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While lauding the
Central Bank of Nigeria’s measures to address credit accessibility in
the economy, finance experts have expressed scepticism about the
effectiveness of the schemes, given the level of success of previous
schemes.

Sunday Salako, a
member of the National Economic Management Team (NEMT) said unclear
procedures and corruption usually hinder the success of such schemes,
even though they were introduced with good intentions.

“The banks have
already started the disbursement of funds,” he said. “These schemes
have been around for a while, even before the crises, because banks
have been expected to put away some funds with the Central Bank for
SMEs.” “The Central Bank is seeking to revamp the aviation industry.”
He also confirmed that a N500 billion fund would be available for the
airline industry.

“It is because of
bureaucracy and corruption that we don’t get to see the effectiveness
of these schemes; we don’t get to feel the impact,” he said. “Look at
the issue of the textile bailout scheme some time ago, during that time
too, they approved money but till date, we don’t know which textile
companies in particular were able to take advantage of it and what
exactly they got from it.”

The Central Bank
said on Sunday that it was extending a N500 billion fund meant to
stimulate credit to the power and manufacturing sectors to the
country’s disturbed airline industry. Banks and the airlines have
continued to exchange press releases justifying their own sides of the
bargains, and finance analysts requesting the federal government to
intervene or risk leaving customers funds at risk as they warned that
some Nigerian airlines are actually in such awful financial state that
they could result in mergers or utter collapse of the industry.

The Central Bank has said it hopes to make these funds available to airlines at a payback time frame of 10 to 15 years.

“These airlines can
now partake from the fund, and those that are indebted to banks can
refinance their loans and amortise them over a period of 10 to 15
years,” Central Bank spokesman, Mohammed Abdullahi said.

He added that the
decision by the CBN is based on the fact that most of the Airlines are
heavily indebted to banks which constitute a risk to the banks
concerned and by extension the banking sector. “It is also to assist in
propping up the demand side to facilitate continued growth of the
economy. This, we believe, would help put off the much feared finance
crisis threatening the smooth operations of the aviation industry” he
said.

The battle for credit growth

The Central Bank
first announced the N500 billion facility in March as part of efforts
to revive credit to the real economy, which has been undergoing banks
tightened lending criteria after the Central Banks’ special audit of
the banks last year.

In May, the Central
Bank issued the guidelines for the establishment of a N200 billion
Small and Medium Enterprises Credit Guarantee Scheme to be wholly
financed by the Central Bank with the aim to fast-track the development
of the manufacturing SME sector of the Nigerian economy by providing
guarantee for credit from banks to SME’s and manufacturers.

It said N200 billion of the fund would allow banks to refinance
loans to manufacturers while the balance will be used to finance power
projects in Nigeria. Despite the Central Bank’s measures including
leaving its benchmark interest rate at six per cent since July, in
spite of double-digit inflation, to encourage banks to grow their loan
books and create credit assets among other measures, the impact so far
has been limited as bank credit to the private sector has remained flat
at around 0.3 per cent this year from about of 25 percent in 2008.