EnuguSME, Author at Enugu SME Centre

BOI $1bn loan will improve capacity of MSMEs

BOI $1bn syndicate loan will improve capacity of MSMEs- FG

The Federal Government has revealed that the Bank of Industry (BoI) under the supervision of the Ministry of Industry, Trade and Investment has concluded a $1billion syndicated term loan in conjunction with international partners to further support Small and Medium Scale Enterprises (MSMEs) in the country.

Disclosing this in Abuja, on Monday, at the Quantum Mechanics Limited MSMEs survival Fund Capacity Building, the Minister of Industry, Trade and Investment, Otunba Adebayo, said the loan is aimed at “further improving the capacity of the bank to effectively support Micro, Small and Medium Scale Enterprises (MSME) – across key sectors of the Nigerian economy – with affordable loans of medium to long-term tenor, alongside moratorium benefits.”He noted that “there is an ongoing discussion with Dunn & Bradstreet to establish an SME risk rating agency – the SME Rating Agency of Nigeria (SMERAN), to provide an empirical basis towards analysing the eligibility of SMEs to access credit.

“I will like to reiterate that our Ministry fully supports MSMEs, as demonstrated by our MSME Survival Fund Initiative which was launched in the wake of the COVID-19 Pandemic by the Federal Government as part of the Nigerian Economic Sustainability Plan (NESP); aimed at protecting MSME businesses from the shocks the Pandemic.”The Minister explained that the survival fund was estimated to save at least 1.3 million jobs across the country while strengthening the growth potential of beneficiary businesses, stressing that the successful implementation of the scheme so far has contributed immensely to quickly pulling Nigeria out of the COVID-19-induced recession.

He said the National MSMEs Clinics also support the growth of small businesses across the country through the provision of critical infrastructure, with twenty-six of such clinics having impressive results.

According to a statement made available to newsmen by Ifedayo Sayo, Adebayo further disclosed that the Nigerian Export Promotion Council (NEPC) has launched the Export Expansion Facility (EEF) under the NESP, to support the resilience of new and existing MSMEs to respond to the shocks of the COVID-19 Pandemic to retain and create more jobs, especially youth and women businesses through the Youth Export Development Programme (YEDP) and Promoting Women Inclusiveness in Non-Oil Export.

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Inflation tops discussion as MPC meets today

Nigeria’s Monetary Policy Committee (MPC) commences its second meeting for the year 2021 today, and will tomorrow announce policy decision on interest rate direction for an economy that sluggishly exited recession in the fourth quarter of 2020.

Maintaining the status quo may likely play out after the meeting, as most analysts polled by BusinessDay expect a ‘Hold’ on the benchmark interest rate due to rising inflation.

Nigeria’s inflation rate increased to 17.33 percent in February 2021, from 16.47 percent recorded in the previous month, according to the National Bureau of Statistics (NBS).

While the Central Bank of Nigeria (CBN) does not formally targets inflation, confining itself to a reference range of between 6 percent year-on-year (y/y) and 9 percent for the headline measure, the trajectory of inflation is such that it would be a challenge to argue for further monetary easing, analysts at FBNQuest said.

“Nigeria’s MPC meets next (this) week, and we struggle to see any decision other than an unchanged stance,” the analysts said.

At the last MPC meeting in January, the committee retained the Monetary Policy Rate (MPR) at 11.50 percent, with the asymmetric corridor remained at +100/-700bps around the MPR.

Also, the Cash Reserve Ratio (CRR) and Liquidity ratio were left unchanged at 27.5 percent and 30 percent, respectively.

“I expect the MPC to hold the rates in March. Yes, inflation rate is rising but economic recovery is still weak at 0.11 percent in previous quarter,”Uche Uwaleke, professor of capital market and president, Capital Market Academics of Nigeria, said.

He noted that, inflationary pressure was more from cost push factors, saying, “I expect that the MPC will advise the CBN to continue to use development finance initiatives through increased interventions to support economic recovery, especially via stimulation of agricultural output to stem rising inflation.”

