The growth and survival of the Micro Small and Medium Enterprises in the country are faced with financing bottlenecks, and legal implications with an estimated financing gap in excess of N48 trillion.
According to the Central Bank of Nigeria, it is imperative for the authorities in the industry to facilitate the perfection of security interest in movable assets for individuals and MSMEs, with a focus on increasing access to finance, for small businesses.
The apex bank noted that there are over 17.5 million MSMEs operating in Nigeria, which account for a substantial portion of the nation’s economy, despite their significant share in the nation’s Gross Domestic Product.
Notably, a World Bank report also suggested that only a paltry 31 per cent of MSMEs in Nigeria currently have a loan with a bank or a microfinance institution, and that personal savings and business income are the most important sources of capital for financing businesses.
At the same time, 82 per cent of financial institutions surveyed in Nigeria complained that inadequate collateral is the most common challenge in granting loans, a problem that had been solved in neighbouring African countries with lesser economic potentials.
In smaller countries, such as Ghana and Liberia, collateral registries established with the support of the World Bank Group have already proved to have a catalytic effect on the economies, it was
gathered.
Elsa Rodriguez, of the Bank Group’s project on ensuring access to finance for small businesses, stated that in Ghana, the collateral registry has facilitated $1.3 billion in financing for the small-scale business sector, since it was established in 2010, and $12 billion in total financing for the business sector, using movable assets as collateral.
Rodriguez said a modern online collateral registry that was launched by the Central Bank of Nigeria in May 2016, with the support of the World Bank Group, had not only improved access to finance for MSMEs and more broadly the financial inclusion agenda in Nigeria, but that it was also helping commercial banks to increase operational profit in the country.
He explained that MSMEs in Nigeria employed about 84 per cent workforce, accounting for seven percent of its export. Yet, the small businesses continue to face structural drawbacks.
He added that Nigeria remained the largest economy in sub-Saharan Africa, and a focus-country for the Universal Financial Access by 2020 initiative.
The Governor of the Central Bank of Nigeria, Godwin Emefiele, however, stated that poor funding directly translates to weaker economic performance, and that the Nigerian economy could, indeed, perform better to manifest in inclusive
growth.
“Already, lending banks operating in Nigeria have registered interest on movable assets worth N1.23 trillion, $1.14 billion and €6.08 million, through 41,408 financing statements,” he noted.
Emefiele added that the achievement underscored the potential of movable assets as collateral to enhance access to credit, and hence, a resolve to drive its effective implementation.
“There is lack of acceptable collateral and the inherent information asymmetries in Nigeria. MSMEs are typically deemed risk-laden, plagued with high mortality rate, and often lacking adequate collaterals acceptable for conventional credit” he
said.
He remarked that the estimated $158 billion or N48.3 trillion financing gap which characterises MSMEs in Nigeria reflects the risk-driven apathy of financial intermediaries to MSME lending, while a little achievement has been recorded in the use of the business support initiative. “The fact is that most of the supposed beneficiaries are either totally not aware of its existence or ignorant of its operations.”
That explained why the CBN, in collaboration with the National Collateral Registry of Nigeria organised the first national workshop for judicial officers on secured transactions in movable assets’ financing law in Nigeria, it was gathered.
The workshop, tagged, “Leveraging movable assets for credit delivery in Nigeria: legal and regulatory framework”, was organised for law officers in Abuja
recently.
The CBN also said it remained committed to the sustainable economic growth of Nigeria and would continue to support the development of necessary financial sector’s infrastructure.
The Collateral Registry system is centralised web-based software designed and developed, based on international standards that contain information relating to security interests in movable property, included in financing statements submitted by registered users.
