The Central Bank of Nigeria (CBN) recently released the guidelines that must be followed by individuals and businesses seeking to access the ₦50 billion ($139 million) targeted loan facility for households and Small and Medium Enterprises that are badly hit by COVID-19. Although there have been complaints from some quarters about the management of the fund, the central bank has further directed that there is no need to present any guarantor to be able to obtain the loan facility.

“All successful Household and SME applicants who have submitted their account details for the CBN ₦50bn COVID-19 Targeted Credit Facility should expect their accounts to be credited within 48 hours of such submission, otherwise they should call 09010026900,” the bank stated in its most recent press release.

What Are The Requirements For The Loan?

To be able to apply to obtain the loan, every SME applicant must show, pursuant to the guidelines issued late March, 2020 ( and several other modifications), that:

• That the business is an existing enterprise based in Nigeria (by presenting documents of registration of business or company as the case may be); OR that even though it has not commenced business, it has bankable plans to take advantage of opportunities arising from the COVID-19 pandemic but is short of adequate funding. However, it is highly improbable for businesses which have not commenced business already to obtain the credit facility because the CBN recently scrapped the requirement of business plan for purposes of procuring the loan. This is coupled also by the requirement of working capital discussed below. Nevertheless, such businesses can still try out their chances. 
• That the business operates in the following sectors: agriculture; hospitality (accommodation, hotel and food services); health (pharmaceuticals and medical supplies); and airline service providers; manufacturing/value addition; trading and any other income-generating activities as may be prescribed by the CBN.
• That the business entity has been adversely affected as a result of the pandemic for businesses that are already in business before the Coronavirus pandemic. In determining whether your business entity’s account balance has been adversely affected by the pandemic as to qualify for the loan, CBN says your present year’s account balance (working capital) shall be, at most, 25% of the average of the previous 3 years’ annual turnover. In simpler terms, assuming your total annual turnover for the past three years is ₦900,000 and your current account balance is ₦150,000, you may not be considered for the loan because the average of the total turnover for the past three years (₦900,000) is ₦300,000 and CBN requires your business’ current working capital to be a maximum of 25% of the average of the working capital for the past three years. ₦75,000 is the 25% of ₦300,000 — the maximum working capital percentage required to process the loan. However, where the enterprise is not up to 3 years in operation, 25% of the previous year’s turnover will suffice.
• The previous point implies that you must present your business’ financial statements for the past three years, as well as have, handy, tax clearance certificates for the said years. 
• The highest amount small and medium scale businesses can ever get under the scheme is ₦25m ($64,628); however the loan amount desired by the business entity would depend on the activity, cash-flow and industry size of the business.
• No business plan is required to be able to procure the loan, apart from filling in the appropriate loan forms issued by NIRSAL. This is based on the CBN’s recent directive.

How Much Is Charged As Interest On The Loan And Do I Need Any Guarantor And Collateral To Procure The Loan?

Interest rate

The interest rate on this loan is five percent (5) per annum, effective March 1, 2020. This is because of the CBN governor Godwin Emefiele’s earlier announcement of an immediate cut on interest rates of all applicable CBN intervention facilities from its former nine per cent (9%) following the outbreak of the COVID-19 pandemic in middle March, 2020. This also means that the interest on the facility shall revert to 9% per annum (all charges inclusive) as from 1st March 2021.

However, it should be noted that the Central Bank also gave further extension of the period of grace for the repayment of the loans by one year on all principal facilities, particularly intervention loans, effective March 1, 2020.

The combined implication of these is that the business entity will not start repaying the principal sum borrowed until after March 1, 2021, although it is still going to pay 5% per annum interest rate (all charges inclusive) on the facility. However, it should be further noted that the total duration of the loan shall not exceed 3 years, including the first year of the moratorium (that is, suspension of repayment of the principal sum) since the whole COVID-19 loan scheme will come to an end 31st December 2024. The NIRSAL Microfinance Bank is also given the power to work out a repayment schedule/work plan, convenient to it, at the application stage of the loan request.

Guarantor And Collateral

Guarantor

By the CBN’s latest modification to its earlier guidelines, SMEs applying for the ₦50 billion COVID-19 Targeted Credit Facility will not be required to provide guarantors before they can access the credit facility.

Collateral

It is entirely the decision of the NIRSAL Microfinance Bank which oversees the management of the facility to decide what the collateral for each facility would be. However, the range of collateral the bank may choose from include any one or more of the following: 

i. Moveable asset(s) duly registered on the National Collateral Registry (NCR). 

ii. Simple deposit of title documents, in perfectible state 

iii. Deed of Debenture (for stocks), in perfectible state 

iv. Irrevocable domiciliation of proceeds 

ii. Life Insurance of the Key-Man, with NIRSAL MicroFinance Bank noted as the First Loss Payee.

viii. Comprehensive Insurance over the asset. 

Which Bank Gives The Loan?

By the terms of the guidelines, it is NIRSAL Microfinance Bank Plc that processes loan requests under the COVID-19 Targeted Credit Facility. So, all loan applications should be directed to the bank. The loan requests are submitted to NIRSAL Microfinance Bank with Bank Verification Number (BVN) with business registration documents stated above. NIRSAL Microfinance Bank appraises the applications and conducts due diligence on the application and, upon satisfaction, forwards it to the CBN which reviews and gives final approval for disbursement from the Micro, Small and Medium Enterprises Development Fund to NIRSAL for on-lending to applicants.

Applications may be initiated online by following this link: https://covid19.nmfb.com.ng/

Further enquiries may be made by contacting 09010026900–7 [Available: Monday to Friday (8am — 5pm)]; or by emailing covid19@nmfb.com.ng.

Are Applications Fees Paid Before Processing Loan Requests?

No! This is contained in one of CBN’s recent assurances. This was supposed to debunk an online article with caption “Central Bank of Nigeria Demands ₦10,000 from Small Business Owners Applying for COVID-19 Intervention Fund,” purportedly published by @SaharaReporters, on April 13, 2020. Consequently, there is no application fee for processing any such COVID-19 loan facility in Nigeria.

What You Should Do If Your Application For The Loan Has Been Declared Successful But You Are Yet To Be Credited

Successful applicants in Nigeria who are yet to receive the COVID-19 loan have been advised to visit here. Such applicants have also been notified to submit “their account details in any bank of their choice.”

However, the CBN has assured that all applicants to the ₦50 billion credit facility, who have successfully completed the application processes and submitted their account details, should expect credit alerts 48 hours afterwards. If an applicant does not receive credit alert after 48 hours of submitting their account details, such an applicant should contact the CBN by calling 09010026900.

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions.
He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance.
He is also an award-winning writer