Nigeria’s Gross Domestic Product (GDP) grew by 0.11 percent y/y in real terms in the fourth quarter of 2020, representing the first positive quarterly growth in the last three quarters.

Though weak, the positive growth reflects the gradual return of economic activities following the easing of restricted movements and limited local and international commercial activities in the preceding quarters, the NBS report noted.

Taiwo Oyedele, head of tax and corporate advisory services at PwC, is of the view that the rising inflation will be of concern to the MPC and certainly does not support any expansionary policy changes, while on the other hand a contractionary policy adjustment will hurt the fragile economic growth and recovery. “So, I expect the MPC to maintain status quo,” he said.

Given the fact that the rise in inflation has been due to cost-push factors rather than demand pull factors, Godwin Emefiele, governor of the CBN, said MPC had placed greater weight on utilising tools that would strengthen the nation’s productive base as a nation.

These measures, such as the intervention programmes being implemented by the bank, will help to improve output by enabling improved production of staple food items. This would ultimately help to support lower food prices and a more favourable outlook for food inflation, Emefiele said at the last MPC meeting.

Nigerian startups raise more money in a single month than whole of 2020

In a month tech investors decided to open their investment wallets in an unusual manner, five Nigerian startups have found themselves $202 million richer. It is the most investment in a single month since 2019 and beats the whole money raised in 2020.

Flutterwave opened the month of March with a $170 million Series C funding that pushed its valuation to over $1 billion; Havenhill Nigeria Limited, a clean energy company raised $4.5 million on the same day as Flutterwave; Kuda Bank followed with $25 million; Termii and Kwik came a day later announcing raising $1.4 million $1.7 million each.

It is the most funding closed in a month since the $200 million investment by Visa in Interswitch. Although Paystack pulled in $200 in the deal with Stripe in October 2020, it is an outright acquisition and so does not count as funding.

The $202 million funding is even more impressive as it eclipses the record of the entire investment in 2020 when about 82 Nigerian startups could only haul in $170 million. According to a report compiled by StartupLists, venture capital investments in Africa took off on a high note in the first three months of 2020 only to be blindsided by the outbreak of the COVID-19 pandemic and consequent lockdowns and economic meltdown across the world.

Fear and anxiety left many investors scampering for safety with their funds put on ice until some certainty could be restored. Hence, investments in tech startups were impacted negatively in the second quarter but in the third quarters, investments began to pick up hitting more than 75 percent of the funding raised in previous quarters 2020.

2021 has been significantly different. Startups such as uLesson, an education technology company, with $7.5 million kicked off the year, indicating investors may be regaining their confidence and are willing to start writing big cheques again. March is certainly proving the investors are ready to push more money into the hands of Nigerian startups.

One reason experts say is responsible for the rise in funding is growing confidence driven by returns on investment of venture capitalists in the country. Paystack’s acquisition may have sold the idea once again that Nigeria does have the talents and solutions to tackle payment and other developmental challenges in Africa.

This could be responsible for the influx of first-time foreign investors. Quona Capital which led a $3 million investment in Cowrywise in January and the lead investor in Kuda Bank’s $2 million Series A raise, Valar Ventures – founded by Peter Thiel – were investing for the first time in Africa.

The funding in March has almost come at the back of each other. Flutterwave’s $170 million was announced the same day Havenhill Nigeria Limited said it raised $4.5 million from Chapel Hill Denham Nigeria Infrastructure Debt Fund (NIDF), the first listed infrastructure debt fund in Nigeria and Africa. The funding is for the construction of 22 mini-grids being developed by Havenhill Synergy Limited (Havenhill) under the Nigeria Electrification Project.

Nigeria’s fiscal position remains precarious despite rising oil price

Bullish crude oil price since the beginning of the year have raised hope of a better global fiscal performance after severe disruptions caused by COVID-19 pandemic that unsettled oil-dependent economies.

