The Central Bank of Nigerian (CBN) has waived the guarantor requirement for the ₦50 billion COVID-19 loan applications. This was revealed in a press statement that was posted on Twitter recently. From the statement, households and SMEs applying for the ₦50 billion COVID-19 targeted credit facility would not be required to provide guarantors before they can access the credit.
Recall that CBN had initiated the ₦50 billion COVID-19 targeted credit facility to provide relief for households and SMEs that are badly hit by COVID-19. According to the guidelines provided initially, the apex bank had stated that households and SMEs with verifiable evidence of livelihood distortion and business crises are eligible for the credit facility. Under this credit scheme, eligible SMEs would receive a maximum of ₦25 million whereas eligible households will receive a maximum of ₦3 million each.
This is not the only targeted relief package for businesses from the Central Bank. Recently, CBN reviewed its monetary policy rate from 13.5 percent to 12.5 percent. The review, which is one of the most significant in terms of basis points in the last couple of years, was positioned to enable resumption of economic activities. The MPR review also should also stimulate growth, accelerate the pace of recovery, and restore livelihood to those who have been badly hit by the pandemic.
The gestures of the government through the apex bank has continued to show commitment to helping Nigerians and the business community recover from the impact of the pandemic. Reducing interest rate and providing credits facilities should position businesses for productivity amidst the current economic crises. The central bank has even urged Nigerians to take full advantage of these business reliefs.
Despite the intention of government which appears positive, the waiver on guarantor requirements on the ₦50 billion COVID-19 loan raises questions. For instance, Mr Victor Akintayo, a business analytics enthusiast and a staff of one of the leading banks in Nigeria noted that the credit facility should ordinarily help businesses and provide a hedge against the looming recession if well harnessed.
However, he noted that the waiver appears fraudulent. This is because beneficiaries may abscond in loan repayment without enforceable penalties. Thus, the waiver may increase the bad loans which in turn will adversely impact on the economy. Another question is on the true beneficiaries of the credit arrangement.
Beyond this is the question of accountability in the disbursement of the funds. Outside CBN’s guidelines for accessing the credit facility, little is known about the accountability procedures. Also, there is some opacity in the process to monitor the use of the supposed credit facility.
Based on these questions, it is important for CBN to clarify the tag for this supposed credit facility. Perhaps, the ₦50 billion COVID-19 funds should be described as grants or endowments rather than as credit. Also, the apex bank should explain how it will ensure that the ordinary Nigerian can access this intervention. Close to this is the need to define the means for which the bank will hold beneficiaries accountable in loan repayment. With Nigeria’s current revenue realities, every penny must be prudently used and adequately accounted for.