Analysts stress household creditworthiness as NIRSAL struggles to recover N50bn in loans

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The solvency of small and medium-sized enterprises (SMEs) and households remains a critical issue for Nigeria’s banking sector, analysts at United Capital Research said.

The analysts said this in view of the difficulties faced by the management of Nigeria’s microfinance bank Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL) as they try to recover 50.0 billion naira obtained by several entrepreneurs and households across the country during the covid19 pandemic.

Unsurprisingly, analysts suggest that many people view these response funds as “free money” with no obligation to repay.

Last week, the management of NIRSAL Microfinance Bank, through their official social media handles, called for the repayment of loans disbursed from the Central Bank of Nigeria’s COVID-19 Targeted Credit Facility (TCF) (CBN) worth N50.0 billion. This follows increasing cases of inability of beneficiaries of CBN intervention to repay loans received under various schemes.

Following the COVID-19 outbreak in Nigeria in March 2020, which wreaked havoc on households, businesses and economic activities in general, the CBN introduced the N50.0 billion Targeted Credit Facility in as part of its recovery plan to help mitigate the impact of the pandemic on the economy and to support households, micro, small and medium-sized enterprises (MSMEs) that have been affected by the pandemic.

The loans were disbursed by the CBN through the NIRSAL Microfinance Bank, with the facility receiving over 80,000 applications.

When the facility was structured, it was to last a maximum of three years and the repayment would be made in tranches with interest rates varying between 5.0% and 9.0% depending on the purpose of the loan.

Also, in an effort to avoid some of the ills of previous response facilities, recipients were required to post collateral with other stringent conditions to ensure repayment.

“In our view, while we expect these loans to be recoupable via posted collateral, we retain reservations about existing structures of monetary interventions.

“Thus, we think the CBN may need to focus its efforts on targeting more organized and formal borrowers with its intervention programs.

“That said, we remain of the view that the Nigerian economy needs more than monetary interventions to return to years of accelerated growth rates,” United Capital analysts said.

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