FirstBank: Championing SMEs’ growth through loan products initiative


First Bank of Nigeria Limited is at the forefront of developing different loan products that suit the needs and growths of SMEs in the country. AMAKA IFEAKANDU looks at the products and their impact on the SMEs and growth of  the nation’s economy

In recent time, the Nigerian government introduced different initiatives to boost activities of the small and medium scale industry in the country.

With the support of the World Bank and the African Development Bank, the government has assisted SMEs through various credit schemes and loans structured to fund their activities.  Some of them are World Bank SME loan scheme, African Development Bank Export Stimulation Loan scheme; CBN Rediscounting and Re-financing Facility, National Economic Reconstruction Fund.

At different times, the apex bank has come up with intervention funds to enhance SMEs production. Apart from government, there are other ways SMEs can be funded which are through bootstrapping, loans from banks, moneylenders and grants from government institutions and non-governmental institutions. Financial experts are of the view that the reason government’s attention has always been on the small scale enterprises is because the total aggregate of the type of business has the potential for accelerating the pace of economic development of the country and has successfully played positive role in the economic life of Nigerians in the rural areas. 

SMEs’ records of low performance

it appears that considering the enormous potentials of the SMEs sector, and despite the acknowledgement of its immense contribution to sustainable economic development, its performance still falls below expectation in many developing countries, including Nigeria. This is because the sector in these developing countries has been bedevilled by several factors. These factors include the unfavourable and very harsh economic conditions resulting from unstable government policies; gross under capitalisation, strained by the difficulty in accessing credits from banks and other financial institutions; inadequacies resulting from the highly dilapidated state of Infrastructural facilities; astronomically high operating costs; lack of transparency and corruption; and the lack of interest and lasting support for the SMEs sector by government authorities. 

These challenges have affected the SMEs’ contributions to the Nigerian Industrial output in particular. 

Government’s  efforts on SMEs growth 

In Nigeria, the current administration and financial institutions are doing everything possible to ensure sustainable growth of the SMEs in the country. 

Under  the mortgage industry, the federal government had in the past, come up with different initiative to develop mortgage industry in the country. The federal government set up Federal Mortgage Bank of Nigeria(FMBN), the National Housing Funds (NHF) and the Nigeria Mortgage Refinance Company (NMRC) with the intention to make housing in the country more affordable.

Also, the Federal Ministry of Finance and the Nigerian Sovereign investment Authority (NSIA) jointly initiated the creation of Family Home Funds and voted N1 trillion for setting affordable housing for Nigerians with the potential capacity to generate up to 1.5 per cent increase in Gross Domestic Products by 2023.

NMRC, which came up with refinanced mortgage loans totalling N18 billion as at December 2018,  explained it was in line with its mandate to promote affordable home ownership in the country.

The NMRC, had in a statement, said:“The deployment of the N18 billion to refinance mortgage loan portfolios of member-lending institutions has helped to boost liquidity in the Nigerian housing market, thus enabling mortgage lenders to provide more housing loans and encouraging long-term mortgage loan creation.”

Although the deployment of the fund impacted either housing delivery or home-ownership, but it fell short of closing the country’s  housing gap. But today some Nigerian banks including  First Bank of Nigeria Limited has introduced loan product that will help boost development of commercial mortgaging in the country. It is believed that accessing such fund would go a long way to boost activities in the sector.

Petroleum sector

The federal government, in partnership with Central Bank of Nigeria (CBN), established a N250 billion intervention facility to stimulate finance and motivate investors in the gas value chain for sustainable business development in the country. The fund, according to the permanent secretary, ministry of petroleum resources, Bitrus Nabasu;  was designed to improve access to financing for private sector investment in the gas value chain and stimulate investment in the development of infrastructure to optimise the domestic gas resources for economic development.

Other objectives of the facility include providing a platform to fast track the adoption of Compressed Natural Gas (CNG) as the fuel of choice for transportation and power generation and Liquefied Natural Gas (LPG) for domestic cooking, transportation and captive power.

Provision of loan facilities either from government or financial institutions always help to revive companies struggling to survive.

