COVID-19 Loan

CBN COVID-19 Loan: All You Need to Know 1

The Central Bank of Nigeria has introduced a Covid-19 loan (stimulus package) of N50 billion. The targeted Credit Fund (TCF) introduced by the CBN is a stimulus package that supports Micro, small and medium enterprises (MSMEs) and households that have been actively affected by the coronavirus pandemic.  

The outbreak of COVID-19 has devastated many businesses and households, not only in Nigeria but across the world. The devastating effect of the COVID-19 pandemic caused a sharp drop in production and demand for some goods, services and overall, a sharp and significant decline in customer confidence.

The Nigerian Federal Government through the Central Bank of Nigeria and the Nigerian Federal Ministry of Finance, Budget, National planning have made published some fiscal and monetary measures that will help to curb the negative impact of the COVID-19 pandemic on the Nigerian economy, households and businesses. 

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The Central Bank of Nigeria has introduced via numerous pronouncements and circulars some COVID-19 stimulus packages that are focused on positively impact various sectors of the Nigerian economy like the manufacturers, health sector, Micro Small and Medium Enterprises, households and others.  

The total amount provided by the CBN is 50 Billion naira that will act as a COVID-19 loan. The N50 billion Targeted Credit Facility (TCF) is a support package to these households or businesses affected by the coronavirus pandemic.  

All You To Need to Know About the CBN COVID-19 Loan

The Target Credit Facility was created to help curb the negative effects of the coronavirus pandemic on MSMEs and households, support MSMEs and homes whom economic activities were affected by the ongoing pandemic. The facility also aims to stimulate credit to micro, small, and medium enterprises to enhance their productivity via development, research and equipment upgrade.  

Who Should Apply?

The CBN released an operational guide for the Targeted Credit Facility, and below are the eligible participants for the COVID-19 loan:  

Families with verifiable evidence of disrupting in livelihood caused by the COVID-19 outbreak.

Existing businesses with verifiable evidence of their business activities directly impacted by the coronavirus pandemic (Eligible enterprises don’t need a business plan to apply).

  • Health (medical supplies and Pharmaceuticals)
  • Hospitality Industry
  • Airline service providers
  • Firms in agricultural produce
  • Manufacturing/value addition

Income-generating businesses like trading as might be prescribed by the apex bank in Nigeria.

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Where Does This Fund Come From?

The program will be funded from the Micro, Small and Medium Enterprises Development Fund (MSMEDF) and the NIRSAL Microfinance Bank (NMFB) which is the certified participating financial institution.

This means that the Central Bank of Nigeria gets the fund from the MSME development fund and you’ll be able to apply for the COVID-19 loan through the NIRSAL Microfinance Bank.

How Can You Access the Fund?

There are two ways you could access the fund according to the circular issued by the CBN March 23, 2020. The two ways to apply for the fund is either as MSMEs/Households or Corporate entity.

MSMEs/Households: The initial step for an eligible household is to apply NIRSAL MFB. The applications must contain your business plan, business registration (both if applicable), a BVN number and a piece of evidence indicating the adverse effect the coronavirus pandemic has on your household.

Corporate Entities: The process is similar to that of MSMEs, and the applications must be sent to NMFB with evidence of a possible disrupt or opportunity impact as caused by the coronavirus pandemic. The NMFB will appraise received applications and perform due diligence and forward satisfactory applications to the Central Bank of Nigeria for approval. After the CBN has reviewed the applications sent by the NFMB, it will disburse the funds to NMFB. 

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Terms of the CBN COVID-19 Loan

The CBN COVID-19 loan has different criteria for determining the loan amount that is given to eligible applicants, and they are:

Households: Households can access a maximum amount of N3 million. The needed working capital should be a maximum of 25 per cent average of the past three years annual turnover. However, if the business age isn’t up to 3 years in operation, 25% of the past year turnover will then suffice. 

SMEs: The loan amount to be granted will be determined by the cash flow, activity and industry size of the applicant with a maximum of N25 million for SMEs.

Interest Rate of The Loan

The interest rate as shared by CBN on its circulated guidelines for the implementation of this stimulus package indicated that the interest rate of the loan would be 5% per annum (all-inclusive) towards February 28, 2021. Then the loan interest will revert to 9% per annum (all-inclusive) from March 1, 2021.  

The tenor of The Loan

The guideline released by the CBN indicates a maximum of one year for a loan for working capital with no option for a rollover. The term loan has a maximum of the tenor of 3 years with a one-year moratorium.

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