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#COVID19 Intervention Fund: How Rejected Applicants Struggle To Grow Businesses

After failing to access the Central Bank of Nigeria’s (CBN) loan intervention to support businesses affected by the COVID-19 pandemic, applicants struggle to keep their sources of livelihood afloat.

Born into the business of kola nut trading, Afeez Oyelayo has expanded his supply from Ifon, Osun State, Southwest Nigeria, to the northern part of Nigeria, where he makes quicker sales.

Throughout his childhood, he was taught by his mother the seasons, system of farming, and how to make money from kola nuts before he started his own business in 2017.

“Kola nut business is common among the Yoruba and Hausa with easy movement from North to west. We get our raw products from villages and repel the shrub to bring the expected seed with the use of much water. After binding, we sell to Hausas,” he said.

Oyelayo has six workers with five rooms acquired for stocking his products before sales.


However, the restriction of movements to reduce the spread of COVID-19 affected Oyelayo’s business as he was unable to make transactions as usual.

“During the lockdown, Hausa traders were unable to travel down to the Western part of Nigeria and also unable to move out of the country with the kolanut. The COVID-19 lockdown consumed all my capital and surviving afterwards was a struggle,” Oyelayo added.

Oyelayo had hoped that the Federal Government’s loan intervention, through the Central Bank, would help revive his business but he got no response after his application.

COVID-19 and Nigeria’s economy

Just like other countries, the impact of the COVID-19 pandemic crippled Nigeria’s health and economic sectors.

In response to this, the country slashed its 2020 budget, established a presidential task force to coordinate efforts to contain the spread, enforced lockdown measures, in stages, across the country, and set up an Economic Sustainability Plan (ESP).

Also, the government received multiple donations to support the fight against the virus into the account of the Coalition Against COVID-19. Porshare reported that the government received financial donations of N21.5bn as of April 7, 2020, while some material donations were given to the state governments and the less privileged across the country by private and non-governmental organisations.

The ESP, based on three pillars, involved a phased disbursement of N2.3 trillion in critical sectors and among critical demographics. However, BudgIT, a Nigerian civic organisation monitoring public funds, published that only N288 billion has been disbursed from  the N500 billion portion of the total amount set aside for COVID-19 intervention programmes under the ESP.

Meanwhile, the CBN simultaneously opened applications for loans under several intervention programmes to support the country’s economy.

The apex bank, after recognising the dampening effect of the pandemic on the economy in terms of GDP, inflation, food price index, forex, PMI, and crude oil sales, said the interventions  were put in place to stimulate economic recovery.

Applications are done via an online portal with clear evidence of the opportunity or adverse impact as a result of COVID-19 pandemic.

Some of these initiatives include the Anchor Borrower Program, Target Credit Facility, HealthCare Support Intervention, Mass Metering, COVID-19 Vaccine and loan for the Creative Industry.

While the bank still expresses worry over low public awareness concerning the initiatives, it has significantly recorded a lot of beneficiaries under these programmes. 

Struggle for survival

Oyelayo, just like other beneficiaries, applied for a loan from the apex bank. His aim was  to invest into his business with an expectation to pay back as sales increased but was not granted.

“At the end of a season, I earn double of my capital because the kolanut business is seasonal and we have two seasons.”

“I started with financial stress and picked up gradually but the COVID-19 pandemic drained me. I filled the form online expecting a response but I did not get it. Survival after that has not been easy for my business,” he said.

Another applicant, Felix Akins (not real name), said he received a mail confirmation that acknowledged his request and no response since then. “I had to shut down one business for another,” he told HumAngle.

Akins, who had been into livestock (poultry) farming for three years, shut down his business to pick up mobile banking as an alternative. 

Loan effectiveness questionable

Aside from the intention to support businesses that have been grossly affected by the pandemic,  disbursements of these loans and intervention schemes sought to ease the burden on the country’s economy.

During the period of lockdown, Nigeria’s inflation rose  to a peak 18.17 per cent in March 2021 (highest in four years),  unemployment rate for Q4 2020 was the highest in over 5 years (33.28 per cent), while the Gross Domestic Product (GDP)  was 0.11 per cent at the end of the fourth quarter in 2020.

Despite a slight relief on the country’s economy, Vahyala Kwaga, Senior Research and Policy Analyst BudgIT Foundation, said  “The Nigerian economy was pushed into a very fragile state in 2020 and was observed to have contracted by 1.8 per cent (World Bank, 2021). This means that businesses were severely hampered from carrying out their economic activity.”

Kwaga noted that an assessment of the interventions and loan disbursement would be  difficult as there are no verifiable, accurate and timely data.

“There have been numerous complaints by Nigerians that the allocations were not 

distributed fairly and equitably. This goes back to the problem in Nigeria’s data-gathering ecosystem.”

“Since there is no prioritization in the gathering of data, it will be difficult to provide authoritative comments on whether interventions have worked.”

“However, if one goes by anecdotal evidence from newspapers and blog sites, Nigerians do not appear to be convinced that the loan disbursement and cash transfers have helped, as it is uncertain what the government hoped to achieve — whether they intended to keep feeding, income levels and general economic activity stable.”

“Yet, in fairness to the federal government, concluding that interventions have not worked for Nigerians and businesses may be difficult to answer because government interventions usually have a ‘lag’ period (two or three quarters) before they show whether they have worked or not,” Kwaga said.

***

This report was carried out with support from BudgIT Foundation


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