A significant portion of loans issued under the Central Bank of Nigeria (CBN) and NIRSAL Microfinance Bank’s targeted credit facility (TCF) remains unpaid, highlighting challenges in repayment.
As of September 30, 2023, out of N419.42 billion disbursed, over 62% remains unpaid, with defaults amounting to N261.07 billion. While principal repayments total N41.39 billion, interest repayments stand at N174.60 million, leaving an outstanding amount of N378.03 billion.
The facility aimed to mitigate the COVID-19 pandemic’s impact on households and SMEs, contributing to job creation and domestic household consumption. However, repayment difficulties have arisen, with most top beneficiaries categorized as ‘non-performing’.
Key issues impacting the TCF’s effectiveness include the perception of loans as grants, inflation, low demand, and foreign exchange shortages. Recommendations include integrating the intervention under Agri-Business/Small and Medium Enterprise Investment Scheme (AgSMEIS) for better management, developing a clear exit strategy, and fostering public-private partnerships.
Despite favorable terms, including moratoriums and reduced interest rates, the high default rate necessitates steps for recovery. Recovery efforts, including deductions from defaulters’ bank accounts, have sparked controversy, emphasizing the need for clarity in repayment requirements.
The National Institute of Credit Administration (NICA) advocates for credit awareness desks within credit professionals’ offices across Nigeria to address repayment challenges. These desks aim to enhance applicants’ understanding of credit processes and responsibilities, fostering better communication between credit providers and clients.
