He said, “In one case I know of, some individuals who are not into any business were able to access some of these intervention funds, just because their political benefactors used their powers to access the funds for them. In particular, I know of the Personal Assistant to one politician who got the loan from Umuahia.”

The criteria asking for wealthy guarantors was found to have disqualified many prospective applicants as most of them happen to be from poor background and were not able to secure such guarantors.

Some of the documents put forward by PFIs for MSMEs to access the fund include tax clearance certificate, statement of bank account, certificate of incorporation, certificate of occupancy or governor’s consent, among others.

Other issues that were identified to be hindering MSMEs from accessing the fund include inefficiencies on the part of the businesses in terms of documentation, low sensitisation, and to a large extent, bureaucratic bottlenecks in terms of the approval process.

The programme appeared to have been designed to fail, as seen by the massive complaints and inaccessibility of the fund by the MSMEs.

The CBN was expected to have learnt from the failure of similar funds like the Small and Medium Enterprises Equity Investment scheme, SMEEIS, SMEDAN fund and numerous other intervention funds which had failed to achieve their objectives over the years.


Again, it was discovered that the CBN may be the ultimate beneficiary and may not be interested in disbursing the fund, because at an interest rate of three per cent, at which it lends to the PFIs, the apex bank is incurring a significant loss because the Monetary Policy Rate (MPR) had remained at 14 per cent.

The MPR is the official rate at which the CBN lends to financial institutions and other clients. Therefore, fixing the interest rate of the MSMEDF at three per cent means a shortfall of 11 per cent to the CBN.

Not disbursing the fund to MSMEs means the CBN would return the money to its coffers and lend it at 14 per cent to financial institutions, making significant arbitrage on the fund.

Specifically, disbursing N220 billion at an interest rate of three per cent would fetch the CBN N6.6 billion per annum, while disbursing the same fund at 14 per cent would fetch the apex bank N30.8 per annum.


Also, investigations revealed that financial institutions, mainly commercial banks, mortgage banks and microfinance banks are frustrating the disbursement of the fund, as many of them are not well disposed to the programme.

The banks were expected to lend to MSMEs at nine per cent, after obtaining funds from the CBN at three per cent, leaving a spread of six per cent for the banks.

Instead of enrolling the MSMEs to the MSMEDF, it was discovered that the banks lend their own funds to the small business owners at between 25 per cent and 30 per cent.


A financial analyst and Chief Executive Officer, Highcap Securities Limited, Mr. David Adonri, stated that there is an urgent need to identify where the problem is coming from.

According to Adonri, who is also a stockbroker, considering the important role played by MSMEs in the economy, it would be surprising if the CBN is withholding the Fund, especially as access to funds at low cost and inadequate volume are major challenges faced by MSMEs.

“Concerning the huge portion of the MSMEDF yet to be disbursed; is it that the CBN failed to disburse the funds to the banks for onward lending or that the banks have diverted the funds to the foreign exchange market or money market?” he queried.

He stated that if the banks have cornered the money and diverted it to unauthorized uses it would amount to betrayal of confidence warranting imposition of appropriate sanctions.

He said availability of the fund to MSMEs would increase their capacity to create wealth for the economy and generation of productive employment.

“So many schemes designed by government to assist MSMEs have been failures. Notable among them are SMEEIS and SMEDAN funds. The time has come for new strategies to be formulated on the best ways to assist MSMEs financially. Current methods are not effective,” he noted.


However, the CBN spokesperson, Isaac Okoroafor, denied that there was any friction between the apex bank and SMEDAN, stating that over the years, it had had series of engagements with SMEDAN.

He said, “It is important to state clearly that there was no controversy between the CBN and SMEDAN. SMEDAN has a different mandate from the CBN. SMEDAN focuses on providing business development services, while the CBN as part of its engagement with stakeholders, have had series of engagements with SMEDAN, which are ongoing.”

Also, confirming the lack of proper feasibility studies by the CBN, Mr. Femi Egbesola, National President of the Association of Small Business Owners of Nigeria (ASBON) said the Fund is very difficult to access because the conditions attached to it are so stringent that most MSMEs cannot meet up with them.

He lamented that more than half of the fund had not been accessed, adding that “If you have a fund of N200 billion for MSMEs and less than N100 billion has been accessed for a period of more than four years, that means it is not a success.”

However, in its response to the inaccessibility of the fund, the CBN spokesman said this claim cannot be sustained given the fact that N76.334 billion had already been disbursed.

Okoroafor stated that while the CBN recognises the need to make funds readily available, a number of challenges remain. These include issues of financial literacy and inability of prospective borrowers to develop bankable business plans, amongst others, which he said the bank had gone ahead to address.

He said, “The CBN has gone ahead to address these issues through the establishment of Entrepreneurship Development Centres (EDCs) in the six geo-political zones to address these capacity gaps.

“Series of stakeholder consultations were held prior to the introduction of the programme in 2013. The CBN has since 2015 embarked on sensitization programme to cover all the states of the Federation, and in 2017 alone, 15 states have been visited for the sensitization campaign, bringing the total number of states visited to about 32.”

However, he declared that the guideline is clear as to the process of accessing the loan, noting that any additional requirements being demanded as alleged, is not from the CBN.


Despite claims by the CBN, Prince Saviour Iche, President, Association of Micro Entrepreneurs of Nigeria (AMEN) challenged the CBN and the BoI to publish the names of the beneficiaries of the Fund, while he called on the Economic and Financial Crimes Commission (EFCC) to probe the BoI.

He said, “Let them come out and tell us the beneficiaries, because some companies that are not registered are collecting money because somebody is there who knows how to exploit the system. That is the problem we have.

