THE Manufacturers Association of Nigeria (MAN) has said that its members hardly access many intervention funds set up by the Central Bank of  Nigeria (CBN). 

In a statement signed by Segun Ajayi-Kadir, director-general of MAN, on Thursday, the group said despite the availability of several funding windows, manufacturers still suffered the dual challenges of scarcity of investible funds high lending rate.

“Generally, MAN observed through feedbacks from members and interaction with the CBN on several occasions that these facilities and funds have not been adequately accessible to manufacturers due mainly to the prevarication of the participating financial institutions (PFIs) and deposit money banks (DMBs),” the statement made available to The ICIR said.

MAN cited an example with CBN’s N1 Trillion COVID-19 Stimulus for Manufacturing and Import Substitution, which commenced in 2020, saying that only 76 companies had received 300 billion naira, translating to 30 percent of the total.

The N1 Trillion COVID-19 Stimulusor Manufacturing and Import Substitution was instituted in 2020 to sustain manufacturing and improve the output of the sector.  It was to be managed by PFIs, which included commercial banks and development finance institutions.

While acknowledging the excellent initiative of the CBN in setting up the N1 trillion COVID-19 facility, MAN noted that most of its members who applied were not able to get it.

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The group said that the various CBN funding windows were commendable, but poor implementation hindered attaining the noble objectives of these funds.

It suggested that the CBN’s strict enforcement should be strict to ensure that the PFIs and DMBs grant transparent and effective access to their intervention funds to manufacturers. “This is especially concerning the N1trillion manufacturing and import substitution facility; the N220 billion Micro, Small and Medium Enterprises Development Fund (MSMED), the 100 billion Health Care and Pharmaceuticals Support Funds and N300 billion Real Sector Support Facility (RSSF).”

It also recommended specific guidelines and timelines for effective and complete disbursement of the intervention funds, saying that there should also be a periodic report of the status of implementation to the CBN to ensure progressive monitoring. It further recommended that PFIs and DMBs who failed to diligently and timeously disburse all the funds allocated be sanctioned.

It likewise urged the CBN to be part of the monitoring process.

Naira 4 Dollar Scheme

On the Naira 4 Dollar Scheme recently introduced by the CBN, the association said the scheme should encourage Nigerians working abroad to remit more
into Nigeria and improve the forex inflow. It noted, however, that the apex bank must dimension the inflows, which had historically been 70 percent for family support and 30 percent for other purposes, including real estate, which carried the greater part.

“To yield more of the anticipated inflow for investment in productive activities, the CBN would have to work with the banks and other relevant government agencies to initiate portfolios and measures to point the remitters in that direction,” MAN counselled.

There was also a need to consider where the domestic foreign exchange-earners stood within the context of this scheme.

“For instance, could a manufacturer who exports his product and repatriates his dollar profit get his money in dollars and also benefit from the Dollar 4 Naira Scheme? This way, you can guarantee almost a 100 percent re-investment in production and reap all the attendant benefits and even partly make up for the losses incurred due to the poor implementation of the Export Expansion Grant (EEG). The average manufacturer who is confronted with a lot of infrastructure and macroeconomic challenges is eminently qualified, if not more qualified, to benefit from such a scheme.”

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The liquidity challenge 

Nigerian manufacturers face many challenges, particularly lack the liquidity to expand operations; Monetary Policy Rate (MPR), which is the benchmark interest rate, is 11.5 percent currently. Still, banks charge as high as 20-30 percent, according to the Lagos Chamber of Commerce and Industry (LCCI).

In 2020, the Interest rate charged to manufacturers averaged 20.75 per cent as against 21.25 percent recorded in 2019, MAN said in a recent economic review.

The cost of funds in Nigeria is high compared with many Sub-Saharan African (SSA) countries. According to their central banks, Nigeria’s MPR is higher when compared with South Africa’s 3.5 percent, Kenya’s 7.5 percent, and Zambia’s 8 percent. In Ethiopia, another SSA nation, the benchmark interest rate is estimated at 9 percent, according to the National Bank of Ethiopia. Botswana’s rate is at 3.75 percent, while  Uganda’s is 7 percent. Similarly, while Namibia’s benchmark rate is 7.75 percent, Mali’s is 9.12 percent.

Ibrahim Maigari Ahmadu, the founder of Liverstock247.com, Nigeria’s first livestock online marketing and listing platform, said the interest rate in banks was high, just as there were many gridlocks to access funds.

Manufacturers identify dollar scarcity, cost of funds as biggest business impediments

“Nigerian commercial banks are risk-averse. They put so many bottlenecks on the way when you want to access funds,” he said.

“Interest rate is very high, which is a major inhibiting factor. Collaterisation is structured to knock you out,” he added.

CBN’s position

The CBN has severally threatened to punish commercial banks not disbursing intervention funds or lending to the real sector. In September 2020, it  threatened to sanction banks not lending to farmers. The previous year, the apex bank had debited 499 billion naira from accounts of 12 banks not meeting Loan-to-Deposit Ratio (LDR) of 60 percent. The LDR was later raised to 65 percent and banks that did not meet the threshold were sanctioned. However, manufacturers believe the  apex bank should move a notch further by strictly monitoring intervention funds domiciled in commercial banks.