The Central Bank of Nigeria (CBN) and the Nigeria Deposit Insurance Corporation (NDIC) have taken over the management of the National Economic Reconstruction Fund (NERFUND) after a N5.7 billion loss incurred by the firm.

But a source claimed at the weekend that the fund obtained by the body was not up to N5.7 billion being declared as loss by the Federal Government.

The source doubted the sincerity of the figure, saying NERFUND received N2.8 billion in 2010. It received $141 million from the Africa Development Bank (AfDB) in 1991 when the exchange rate for the naira was N9.9 to a dollar. NERFUND also got N350 million loan from the Federal Government.

The source, who pleaded not to be quoted because he is not allowed to talk to the press, said the cumulative fund given NERFUND is below N4 billion, adding that the “government just wants to give a dog a bad name to hang it”.

NERFUND was established by Decree No. 2 of 1989 to provide medium to long-term loans to Participating Banks (PBs) for on-lending to small and medium enterprises (SMEs) for the promotion and acceleration of productive activities in such enterprises.

The erstwhile Managing Director of NERFUND, Baba Miana Gimba, once said that NERFUND had funded about 266 firms and that about 1,850 entrepreneurs benefit from NERFUND loan facilities across the Federation.

To qualify for NERFUND funding, applicants must own a business of manufacturing (not Agriculture) and he/she must come up with a bankable project and a thorough feasibility report stating categorically the prospective nature of the business.

With regards to interest rates, NERFUND is non-profit oriented though it charges “a small interest that is required which is about 13 per cent for small and medium business and this 13 per cent remains unchanged throughout the tenure of the loan. For micro credit, the interest rate is about eight per cent.

Beneficiaries are expected to own 10 per cent of equity of proposed business. The prospective beneficiary must have a limited liability company or registered enterprises and can only access between N100,000 and N5million.

Between 1989 and 2000, the Fund gave out over N3 billion to finance 266 projects, but between 2000 and 2010, there was a break in terms of credit facilities extended to businesses. It was resuscitated in late 2010 and between 2010 and February 2012, NERFUND said it gave out about N1.6 billion to micro entrepreneurs who needed between N1 million and N5 million each.

President Goodluck Jonathan has approved the takeover of the management and control of the agency.

A statement from the Permanent Secretary Ministry of Finance, Mrs. Daniella Nwaobia said “the decision to take over the management and control of the Fund followed the President’s approval of the recommendations of the CBN and the NDIC Joint Special Examination report on the books and affairs of the Fund.”

Mrs. Nwaobia lamented that the capital invested in the institution by the Ministry of Finance had been completely eroded, with losses standing at N5.7 billion.

The Fund, the report added, had not been able to service loans taken for on-lending from the African Development Bank (AfDB), the Ministry of Finance and other sources.

The new management team appointed by the Ministry of Finance is headed by Mr. Muhammad Gidado Kollere of the NDIC as Managing Director/CEO and Mr. Ihua Elenwor of the CBN as Executive Director (Operations).

The team is to oversee the affairs of the institution for an initial period of one year. It has been mandated to, among other things, mount an aggressive recovery of all outstanding loans, overhaul the Fund’s records, reconcile all accounts with correspondent banks and render quarterly reports to the Board of the Fund, headed by the Permanent Secretary, Federal Ministry of Finance.