Muhammadu Buhari, presidential candidate of the All Progressives Congress (APC), says he will create an Entrepreneur Bank to enable micro, small and medium enterprises (MSMEs) access cheap funds.
Buhari, Nigeria’s current president, is seeking a second term, having been elected in 2015 to serve a term of four years.
In his abridged manifesto entitled, ‘Next Level’, Buhari says his government will provide debt and equity support for young entrepreneurs and enable them access soft loans to support their business ideas across different value chains.
He explains that his next term will usher in business planning support profiling and tailored advisory services for entrepreneurs.
“The next four years will be quite significant for our country…Our choices will shape us – our economic security and our future prosperity. Nigeria, more than ever before, needs a stable and people-focused government to move the agenda for our country forward,” Buhari says in his manifesto.
He pledges to help in developing the capacities of Nigerians, especially entrepreneurs, where needed, adding that he will legislate and enforce deadlines for issuance of government licences and permits in line with his plan to improve the doing business environment.
Buhari further pledges to simplify investments, customs, immigration, trade and production procedures, while creating a one-stop shop for all regulatory agencies under one roof in each senatorial district.
Buhari’s plan to create an entrepreneur bank is hinged on the general belief of the business community that funding is one of the biggest challenges facing small businesses in the country.
Results of survey conducted by the Manufacturers Association of Nigeria (MAN) shows that the average interest rate charged manufacturers (including SMEs) by banks in the second half (H2) of 2017 was 23.05 percent as against 22.65 percent in first half (H1) of 2017 and 21.4 percent in H1 of 2016.
Many banks are unwilling to offer loans to MSMEs and those that do often provide same at above 20 percent. Though experts say funding is not the biggest challenge facing small businesses, they unanimously agree that it is among the top four.
Frank Jacobs, immediate past president of MAN, mentioned many times that small businesses need five percent interest rate loan to navigate the country’s tough environment.
Jacobs said a number of times that only few businessmen could take a loan at 20 to 35 percent and return it conformably.
Buhari must have seen numerous reports showing the extent to which 37 million MSMEs in Africa’s most populous country struggle in their bid to get cheap funds.
Nigeria’s monetary policy rate (MPR), which is a benchmark interest rate in the country, is 14 percent. The country’s lending rate is highest among peers.
The monetary policy committee (MPC) of the South Africa’s Reserve Bank met in March this year and cut interest rates by 25 basis points.
The current repo rate (central bank lending rate to commercial banks) in South Africa is now 6.5 percent, and the prime lending rate (lending rate to customers) is 10 percent.
The Reserve Bank’s MPC had earlier cut the repo rate in July 2017 by 25 basis points from 7 percent to 6.75 percent.
Similarly, Kenya Central Bank’s monetary policy committee cut the determining bank rate in late July to 9 per cent from 9.5 per cent.
BusinessDay gathered that Kenyans now borrow at an interest of 13 per cent (as against from 13.5 percent earlier) in line with the interest rate capping rule that limits lending rates to 4 percentage points above the CBR.
Zambia is one of the emerging countries in SSA and its central bank cut benchmark lending rate by 50 basis points to 9.75 percent in February this year, citing lower consumer inflation and weaker economic growth, according to Reuters.
In October 2017, the central of Ethiopia raised its benchmark interest rate to 7 percent from 5 percent.
At least the benchmark interest rate of most SSA countries have remained single digit, barring few, meaning that it is cheaper for businesses to access funds there than in Nigeria.
Babatunde Paul Ruwase, president of the Lagos Chamber of Commerce and Industry (LCCI), said recently that low interest rate will stimulate investment, impact positively on growth, create more jobs, increase income, and boost output.
Tony Elumelu, founder of Tony Elumelu Foundation, recently said that every $1 spent on SMEs generates $5.