MICROCAPITAL STORY: Federal Government of Nigeria Disburses Microloans Worth Naira 81 million (approximately $543k) to Small and Medium Enterprises (SMEs) in Nigeria

The Federal Government of Nigeria disbursed loans worth Naira 81 million (approximately USD 543k) to encourage employment generation in the country. According to a press release on AllAfrica.com, these loans were disbursed in the capital city of Ajuba and chaired by the Secretary to the Government of the Federation (SGF), Alhaji Yayale Ahmed. The loan drawn was from the Enterprises Creation Fund which was launched by The National Directorate of Employment (NDE) in partnership with the Nigerian Agricultural Cooperative and Rural Development Bank (NACRDB). According to the release, the partnership between NDE and NACRDB was established in 2004. The loans were provided as soft loans to 370 beneficiaries to help them establish small business enterprises in keeping with the Directorate’s efforts to create and promote small businesses. Soft loans are loans that have extended grace periods and below-market rates of interest. No information on the interest rate charged for these loans is available.

Speaking at the event, Mr. Ahmed called for the people of Nigeria to support the Government in its efforts to transform the Nigerian economy into ‘one of the leading first economies of the world’ by the year 2020. He stressed on the importance of the seven-point agenda laid down by the President of Nigeria, Umaru Yar’Adua as a means to achieving Nigeria’s goal to transform the economy by 2020. According to the World Bank, roughly two out of every three Nigerians live below the poverty line. The 2008 Human Development survey of the United Nations ranks Nigeria among the 25 poorest countries, measured on the basis of standard of living, life expectancy and literacy.

The President’s seven point agenda focuses on issues and reforms needed in Nigeria specifically in the areas of power and energy, food security, wealth creation, transportation, land reforms, security and education. Presiding over the event, the Secretary to the Government assured the people that the Government would continue to implement programs that would help ensure that jobs are created. So far, only 12 out of 36 Nigerian States contribute to microfinance activities, as reported in this MicroCapital story. In this regard, the Central Bank of Nigeria (CBN) has taken several measures to ensure a stable financial system is available to the poor. This MicroCapital story provides information on the efforts of the CBN to regulate the activities of all informal financial institutions and bring them under its purview.

Under the collaboration for the Enterprise Creation Fund, the NDE conducts skill training for unemployed youth as well as trains graduates in entrepreneurship development while the NACRDB provides loans to the beneficiaries. All graduated trainees under the NDE’s skills acquisition programs as well as unemployed graduates of higher institutions who have benefited from development schemes of the NDE are eligible to draw from the Enterprise Creation Fund. Mr. Ahmed commended the leadership and management of NDE and NACRDB for their collaborative efforts to disburse the loans. He also called for the two agencies to closely monitor the progress of the trainees with a view to ensuring that the funds provided are applied judiciously.

NACRDB is dedicated primarily to agricultural financing at both the micro and macro levels, as well as micro financing of small and medium scale enterprises. The Bank is a registered limited liability company that is wholly owned by the Government of the Federal Republic of Nigeria with the Federal Ministry of Finance owning 60 percent of the share capital and the Central Bank of Nigeria 40 percent. The Managing Director of the NACRDB, Mallam Babare Girei, said that since the inception of the fund in 2004 loans worth approximately USD 670 k have been disbursed to 770 beneficiaries in the 36 states of the federation.

By Bharathi Ram, Research Assistant

Additional Resources:

AllAfrica News: http://allafrica.com/stories/200901190696.html

MicroCapital.org:

Dec 23, 2008: KMFB disburses loans to Nigerians

Nov 3, 2008: Only 12 out of 36 States contribute to Microfinance Activities

United Nations: Human Development Index