The Covid-19 pandemic exerted enormous economic challenges on Nigeria, with 42 per cent of people who were working before March 2020, especially those in the hospitality and service industry no longer doing so, the World Bank has revealed.
The Senior Financial Sector Specialist, World Bank, Mr. Ahmed Rostom, who described the development as disturbing during a webinar series of the Development Bank of Nigeria (DBN) with the theme: ‘Risk Sharing: A Key Driver for Increased Financial Access and Economic Development for MSMEs,’ said the drop in the workforce followed surveys carried out by the bank between April and March 2020.
Panelists at the event noted that current realities in Nigeria, including the pandemic had brought to light the urgent need for additional support in alleviating the financial constraints faced by Micro, Small and Medium Scale Enterprises (MSMEs).
The panelists included the Chief Executive Officer of InfraCredit, Mr. Chinua Azubike; Group Head, Emerging Business, Access Bank Plc, Mrs. Ayodele Olojode; Senior Financial Sector Specialist, World Bank, Mr. Ahmed Rostom; and the Managing Director, JNC International, Mrs. Claire Omatseye.
They were unanimous on the need to increase awareness by key industry stakeholders in ensuring that the much-needed stimulus and alternative means of facilitating financing are discovered to stem the shock to Nigeria’s economic and financial system.
The panelists highlighted that credit guarantees schemes (CGS) are popular policy instruments that were created to help alleviate the credit constraints faced by MSMEs, adding that in Nigeria, however, there exist some challenges with risk-sharing in the local market as most MSMEs do not fully grasp the concepts of risk-sharing and credit guarantees.
They also stressed the need for key industry stakeholders, MSMEs, banks and regulators to openly discuss alternative means of financing and the existence of risk-sharing.
The Group Head Emerging Business, Access bank Plc, Mrs. Olojode, explained that MSMEs do not have regular and sustained access to finance because of limitations like high interest rates, lack of tangible collateral and economic conditions.
She emphasised that: “Risk sharing facilities will help increase access to finance which helps MSMEs grow, increases employment and output in the economy.
“The credit guarantee industry in Nigeria is still at a nascent stage, where the volume of guarantees and the size of the industry contributions to SMEs remain low compared to peers in other economies.
“Credit guarantee is the future because it will compensate for insufficient collateral, provide regulatory capital relief for banks, growth for MSMEs, increased economic GDP and job creation.”
The DBN webinar series is aimed at providing capacity building for MSMEs through digital platforms to ensure they are empowered to remain in business through this unprecedented period.
The DBN is a development finance institution, established by the federal government in collaboration with global development partners to address the major financing challenges facing the MSMEs in Nigeria.
The bank carries out this function by providing financial institutions, predominantly deposit money banks, microfinance banks and other financial institutions with funding facilities designed to meet the needs of MSMEs.