Central Bank of Nigeria inks deal to set up credit fund for small businesses

The governor of the Central Bank of Nigeria (CBN) has come under fire for not doing enough to ensure that the country's small businesses have sufficient access to credit, shortly after inking a deal to set up a fund devoted to the task.

Godwin Emefiele, who announced a raft of measures to promote economic development when he took office in June, was on Monday accused by the Centre for Social Justice, an Abuja-based non-profit organisation, of moving too slowly on his "earlier promise" to reduce lending rates for small and medium-sized enterprises (SMEs).

On Thursday, Emefiele signed a memorandum of understanding with Nigeria's state governments on the establishment of a $1.4 billion development fund, which he described as an innovative way of improving [small businesses'] access to finance, shoring up their potential for job creation, and enabling them reduce poverty within the country".

"[SMEs] are globally recognised as the critical engines of economic growth due to their potential to create jobs, boost production, generate income and reduce poverty," Emefiele said. "Despite this recognition, [they] do not have the adequate financing needed to play this pivotal role in our development trajectory.

The governor, who estimated the financing gap of Nigeria's small businesses to be around 10 trillion naira ($60 billion), added: "This fund is directly in conformity with my resolve to create a professional and people-centred central bank that will act as a financial catalyst for job creation and inclusive economic growth".

The development fund, Emefiele said, will allow state governments to access up to two billion naira ($12.5 billion) each, which subsequently will be lent to SMEs through commercial banks that will be required to submit an analysis of the fund's "social impacts".

He added the CBN would undertake "regular on and offsite checks" to ensure funds do not end up in the wrong people's pockets.

"[Our] objective is to ensure that these funds get to people at the very bottom of our social pyramid at single-digit interest rates," Emefiele said.