Afrikan Heroes

Owners of businesses in the Nigerian creative industry now have access to loans as high as ₦500,000,000 (about $1.4 million). This is according to Nigeria’s Central Bank’s recent disclosure.

The Creative Industries That Are Covered:

According to the CBN, which is collaborating with the body of top officers of deposit banks in Nigeria (the Banker’s Committee), the Creative Industry Financing Initiative is targeted at:

1. Businesses in the fashion (including designing) industry
2. Businesses in the Information Technology (including e-commerce, online payment solutions, software engineering etc.)
3. Businesses in the Nigerian movie industry (including movie producers, movie distributors)
4. Business in the Nigerian music industry (whether as record labels, music artistes, etc.)

Maximum Amounts Each of These Businesses May Get

The businesses may get up to the following amount:

1. A student of Software Engineering anywhere in Nigeria may get up to ₦3 million ($ 8,294) to boost his education.
2. Movie Production businesses may get a maximum of ₦30 million ($82,943) to boost their businesses.
3. Movie distribution businesses may get up to ₦500 million ( $1.4 million)
4. Businesses in the Nigerian Fashion and Information Technology can also get funds to cover their rental/service fees (the exact amounts were not specified)
5. Music Businesses may also get funds to cover their training fees, equipment fees, and rental/service fees.(The exact amount is however not specified. It also appears that the funds are not extended to businesses of production of music, and other related music roles)

Interest Rate and Dates of Repayment

The new Initiative pegs on any of the amount borrowed, the interest rate of 9 percent per year, including all charges. This is below the national lending rate of 13.5%, meaning that businesses that accessed loans through the Creative Industry Financing Initiative would be 4.3% more profitable than would be the case if they go through Nigerian commercial banks.

The Repayment Schedule for Each of the Loaned Amounts Include:

Loan under each category would be due for repayment as follows:

1. For Software Engineering Student Loan, it is a maximum of three years (This could be criticized because Nigerian school system runs for a full four-year academic calendar period, and the time may be too short to begin to reap the benefits of such loans, even if a lesser program is subscribed for).
3. For Movie Production and Distribution, it is a maximum of ten years.
4. For Fashion, Information Technology (IT) and Music, it is a maximum of ten year
5. Normal lending period can be as long as 36 months (three years) or more, depending on the loan agreement.

How To Procure The Loan

The Central Bank of Nigeria’s disclosure hints that any business in any of these categories desiring to procure the loan would need to do the following:

1. Prepare its business plan or statement on how much is needed for the business. However, it would also be noted that feasibility reports of the intended projects may be required.
2. Proceed to any commercial bank or the applicable financial institutions to access the fund. Hence, all commercial banks in Nigeria are expected to be part of the program.
3. In an application to the bank, state how much is needed to fund the business. The application should be made pursuant to the CBN Creative Industry Financing Initiative.
4. The commercial bank will discuss the request and provide the business owner the money.

What Would Be Needed To Discuss The Request Further?

• The circular is however silent about whether collateral is needed for the loan. Banks are however expected to be tough to some degree since they bear the risk of bad loan performance. So, businesses should expect to pass through some tough risk management procedures to be able to access the loans.
• Most Nigerian banks require, on minimum, the following documents in order to be able to process the loan application: Application letter; Duly completed Retail Loan Application Form; Proforma Invoice from the banks’ approved vendors; Business Profile; Current utility bill; Latest Audited Account; Six (6) Months Bank Statement; Other KYC requirements for opening a corporate or business account.

It could be noted however that the loans may be targeted at existing and profitable businesses, with good balance sheets, and not new businesses with no financial track records, except in exceptional circumstances.

Why Focus Is On the Creative Industry

The CBN appears to have focused on the creative industry for the following strategic reasons:

• The film industry sector contributed 2.3 per cent (N239 billion) of Nigeria’s Gross Domestic Product (GDP) in 2016 alone.
• In the same year, Nigeria’s music industry grew by 9 per cent to reach a value of 39 million dollars, and is set to grow by 13.4 per cent CAGR by 2021, with an estimated worth of about 73 million dollars.
•  Information Technology: The gaming industry in Nigeria, according to a PwC study on gaming, benefited from a broadening customer base, mostly the large and youthful population, with the Nigeria’s video game industry’s value put at $150 million USD as at 2016. It is also estimated that mobile gaming in Nigeria would surpass $147 million USD by 2020

This writer advises that you check out your local banker in Nigeria for more information on how to access the loan.

Charles Rapulu Udoh

Charles Rapulu Udoh a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organisations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution and data analytics both in Nigeria and across the world.