Transportation Sector

Also, in its effort to sustain the growth of the SMEs in the transport sector, the federal government recently initiated intervention grant for micro transport operators under its Survival Fund for Micro, Small and Medium Enterprises (MSMEs). The scheme tagged the Transport Track targeted at 4,505 beneficiaries in each state across the country. But the grant is not sufficient enough to close the transportation gap experiencing in the country. Experts are of the view that transport industry has the capacity to generate more revenue to Nigeria if government and financial institutions give them adequate support. Available data showed  the Nigerian transport sector accounts for 74 per cent of Public-Private Partnership (PPP) amounting to $27 billion funded projects in the country with an investment gap of about $113 billion. 

Agricultural sector

Without doubt, agriculture remains key to the country’s economic diversification agenda. The  CBN has developed different agricultural schemes to sustain growth in the agric sector. Some of the schemes include Agric Credit Guarantee Scheme Fund (ACGSF), Commercial Agriculture credit scheme (CACs), Agricultural Credit Support Scheme (ACSS) and Anchor Borrower Programme. The CBN’s intervention funds in agriculture have helped farmers to some extent increase productivity. 

The Agri-Business/Small and Medium Investment Scheme (AGSMEIS) was also established  to support the federal government’s efforts at promoting agricultural business/ Small and Medium Enterprises (SME) as a vehicle for sustainable economic development and employment generation. But with the outbreak of COVID-19 pandemic, the federal government has seen the urgent need to diversify its revenue base into non-oil sectors by boosting support to priority sectors of the economy with high potentials to create jobs.

Construction sector

Contract financing is seen as a great way of fulfilling government contracts, and is quite common in the construction sector. It can be seen as a form of working capital finance. Contract financing is a payment solution where the contractor sells an invoice to a contract financing company to receive an advance up to 90 per cent of the invoice amount before the project begins. This provides the company cash flow which can help finance project-related costs, such as inventory and equipment. When the contract is paid by the customer, the contract financing company will send the contractor the remaining amount, less a fee. 

First Bank’s efforts at promoting SMEs growth

First Bank of Nigeria is one of the nation’s banks at the forefront supporting the growth of  SMEs in the country. The bank has initiated different products targeted at financing the specific needs of SMEs.  Some  of the funds can be used for commercial mortgage finance, petroleum distributorship finance,  operational vehicle finance, contract finance among others.

Commercial Mortgage

This facility is designed to meet the funding needs of established small and medium scale enterprises in a viable business with respect to acquiring business premises under the outright purchase or construction scheme.

The loan attracts 60-month tenor with maximum loan amounting to N100 million while the collateral is the property purchased. 

The beneficiary  will also pay management fee of one per cent under a competitive interest rate.

Petroleum Distributorship Finance  

The product is created to provide finance for dealers of fast moving white petroleum products (Premium Motor Spirit (PMS), Dual Purpose Kerosene (DPK), Automotive Gas Oil (AGO), and must possess DPR license and have been in business for at least 24 months.

The loan has 12-month tenor  with flexible collateral and  a maximum loan amounting to N120 million. The product  has competitive  interest rate  with the  management fee of one per cent.

Operational Vehicle

This product is initiated  to part -finance SMEs vehicles for operational use for day-to-day running of their business such as logistics and distribution. It was put in place to support business growth and expansion by giving beneficiaries the opportunity of purchasing the vehicle with ease.

The loan has 24 to 36-month tenor depending on the brand of the vehicle. The maximum loan is put at N20 million and above while collateral is the vehicle purchased.

Fast Moving Consumer Goods  (FMCG)

This facility was developed to provide finance for distributors of FMCG companies on the bank’s approved list of principals to support distributors’ working capital requirement for their business expansion. The loan provides opportunity to increase volume of business and meet target set by principals.

The loan has 12-month tenor with maximum loan totalling N500 million and flexible collateral. The loan attracts flexible and competitive interest rate with the management fee of  one per cent.

Contract Finance

Contract Finance was established to provide structured and controllable funding to eligible SMEs for the execution of contracts for companies listed on the bank’s approved list.

The fund has 180-day tenor with maximum loan amounting  to N50 million and above.  It has flexible collateral depending on the nature of contract. Interest rate is  flexible and competitive with management fee of one per cent.

In all, SMEs constitute the driving force of industrial growth and development in the country. The government should focus on and nurture the sector by making funds at low-interest rates more accessible to players in it to help them thrive.