The price rise of more than 75 percent since November 2020 has been on account of major economies reopening and vaccinating their populations after the pandemic shut down factories and grounded the aviation industry in March 2020.

But with the positive sentiments associated with rise in oil price, celebration from the Nigerian economy, sadly, comes off as premature as the country’s fiscal position still remains precarious.

Analysis shows that as of today, Nigeria’s economy can attain fiscal break-even position only if oil prices climb as high as $103 per barrel.

This was attained by incorporating the current official exchange rate at N380/$1, Federal Retained Oil Revenue to Gross Oil Revenue at 37 percent, Average Daily Production of 1.7 million barrels per day (OPEC quota), the current budgeted expenditure as well as budgeted Non-Oil + Other Revenue and Unfunded Revenue at N4.6 billion and N8.9 billion, respectively.

Over the years, the Federal Government has struggled to finance its budget mainly due to low revenues, which have been susceptible to oil price volatilities.

At year-end 2020, the Federal Government’s retained revenue was N3.94 trillion, indicating 73 percent of target of the revised N10.805 trillion 2020 budget, which reflected the effects of the COVID-19 pandemic.

This has resulted in an increasing budget deficit for the country and an increased borrowing culture by the government from both domestic and international sources.

Figures from the Debt Management Office (DMO) indicate that Nigeria’s total public debt as of December 31, 2020, was N32.915 trillion, including those for Federal and State Governments, as well as, the Federal Capital Territory. Debt stock is further projected to hit N38.68 trillion by December 2021, according to Zainab Ahmed, minister of finance, budget and national planning.

The Federal Government projects overall budget deficit to stand at N5.60 trillion for the year 2021, representing 3.93 percent of GDP.

With the planned borrowing of N4.69 trillion to finance the budget deficit, total public debt is expected to rise to N36.89 trillion by December 31, 2021.

Livestock Sector Can Add N33tn To Economy —FG

Nigeria’s livestock sector has the potential to add N33tn worth of investments to the country’s economy, the Federal Government has said.

Minister of Agriculture and Rural Development, Sabo Nanono, who said this to the media in Abuja on Saturday evening, stated that the Federal Government was working hard to ensure the release of this huge investment into the economy.

He said, “Just this week in Kano, I inaugurated the pilot scheme of the National Livestock Breed Improvement Initiative aimed at increasing the diary potential of our indigenous dairy cows and meat yield of our national herd.
“The livestock sector has a huge economic potential netting N33tn which should be explored and harnessed.”

He said the goal of the Federal Ministry of Agriculture and Rural Development was to facilitate economic diversification from an oil based economy to an agro based economy.

Nanono stated that to achieve this, the FMARD had commenced the implementation of agricultural mechanisation aimed at massive cultivation and output.

He said, “This will ensure that we have more than enough to feed the population and export to neighboring countries. We are also deepening our extension services to grow the agricultural sector and make farming an informed profession.

“We’ve inaugurated a compact and viable livestock subsector capable of sustaining the supply of beef and dairy demands of the nation for consumption, processing industry and export.”

In another development, the Nigerian Veterinary Medical Association raised an alarm that the activities of uncertified animal care givers were slowing down the growth and development in the livestock subsector.

NVMA is regulated by the Veterinary Council of Nigeria, an agency under the Federal Ministry of Agriculture and Rural Development.

Zenith Bank, GTB, Union Bank Lift NSE Banking Index By 2.09%

Growth in the share price of Zenith Bank Plc, Guaranty Trust Bank (GTB) and Union Bank of Nigeria Plc lifted the banking index of the Nigerian Stock Exchange (NSE) by 2.09 percent during trading for the past week.

The Banking Index which measures the performance of Nigerian banks on the NSE closed at 361.13 index point on Friday, March 19th from the 353.75 index point it commenced trading with on Monday, March 15th, surging by 7.38 index point, representing 2.09 percent appreciation. The banking index, however, fell by 8.11 per cent Year- till – Date (YTD)

The Financial Services Industry which includes the banking sector (measured by volume) led the activity chart with 1.888 billion shares valued at N12.446 billion traded in 12,019 deals, while a total turnover of 2.342 billion shares worth N19.272 billion in 20,173 deals were traded this week by investors on the floor of the Exchange, in contrast to a total of 1.675 billion shares valued at N23.541 billion that exchanged hands last week in 21,732 deals.