“If the entire MSMEs groups are saying that they are not benefitting from the Fund, it means something is wrong. We the MSMEs groups meet at our level and we discuss; none of us have collected the money. Then who is collecting the money. That is the big question that we don’t know.”


In the case of accessing funds from the BOI, Iche claimed that if any MSME tried to access the Fund, it would not collect a dime.

“But if you go through the ‘other channel’ which they have, you can get the money quickly. They have other channels. Bank of Industry staffs have a link, whereby if you need this money, they would direct you to where you can get it at 25 per cent, compared to the single digit interest rate proposed for the Fund. It is the same CBN money but they diverted it,” he alleged.

He alleged that the numerous conditions put forward by the CBN and the participating financial institutions (PFI) are indirect ways in which the authorities are telling the MSMEs that the money is not meant for them.


However, in his reaction to claims that politicians are subverting the programme, Okoroafor said the CBN is not unmindful that the programme could be open to abuses, but noted that the bank had put in place measures to ring-fence the facility from undue political interference.

He said, “These structures are constantly evaluated to plug loopholes that may emerge as we operate the scheme.  For example: there are CBN Development Finance Officers in every state of the federation that provides updates on MSMEDF disbursement activities in the state.

“The guideline provides conditions to be met by states government before they can access fund, and the state signs a memorandum of understanding on the use of the Fund.”

However, despite the widespread complaints of inaccessibility, Okoroafor stated that the guidelines are very clear as to the process of accessing the loan, stating that any additional requirements being demanded as alleged, is not from the CBN.

Furthermore, he noted that the CBN normally conducts periodic and continuous evaluation on the extent and performance of the Fund, which has helped in evolving strategies to strengthen the Fund.

For example, he said the spread for the PFIs was increased from initial interest rate of six per cent to seven per cent, as well as reducing the collateral requirements for their participation.

“Also, based on the feedback from evaluations, he said the CBN had reviewed the guideline to enable ease of accessibility. The CBN will continue to engage with stakeholders on how to improve on the Fund” he added.


Reacting on claims that it is frustrating MSMEs from accessing the loans, an official in the Corporate Communications department of the Bank of Industry, BoI, who asked not to be named, said the Fund is not domiciled with the BoI and that the inability of MSMEs to access the Fund through it was because it had also not been able to access the Fund.

She said, “Nobody can tell us to give them money, because we also have tried, we have not gotten the fund so they cannot tell us to go and bring money that is managed by CBN; it does not work that way.”

She explained that the N220 billion MSMEDF was like a window that the CBN opened for the BoI and other commercial banks in the country to access on behalf of MSMEs.

“There is a guideline and criteria that CBN has brought out. If any MSME approach the BoI now and say it wants to have access to the MSME fund; if it does not meet the requirements that CBN had stated, we would not present the request to the CBN, because there is no way we can go to them and say we need this money, without the guidelines being met; it is not possible,” she noted.


In the guidelines for setting up the MSMEDF, the CBN said 10 per cent of the Fund is devoted to developmental objectives such as grants, capacity building and administrative costs while ninety (90) percent commercial component would be released to Participating Financial Institutions (PFIs) at two per cent for on-lending to MSMEs at a maximum interest rate of nine per cent per annum.

To achieve the provision which stipulated that women’s access to financial services should increase by at least 15 per cent annually to eliminate gender disparity, the CBN earmarked 60 per cent of the Fund for providing financial services to women.

In addition, it stated that two per cent of the wholesale component of the Fund shall go to economically active persons with disabilities, excluding mental disabilities.

The CBN said eligible activities to be financed include agricultural value chain, services, cottage industries, artisans, trade and commerce and any income generating business as may be prescribed by the CBN from time to time.

The broad objective of the Fund, the CBN said, was to channel low interest funds to the MSME sub-sector of the Nigerian economy through PFIs to: enhance access by MSMEs to financial services; increase productivity and output of microenterprises; increase employment and create wealth; and engender inclusive growth.

Listing the benefits of the MSMEDF, the CBN said the Developmental Components would be utilized for capacity building of staff of PFIs, research and provision of other financial services infrastructure.

It also stated that the long term single digit loans at nine per cent per annum had resulted in reduced cost of borrowing which will impact positively on the earnings of the MSMEs, adding that the Fund will provide liquidity for the sub-sector and result in general improvement of the financial system stability, while it would ensure job creation.

However, with the myriads of complaints from the expected beneficiaries of the Fund, it is becoming very obvious that many of these objectives are yet to be achieved, why the expected benefits are still far from seen.

With its disbursement of N76.3 billion of the total Fund, a large chunk of the money it appears, is either still sitting in its safes or had been diverted to other purposes, which would require an investigation by the anti-corruption agencies to unravel.


To ensure the Fund achieves its objective, the Director General of the Warri Chamber of Commerce, Industry, Mines and Agriculture, WACCIMA, Mrs. Ese Emevor, noted that taking steps to address perceived lopsidedness in accessing the funds would help address issues of restiveness among others.



    She also called on governors in the southern part of the country to make efforts in ensuring that MSMEs in the region, especially through the use of approved consultants, are well coordinated to access such funds.

    Again, she said the Central Bank of Nigeria and other authorities involved should conduct an evaluation of the entire process so as to identify the factors hindering the disbursement of the funds and the inability of MSMEs to access the funds.

    Emevor asked that the CBN look at other ways to ensure that genuine small businesses meet up with the requirements for the fund.

    This investigation was supported by the John D. and Catherine T. MacArthur Foundation and the International Centre for Investigative Reporting.

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