Relief as CBN begins disbursement of N200bn creative industry fund

Standing at an all-time high of 23.10 per cent by the end of September 2018, Nigeria’s rising unemployment rate has become an intense subject of discussion among every social strata of the country. Despite this, population growth is one of the highest in the world at 3.2 per cent according to a report by National Bureau of Statistics (NBS). Aside illiterates who join the labour market as early as early teens, millions complete their primary and secondary school education annually and immediately swelling the job market because of their inability to further their studies due to funding reasons or inability to gain admission. There are as yet another five million or so more leave various tertiary institutions every year.

There have been efforts in the past by governments and other organisations aimed at creating employment, growing the economy and diversifying sources of foreign exchange earnings for the country but most of these either failed out rightly or only achieved insignificant levels of success. Some of those measures included monetary, fiscal and industrial policy measures to promote the development of SMEs.

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Some states established industrial estates to reduce overhead costs. Some specialised financial schemes and institutions like Small Scale Industry Credit Scheme (SSICSs), Nigerian Industrial Development Bank (NIDB), Nigerian Bank for Commerce and Industry (NBCI), National Directorate of Employment (NDE), National Economic Reconstruction Fund (NERFUND), were all set up by the Federal Government in its quest to attain the above objectives.

Even the Central Bank of Nigeria established the omnibus Small and Medium Industry Enterprises Investment Scheme (SMIEIS) in conjunction with the Bankers’ Committee.  The fund was engaged in equity participatory funding of businesses that are agro-allied, information technology, telecommunication, manufacturing, educational establishments, services, tourism and leisure, solid minerals, construction, and any other activity as may be determined from time to time by the Bankers’ Committee.

Yet, by 2014 when current Governor of CBN, Mr Godwin Emefiele took office, the economy was badly shaped, and this manifested in plummeting oil prices, dwindling external reserves, worsening unemployment all leading to a recession by the second quarter of 2016.

Upon his assumption however, Emefiele promised to focus on utilising the development finance responsibility of the apex bank in reflating the economy.

One of the innovative approaches to development financing introduced by Emefiele was the establishment the Agri-Business/Small and Medium Enterprises Investment Scheme (AGSMEIS) by the Bankers’ Committee at its 331st meeting of February 9, 2017.

It was aimed at supporting Federal Government’s efforts at promoting Agricultural businesses/Small and Medium Enterprises (SMEs) as a vehicle for sustainable economic development and employment generation.

All Deposit Money Banks (DMBs) pursuant are required to set aside and remit to the designated account domiciled in the Central Bank of Nigeria (CBN), five per cent of their annual Profit After Tax (PAT) for equity investment in permissible activities as stipulated in the scheme guidelines.

The AGSMEIS is a voluntary initiative of the Bankers’ Committee to support the Federal Government’s efforts and policy measures for the promotion of agricultural businesses and small and medium enterprises (SMEs) as vehicles for sustainable economic development and employment generation.

The objectives of the scheme are to: ensure access to finance for Small and Medium Enterprises (SMEs), as these enterprises are the engine of growth of the Nigerian economy; generate much-needed employment opportunities in Nigeria; develop agricultural value chain and ensure sustainable agricultural practices; and boost the managerial capacity of Agri-Business/SMEs as pipelines of growth enterprises that can become large corporate organizations.

The Scheme shall cover the following activities: agricultural investments which include production, storage, processing and logistics; SMEs in the real sector as well as services sectors which are backward integrated into manufacturing/agriculture/mining/modular refineries including local initiatives in information and communication technology (ICT), and other activities as may be determined by the Bankers’ Committee from time to time.

Investments under the scheme which could be for start-ups, expansion of established companies or reviving of ailing companies, shall be through equity in the form of fresh injection of capital.

Participating banks shall set aside 5 per cent of their PAT annually after their financial statements have been audited by external auditors and approved for publication by the Central Bank of Nigeria.

