5 Government Agencies that Lend Money to SMEs in Nigeria

DID you know that you can access capital from government agencies for your SME? SMEs are very important to the development of a country’s economy. This is because they are the largest employer of labour. According to the National Bureau of Statistics, SMEs account for 50 percent of industrial jobs, constitute about 90 percent of  activities in the manufacturing sector and contribute 48 percent to the country’s GDP. The SME sector, despite its huge significance, has continued to under-perform in Nigeria.

This under-performance is a function of several factors such as poor managerial skills, minimal access to the required technology, unfriendly business environment, and poor funding, according to the FSS 2020 SME Sector Report, 2007,  As a result, the government has established several agencies to meet the funding needs of SMEs in Nigeria.

Here are some of the government agencies that provide loans to SMEs in the country.

1. Bank of Industry (BOI)

This is a financial institution owned and run by the Nigerian Federal Government. It focuses on making loan facilities available to SMEs for the purchase of industrial equipment. Rather than disburse funds to the SME, the bank sends funds to vendors that make the equipment available. Some of the target sub-sectors are:

1. Agro-processing
2. Information Technology
3. Solid Minerals
4. Oil and Gas
5. Creative Industry

Loans from BOI for SMEs begin at N5 million and it accepts collateral for loans provided. By way of collateral, you can provide any of the following:

1. Legal mortgage on a landed property with a certificate of occupancy.
2. Debenture on company assets.
3. Bank Guarantee.
4. External guarantors, providing a notarized statement of net worth. This for loans less than N10 million.

SME loans from the BOI come at a rate of 12.5%. You can learn more about BOI loans by visiting the loan centre (https://www.boi.ng/loan-application-checklist/).

2. NIRSAL and Nirsal Microfinance Bank

NIRSAL stands for Nigeria Incentive-Based Risk Sharing System for Agricultural Lending. It is a non-bank financial institution with a capital base of $500 million and owned by the Central Bank of Nigeria. This institution was set up to redefine, measure, share and re-price credit risks related to agribusiness in Nigeria. Through NIRSAL Microfinance Bank, the CBN makes its Agri-Business Small and Medium Enterprise Investment Scheme loan available to SMEs (AGSMEIS). The maximum amount an SME can access from this body is N10 million at an interest rate of 9% per annum. Businesses eligible for this loan include:

1. SMEs in the agricultural sector.
2. SMEs involved in manufacturing, petrochemicals, and mining.
3. Businesses providing services such as creativity and information and communication technology.
4. Any other business determined by the CBN.

To access this loan, an SME should satisfy these requirements:

1. Submit the completed loan application form.
2. Provide BVN.
3. Complete entrepreneurship development training from an accredited entrepreneurship institution (EDI) with a certificate.
4. Introduction letter from any of village head, clergy, traditional ruler, district head, or senior civil servant (micro-enterprises or individuals only).
5. Certificate of business registration with the CAC.
6. Tax Clearance Certificate (TCC) and Tax Identification Number (TIN) where applicable.

3. SMEDAN

SMEDAN stands for Small and Medium Enterprises Development Agency and it was established by the government in 2003. The main aim was to facilitate the growth and development of Micro, Small, and Medium Enterprises in Nigeria (SMEDAN, 2020).

This body also provides SMEs with loans at very low-interest rates. Along with the loans, are other services including mentorship and training. These loans are drawn from several fund providers including microfinance banks, commercial banks, and cooperate societies. To access these loans, you have to go through the SMEDAN credit information portal.

Here’s a summary of the steps to follow:

1. Visit the SMEDAN credit information portal http://cip.smedan.gov.ng/.
2. Choose your business loan option.
3. Submit basic information like age, the amount needed, employment status, and purpose for the loan.
4. Check for results based on this submitted information.

You should get a list of requirements for the loan you qualify for as well as the specific interest rates.

4. NEXIM

Nigerian Export-Import Bank (NEXIM) is a financial body established as an Export Credit Agency by Act 38 of 1991. The bank has a share capital of N50 billion equally held by the CBN and the Ministry of Finance. NEXIM provides a loan facility known as the Small and Medium Enterprise Export Facility (SMEEF). This facility was designed to provide support to SMEs focusing on non-oil exports. The intention is to broaden Nigeria’s export basket as well as facilitating industrialization for value-added exports.

Projects that are eligible for support from NEXIM include:

1. Transactions related to the export of products manufactured in whole or part within Nigeria.
2. Export-generating imports such as raw materials, spare parts, and equipment.
3. Export of services such as tourism, consultancy, event planning, transport, etc.
4. Transactions relating to value-added production with support from States or Regions and promotion from the private sector.
5. Projects having regional export promotion or export development objectives.

The interest rate for loans from NEXIM is 9% per annum. Project finance tenor is between 2 to 7 years while it is 1 year with an option of a single roll-over for working capital.

5. Development Bank of Nigeria (DBN)

The Development Bank of Nigeria was established to meet the financing needs of Micro, Small, and Medium Scale Enterprises (MSMEs) in Nigeria. To achieve this, the bank provides financing, technical assistance, and partial credit guarantees to eligible intermediaries. The Participating Financial Institutions (PFI) in turn lend to beneficiaries. Therefore, for an SME to access loans from the DBN, it must have an account with an eligible PFI. PFIs include Commercial and Microfinance Banks as well as Development Finance Institutions.

To access a DBN loan:

1. Visit your PFI and express an interest in getting a loan from the DBN.
2. The PFI assesses your loan application by viewing the business or loan purpose.
3. If it deems it fit, the PFI submits an application to the DBN on your behalf.
4. DBN also assesses the application and if it approves, it disburses the funds to your PFI.
5. The PFI disburses the loan to the end-borrower.

Interest rates are flexible and SMEs have up to 10 years to service the loans.

Taking loans from the government provides SMEs with several benefits. The most important benefit of all is very low-interest rates compared to commercial banks. Small business owners can consider these options to aid their growth and development.