The NSE All-Share Index and Market Capitalization depreciated by 0.69% to close the week at 38,382.39 and N20.082 trillion respectively.

Checks by InsideBusiness shows that Zenith Bank led the gainers in the banking sector during the week in review in terms of market capitalisation.

The tier-1 financial institution rose by 6.13 percent in value of its market capitalisation and share price, rising from N665.605 billion and N21.20 Kobo per share to N706.421 billion and N22.50 Kobo per share respectively.

The appreciation saw Zenith Bank gaining N40.815 billion and its outstanding shares remain at 31,396,493,786.

GTB followed with a N30.902 billion growth in the bank’s market share, climbing from N881.463 billion to N912.366 billion, representing 3.50 percent appreciation.

The Orange brand also recorded soared share price, moving from N29.95 Kobo per share to N31 per share.

Union Bank completed the biggest gainers’ table for the week when its share price and market capitalisation jumped by 4.95 percent, indicating a N7.280 billion surge.

The first generation bank saw its market capitalisation currently standing at N154.339 billion up from N147.059 billion, while the value of its share price rose from N5.05 Kobo per share to N5.30 Kobo per share.

Ecobank Transnational Corporation (ETI) dominated the losers for the week, losing N5.504 billion representing 5.8 percent to close at N94.500 billion in market capitalisation down from N88. 995 billion.

The share price which opened at N5.15 Kobo per share on Monday, March 15th fell to N4.85 Kobo per share on Friday Friday, March 19th.

Nigerians rise against $1.5bn Port Harcourt refinery repair bill

Nigerians are enraged over government’s plan to spend $1.5 billion (about N570bn) on the repair of one of its derelict and unprofitable refinery.

The government’s long history of wasteful spending on turnaround maintenance on its struggling refineries triggers a feeling of bitterness in the hearts of many whenever the government says it wants to pump more money into them.

They question why the government is throwing money it does not have into a venture that is entrenched in a culture of waste and has gulped far too much public funds with nothing to show for it. Its inflated payrolls also contribute to the non-competitive cost of fuels produced.

Many are in awe of how a cash-strapped government that has been knocking at the door of the World Bank for a $1.5 billion loan since last year is able to turn around and spend a similar amount on merely repair works on one dying refinery, an effort history suggests will be futile.

To put the planned repair into context, the government wants to spend $1.5 billion on a refinery that has never operated above its 200,000bpd capacity, whereas Shell sold a more efficient and profitable refinery with a capacity of 157,000bpd in California for $1.2 billion last year.

The complex nature of running refineries is why experts have called on the government to privatise them rather than seek to hold control and continue splashing cash on them.

“Refineries are one of the most complex facilities to run, they are capital, technology and management intensive operations, yet low margin,” Olagoke Balogun, former processor operator at Chevron with 13 years experience in the refining business, tweeted on Thursday.

Balogun noted, “Aside from corruption, the Nigerian state is grossly incompetent to run such complex operations even if they wanted to.”

It is not the first time the government is carrying out rehabilitation works on its cash-guzzling yet unprofitable refineries.

Over the past 12 years, Nigeria tried and failed four times to crank up its aging crude-processing plants.

The West African country of about 200 million people still imports more than 90 percent of products like petrol, diesel and kerosene, swapping crude oil for refined petrol, kerosene and aviation fuel.

Despite the repeated failure to breathe life into the refineries, the state-run energy company, NNPC, is giving it another shot, ignoring global examples on how to run a successful refinery.

Globally, most refineries are privately owned and run on razor-thin low margins in order to realise the highest returns.

