Muhammadu Buhari, presidential candidate of the All Progressives Congress (APC), says he will create the 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.
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.
However, the question is, does Nigeria really need Buhari’s proposed Entrepreneur Bank? To answer the question, it is critical to understand that Nigeria already has development banks that lend credit to entrepreneurs.
The Bank of Industry (BoI), for instance, lends credit to entrepreneurs at about nine percent. The focus of the BoI is the industrial and value-adding sectors such as manufacturing, agro processing, entertainment and export, among others.
The Bank of Agriculture (BoA) also lends to farmers and those in the agric value chain. Ideally, BoA is supposed to lend to farmers at a single-digit rate, but the bank has been cash-strapped for a long time now. The bank officials are unhappy that they are not in charge of the Anchor Borrowers Scheme, which ordinarily could have increased the relevance of the bank, BusinessDay understands.
Similarly, the current government set up the Development Bank of Nigeria (DBN) in 2016 with a view to increasing lending to small businesses and development-oriented sectors. Entrepreneurs tell us that this bank lends to them at a double-digit rate of 13 to 16 percent.
Hence the country already has three banks that cater to the needs of entrepreneurs.
BusinessDay found that what these banks lack is adequate funding.
“Recapitalise BoI, BoA and any other DFI in the country, rather than duplicate institutions that perform the same function,” Ike Ibeabuchi, managing director of MD Services Limited, said.
“Buhari may expand the roles of these banks, but Nigeria does not necessarily need another bank. This comes with its bloated cost profile,” Ibeabuchi said.
Buhari has in 2016 pledged to recapitalise BoA to increase lending to the agricultural sector and serve as money deposit bank for farmers. As part of the plans, the bank was tapped to be eyeing to raise N1 trillion for its partial privatisation. The same year, Buhari also pledged to recapitalise BoI the same year. But all these plans were not implemented.
, Entrepreneur Bank