By Chika Otuchikere
The Governor of the Central Bank of Nigeria (CBN) Mr. Godwin Emefiele, has revealed that Micro, Small and Medium Enterprises (MSMEs) in Nigeria need funding in excess of N48 trillion to boost the economy.
Emefiele made this known Monday, during his address at a workshop for Judges on the “Secured Transaction in Moveable Assets Act”, where he affirmed that poor funding of the MSMEs directly translates to weaker economic performance.
The CBN governor who harped on the crucial role of the MSMEs in the growth of any economy, said it was the quest for an inclusive economic growth and development that informed the CBN and International Finance Corporation (IFC) and the World Bank Group to establish the Secured Transactions and National Collateral Registry.
According to him, “the core objective of this initiative is to improve access to credit for underserved Nigerians and to reduce the inherence of information asymmetry in the credit market. The Registry also allows Nigerians seeking to access credit to use their movable assets as collateral”.
Emefiele disclosed that the National Collateral Registry would increase lending by financial institutions to MSMEs to over N1.23 trillion, saying that the Secured Transactions in Movable Assets Act, 2017 allows borrowers to seek credit from any financial institution, leveraging assets like jewelries, farm products and vehicles as collateral.
His words, “Nigeria’s quest for inclusive economic growth and development would be futile if we fail to adequately ease access to finance to the Micro, Small and Medium Enterprises (MSMEs), which we know are vulnerable today, but remain the catalysts of economic growth in Nigeria.
“A recent survey showed that over 17.5 million MSMEs operate in Nigeria, accounting for a significant portion of our economy. The same survey indicated that the most commonly cited challenge beleaguering these enterprises is financing bottlenecks. With an estimated financing gap in excess of N48 trillion for these enterprises and their significant share in our Gross Domestic Product (GDP), poor funding directly translates to weaker economic performance.
“Support for MSMEs financing is more critical now than ever, given the need to boost Nigeria’s long-term growth trajectory since exiting recession in the second quarter of 2017. In real terms, our GDP grew by 1.8 percent (year-on-year) in the third quarter of 2018, compared with 1.2 percent in the corresponding period of 2017.
“As a matter of fact, the observed growth was largely driven by continued improvements in non-oil sector activities, such as agriculture, information and technology, manufacturing, transportation and storage, trade, and other services.
“As you may already know, about 96 percent of enterprises operating within these sectors are MSMEs. These enterprises account for an estimated 48 percent of Nigeria’s nominal GDP, 7 percent of our export, and about 84 percent of workforce. Undeniably, MSMEs contributes enormously to job creation, utilization of domestic resources, income generation, and improvement of local technology.
“MSMEs are typically deemed risk-laden, plagued with high mortality rate, and often lacking adequate collaterals acceptable for conventional credit. Accordingly, the estimated US$158 billion or N48.3 trillion financing gap which characterises MSMEs in Nigeria reflects the risk-driven apathy of financial intermediaries to MSME lending (IFC, 2017).
“These statistics bring to fore the urgent need for all stakeholders to synergize, support and promote the development of MSMEs through improved access to affordable finance. This is consistent with the Federal Government’s inclusive economic growth and development aspirations”.
The acting Chief Justice of Nigeria, Justice Ibrahim Muhammad, who gave an address at the workshop whose theme was “Leveraging Moveable Assets for Credit Delivery in Nigeria: Legal and Regulatory Framework”, pledged that the judges would interpret and apply the Secured Transactions in Movable Assets Act, 2017 in their judgments.
“The workshop is aimed at exploring effective means of accessing finance by the use of all forms of assets capable of being moved or transferred as collateral.’’