Refinery managers seek to pay the lowest price for crude oil, maximise the yield of the higher value products, control operating costs and receive the highest price for its refined products on a sustained basis.

Nigeria’s refineries, which have overtime struggled to operate at 10 percent capacity utilisation, are however unable to operate on these four basic principles.

They currently pay international prices for crude oil, are unable to control operating costs, and cannot maximise the yield on the high-value product (petrol) because they receive the lowest prices for it.

Atedo calls $1.5bn refinery bill brazen adventure

Leading banker and outspoken campaigner, Atedo Peterside, has asked the federal government to halt the outrageous plan to spend $1.5bn to repair the Port Harcourt refinery.

In a tweet, Atedo said “FG should halt $1.5bn approval for repair of Port Harcourt refinery and subject this brazen & expensive adventure to an informed national debate.

“Many experts prefer that this refinery is sold “as is” by BPE to core-investors with proven capacity to repair it with their own funds.”

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Investors: How companies can attract funding

As investors gear up to tap from opportunities in Nigeria through investments in the country’s estimated 41.5 million startups, small and medium scale companies in need of growth capital have to be investment-ready to attract funding, according to industry stakeholders.

Discussing one of the most important aspects of business for most entrepreneurs in Nigeria and Africa – funding, trade and investment stakeholders in a recent webinar organised by the Nigerian-British Chamber of Commerce said businesses should be created based on ‘universal foundation’ or ‘sustainable foundation.’

“Integrity, strong governance and keeping proper records of the business and the ability to leverage on environment impactful initiative are very important,” Bisi Lamikanra, former partner and head of the advisory services, KPMG Nigeria said.

Small and medium-sized enterprises (SMEs) are described by analysts as the bedrock of the Nigerian economy as they account for over 95 percent of all businesses and contribute over 50 percent to the economy.

But hard hit by the double challenge of COVID-19 and slow economic growth, small businesses in Africa’s most populous nation are now more vulnerable as constraints in liquidity and cash flow, coupled with increased payment delays have resulted in endemic depletion of working capital.

With the high cost of accessing bank credit and lack of the much-required collateral, many Nigerian businesses are at the mercy of investors for funding to expand and increase the bottom line, but they also have to be ready to be attractive for investment.

“An investor-ready company just means that such a business is ready for marriage between itself and an investor. So an investor can partner with them and honour the agreement,” Okechukwu Enelamah, chairman, African Capital Alliance (ACA), and former minister of Industry, Trade, and Investment, said.

Meanwhile, companies like Flutterwave and Kuda are some of the startups that raised funding within the first three months of 2021. The former raised $170 million from a Series C fundraising while the latter secured $25 million in a Series A fundraising.

CBN Denies Placing New Restrictions On Cryptocurrency.

The Governor of the Central Bank of Nigeria, (CBN), Gowin Emefiele has denied that the apex bank place new restrictions on the use of cryptocurrency noting that the recent directive was to protect the financial system and generality of Nigeria from the risk inherent in crypto-asset transactions.

CBN in a directive to financial institutions barred banks and other financial institutions in the country from facilitating cryptocurrency. The bank regulator had on February 5, 2021, sent a letter to all local financial institutions to shut down all bank accounts associated with cryptocurrency trading platforms.

This directive generated uproar some quarters and economic analysts who commended the commitment towards building a digital economy.

The CBN Governor in a keynote address at the 30th Seminar for Finance Correspondents and Business Editor over the weekend explained that the directive was not new but only amplified an earlier regulation on the subject of cryptocurrency.

“The recent directive became necessary to protect the financial system and the generality of Nigerian from the risk inherent in crypto-asset transactions, which have escalated in recent time, with consequences on financial stability and implementation of monetary policy.”

He however added, ” our policy does not preclude Nigerian from harnessing the underlying technology that supports crypto transactions, which is distributed ledger, commonly referred to as a blockchain.”

Emefiele disclosed further that there are several examples where blockchain technology has been used to facilitate and improve transparency in the settlement of trade transactions.

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