MSMEs need N48 trillion to boost Nigerian economy –Emefiele

February 11th, 2019

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.’’

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