Eligible applicants shall submit applications through any of the participating banks to CBN. CBN shall conduct initial review of the project to ensure the project is within the focal sectors of the Scheme. All projects that meet this requirement shall be forwarded to the Project Review Committee (PRC) of the Bankers’ Committee through the Chairman, Sub-Committee on Economic Development, Sustainability and Gender.

However, to be eligible for funding under the Scheme, a prospective investor shall: comply with the provisions of the Companies and Allied Matters Act (1990) such as filing of annual returns, including audited financial statements; Comply with all applicable tax laws and regulations and render regular returns to the appropriate authorities; and apply through a participating bank.

A subset of the AGSMEIS is the N200 billion Creative Industry financing initiative.

Through this initiative, CBN intends to create about 300,000 jobs over a five-year period out of the N200 billion intervention fund scheduled for imminent disbursement to the creative industry.

In the view of immediate past Minister of Information and Culture, Alhaji Lai Mohammed, the creative industry is one area where the Nigeria has comparative advantage and capacity to deliver the economy from mono-economy and noted the Federal Government’s resolve to incentivise the sector.

At its meeting in March 2019, the Bankers’ Committee led by CBN announced that it has developed a Creative Industry Financing Initiative (CIFI). Under the initiative, beneficiaries could get up to N500 million loan at nine per cent interest rate. The creative industries that could apply include fashion, information technology, movie distribution, music and software engineering. This specialised initiative is part of efforts to boost job creation, particularly among the youths.

Managing Director and Chief Executive Officer (CEO), Access Bank, Mr Herbert Wigwe explained that the intervention, which will take place in four strata of the creative industry, that is, movies, music, IT and fashion is aimed to ensure that the entire value meets world class standards. “As a starting point, it will lead to about 300,000 new jobs over a five-year time span. It will lead to significant accretion as far as Foreign Exchange (Forex) is concerned coming from each of the verticals. It will also lead to significant savings in the textile industry,” he highlighted.

“The loans are for a maximum of 10 years, they are single-digit interest rate loans and reflective of the fact that in these specific industries, what they require is long term financing at single-digit; while we will ask for collateral it will be flexible. I think it is a big initiative to our country.”

Although similar interventions have been made in the past, collateral remains a major challenge to accessing such loans, but Wigwe gave the assurance that creative industry loans would be flexible and hinged on various collaterals such as personal guarantees, collateral registry and the assets being financed. However, prospective participants will be subjected to thorough screening.

“First of all, it must be the primary business of the person. It is very important. There must be some form of equity. We are taking into consideration the specific circumstances around industry participants. It’s a big catchment area and we believe it’ll create the impetus for longer term fund providers to come in and it will create room for expansion in terms of what this fund is put into,” he noted.

Nigeria’s creative industry appears to be one of the many options available to the government, having contributed about N239 billion to the nation’s Gross Domestic Product (GDP) in 2016.

According to Forbes, Nigeria’s movie industry – Nollywood, which is one of the catchment sectors of the creative industry is currently worth $800 million and ranked second largest in the world, after Hollywood. It is already bigger than India’s Bollywood on per-capita basis. This push from CBN and deposit money banks is expected to even boost the sector further both qualitatively and quantitatively. It would also further diversify sources of foreign exchange.

Already, CBN has invited interested and qualified individuals and companies to apply for the fund through any of the participating commercial and merchant banks.

Applying for the loan

The first step is to prepare a business plan or statement on how much you want for your business.

You can get a loan of up to: N3 million for software engineering student; N30 million for movie production business; N500 million for movie distribution business; cover your rental/service fees for fashion and information technology business; cover your training fees , equipment fees, and rental/service fees for music business.

Go to any bank of your choice to access the fund; tell your banker how much you need; your bank will discuss your request and provide you the money. The maximum interest rate of 9.0 per cent per annum (all charges inclusive) is applicable to all loans.

Period for repayment of the loans: for software engineering student loan, it is a maximum of three years; for movie production and distribution, it is a maximum of 10 years; for fashion, information technology and music, it is a maximum of 10 years.