How NERFUND Provides Loans for Micro and SMEs in Nigeria

The Managing Direcror and CEO of The National Economic Reconstruction Fund (NERFUND), Baba Maina Gimba, is a lawyer and former banker. He hails from Potiskum, Yobe State. He has varied work experience starting from Borno State, where he served as Magistrate in the judicial Service and later Commissioner of Justice/Attorney General before joining African International Bank (AIB) in 1991 as a Company Secretary/Legal Adviser. He joined NERFUND in 1999 as an Executive Director (Operations) until 2002 when he was appointed Managing Director/Chief Executive Officer. In this interview granted to the Economic Confidential, Mr. Gimba provides insight into the activities of NERFUND. Excerpts:

EC: When was NERFUND established?
The National Economic Reconstruction Fund, NERFUND was established in 1989 via Act Cap 254, 1990 Laws of the Federal Republic as an apex institution to help catalyze the development of SMEs. Such SMEs must be wholly Nigerian owned and engaged in the business of manufacturing, mining, quarrying, industrial, support service etc.

What are your major mandates?
The aims and objectives of the Fund are: to correct any observed inadequacies in the provision of medium to long term financing to small and medium scale industrial enterprises, especially manufacturing and agro-allied enterprises and ancillary services. It is also required to provide medium to long term loans to participating commercial and merchant banks for on-lending to small and medium scale enterprises for the promotion and acceleration of productive activities in such enterprises. In addition it facilitates the provision of loans with five to ten year maturity, including a grace period of one to three years, depending on the nature of the enterprises or project. It is also mandated to provide such loans either in naira or in foreign currencies or both according the source of funds available to the Fund and the requirements of the eligible enterprises or project

EC: Do you get subvention from government?
NERFUND has been able to make a sustainable growth without government subvention. There had been no subvention aside from the seed capital of N300 million to the Fund since inception.

EC: Who provides the bulk of funds for NERFUND?
At inception, funding for the NERFUND came from local, bilateral and multilateral sources which include Capital fund from Federal Ministry of Finance, Central Bank of Nigeria
And other loans from African Development Bank (ADB) and MOFI

EC: Is it true that there was lull in the operation of NERFUND?
Well, let us say the Fund was not operating in its normal capacity in response to a government policy.

EC: We learn that NERFUND is now operating as a single entity, what is the reason for that?
Following the conclusion of the merger of Nigeria Industrial Development Bank (NIDB) and Nigeria Bank of Commerce and Industry (NBCI) to form Bank of Industry (BOI), the Federal Government has excluded it from the fusion of all development finance institutions (DFIs). The fund shall be partnering with SMEDAN and NDE to aggressively stimulate the rapid setting up of MSMEs. NERFUND is still in existence as a going concern and performing its statutory functions as stipulated in the NERFUND Act, Cap. 254, 1990 Laws of the Federation.

EC: We learn you are partnering with other agencies, how far about the partnership?
After motley of external challenges, arising from vicissitudes reminiscent of most developing economies, the Fund is currently being retooled and repositioned to midwife a new category of enterprises. We embarked on the segmentation of our target sub-sector by taking on board some Development Agencies (Das) who are assisting us to process micro enterprises for funding. The Development Agencies shall intermediate between NERFUND and the Micro Enterprises, most of whom they had spent time building their managerial capacities. This new level of relationship has begun to blossom and yielding fruits. The first set of micro enterprises presented by the DAs had been approved and we are disbursing to some with term loans of one-to-three year’s tenor plus six months moratorium.

EC: Who are the Development Agencies?
The developments agencies include Small and Medium Enterprises Development Agency of Nigeria (SMEDAN); National Directorate of Employment (NDE); National Centre for Women Development; Enterprise Development (EDC); and National Board for Technology Incubation (NBTI) and more are signing the MOUs. It may interest your readers to know that we are also partnering with state governments. Early in March, we signed an MOU with the government of Ondo State. The are contributing N400 in a counterpart funding arrangement where NERFUND would be contributing N600million.

EC: Tell us more about the significance of these MOUs?
Like I mentioned earlier, the agencies we sign MOUs with are capacity building institutions and the Management of the fund believes that funding MSMEs through them would help mitigate the risk element thereby enhancing our loans recovery rates.

EC: How much of loans have been repaid so far?
NERFUND has an excellent loan recovery rate. Of the 266 projects that were disbursed between 1990 and 1998, 210 have fully repaid their loans. The remaining 50 projects are at various stages of repayment and we are giving all necessary incentives and support to enable them to repay.

EC: How many projects have you approved so far?
On projects approvals and disbursements, the Fund approved a total of 570 projects between 1990 and 1998. Out of this number, term loans of 5-7 years tenure were disbursed to 266 of the approved projects. The SMEs are spread across the 36 states of the federation and the Federal Capital Territory (FCT). The banking distress of the mid 1990s had impacted negatively on the operations of the Fund. About 72 of the projects funded were locked up in the portfolio of liquidated banks. The Fund had however successfully re-possessed all the affected projects from the Nigeria Deposit Insurance Corporation (NDIC), the statutory liquidator of the banks. Also at the last quarter of 2010 a total of 208 projects were approved and disbursed. Furthermore, another 513 were also approved in the first quarter of 2011. Most of these projects applied for micro credits. Also, the newly approved enterprises are spread across the six geo-political zones of the federation.

EC: Are the public adequately informed on the facilities you provide?
I encourage eligible members of the investing public who have bankable proposals for the establishment of micro, small and medium scale enterprises to forward such proposals to the Fund for consideration and possible funding. Again, that is another reason we are partnering with Development Agencies and state governments, to take NERFUND facilities closest to the people. Let go further to state that the process of obtaining NERFUND loan is not cumbersome. Nigerians should know that loan applications, after appraisal are subjected to consideration by the Interim Management Committee (IMC) following which they would be presented to the minister of Finance for final approval. I therefore call on eligible entrepreneurs to take advantage of the funds’ facilities that offer attractive single digit interest rate, suitable for industrial financing.

EC: How has it impacted positively on the economy?
NERFUND operations have had far reaching impact on the Nigerian economy. Apart from helping to conscientize Nigerians in the early “90s to embark on manufacturing rather than merchandize foreign made goods, the fund has helped to create jobs for teeming Nigerians and contributed immensely to GDP. Take the 266 projects disbursed between 1990 and 1998, they estimated to generate about 18,620 direct and 148,000 indirect employments to Nigerians, Current disbursements are on-going but the 721 micro enterprises so far approved are capable of creating about 3,605 direct jobs.

EC: What are the processes of getting loans from NERFUND?
Like we always say, the process of obtaining a NERFUND loan is serious but straight forward. First step is to identify an investment opportunity that meets our funding criteria. Ensure that you understand the business and the working of the sector in which you are about to venture into. Next step would be to develop a feasibility or business plan on your intended enterprise. Forward either report to the Fund, ensuring that you attach Photostat copies of your certificate of incorporation and proforma invoices of proposed plant and machinery. We should always note that NEFUND credit is in two categories: Micro loans that are below N5million and SMEs that are above N5million.

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4 COMMENTS

  1. am olajiki olatuyi luke a Nigerian by birth from Ondo state. I graduated from political science department of the University of Ado Ekiti (Unad),now Ekiti state university (Eksu) in 2009. I did my NYSC service in Plateau state in 2010. I never knew the reality of life after school until i entered into the problem of unemployment after my service year. To take my destiny in my hands, i went into fish farming after searching unsuccessfully for job but unfortunatly, i met another brick wall. Presently, i own a farm with 1,500 fish at their smoking size stage. I have spent all my savings and the money i borrowed on this project and now i have ran out of money and unable to feed my fish. I will be greatly relieved if this body can give me a financial aid. I am ready to submit myself to your verification to be sure of the certainty and genuiness of my claim if need be. Your willingness to help me will definatly activates a destiny! Yours faithfully, Olajiki

  2. NERFUND keep it up you are building the economy.
    Such loans if genuinely given and monitored Nigerians will be happy and the economy will grow.

  3. i wish to request for a PARTNERSHIP/ COLLABORATION OR PROJECT FUNDING / SPONSORSHIP Between NERFUND AND OUR ORGANIZATION KNOWN AS CITIZENS FOUNDATION FOR AGRICULTURAL DEVELOPMENT IN AFRICA (CIFADA) for the Actualization of PRESIDENTIAL AGENDA ON JOB CREATION, AGRICULTURAL DEVELOPMENT , YOUTH AND WOMEN EMPOYMENT , ACROSS THE SIX GEO- POLITICAL ZONE OF NIGERIA.

    THIS NOBLE ORGANIZATION IS PROJECTING ON MASSIVE PLANTATION OF YELLOW CASSAVA TO BE CONVERTED TO KEROSENE, DIESEL AND FOOD SUSTAINABILITY. ETC

  4. I wist to request for a Partnership/ Collaboration Or Project Funding and Sponsorship between NERFUND AND OUR ORGANIZATION KNOWN AS CITIZENS FOUNDATION FOR AGRICULTURAL DEVELOPMENT IN AFRICA (CIFADA) for the Actualization of PRESIDENTIAL AGENDA ON JOB CREATION, AGRICULTURAL DEVELOPMENT, YOUTH AND WOMEN EMPOWERMENT, ACROSS THE SIX GEO- POLITICAL ZONES OF NIGERIA.

    THE ABOVE NAMED ORGANIZATION KNOWN AS CIFADA, NIGERIA IS PROJECTING ON THE MASSIVE PLANTATION OF YELLOW CASSAVA TO BE CONVERTED TO KEROSENE , DIESEL AND FOOD SUSTAINABILITY.

    MY POSITION IN THE ORGANIZATION IS THE PROJECT MANAGER/ SUPERVISOR’

    THIS PROJECT HAS BEEN SUFFERING FROM LACK OF ADEQUATE FUNDING AND SPONSOR FOR SMOOTH IMPLEMENTATION

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