CBN’s 220Bn MSMEDF Initiative: Of Suspicious Disbursements And Denial Of Information (Part 2), By Celestine Okeke
This is in continuation of a series that is planned to run for twelve (12) weeks, if you missed the part 1 kindly search it up below. We will be discussing specific infractions on the provisions of the guideline in this part 2.
The guideline for the fund indicated clearly in sections 5:2 that “PFIs (excluding DMBs) shall mandatorily undergo pre-disbursement capacity building programme to be implemented by the CBN. The Programme shall cover loan appraisal, disbursement, monitoring and recovery among others”
The objective behind the provision above was to help ensure that officials of the various State SPV’s (special purpose vehicles) and Participating Financial Institutions (PFIs) receiving the funds for on-lending are equipped with the requisite skills that will ensure effective loan disbursement and recovery.
In clear contravention of the provisions of the guideline, CBN officials conducted no pre-disbursement capacity building programmes for the benefitting states, the bank only publicised a call for consultants to bid for the programme in May 2015, months after the funds had been disbursed and utilised by the states.
The guideline in sections 5:5 also clearly indicated the following procedures for applications by states;
The borrowers shall apply to the PFIs for a facility.
The PFIs shall forward their applications through the State SPV to the CBN specifying the amount, categories of clients, purpose, etc.
CBN shall appraise all applications submitted by the SPVs in favour of the PFIs, in line with the criteria in Section 5.5.
CBN approves and disburses funds through the PFIs’ correspondent banks.
Findings revealed that rather than solicit for applications from MSMEs in their states in line with the guideline, states prepared whatever it was they prepared and got funds for which no applications has been made for and no appraisal made by the CBN officials.
The disbursement made out to Borno State Government clearly outlines how the CBN officials contravened the provisions above, as at May 2015 and even after, the Borno State PDP and the APC were engaged in a media warfare as regards the disbursement of the funds; while the PDP was accusing the APC led government of delaying the disbursement of the fund it received between January and February for the election period so as to use same for campaign purposes, the APC led government claimed it was delaying the disbursement for after the elections so as not to be accused of using same for electoral campaigns whereas had the CBN officials followed through the application process flow, no state governor would have received a fund for which no application had been made for.
The case is no different for my home state, Anambra, after the disbursement of the fund to the state; MSMEs in the state were asked to go apply to select microfinance banks, applications that were paid for and disbursements not yet seen. The CBN officials clearly allowed state governors to receive funds, after which they begin the process of deciding what percentage of the funds will be disbursed to MSMEs and even more worrisome, what percentage will be disbursed to political cronies and supposedly MSMEs.
The guideline of the fund in sections 5:7 states amongst the following that the CBN shall;
- g) Monitor the implementation of the Fund and prepare periodic reports on its performance.
- i) Ensure compliance of other parties with the Guidelines.
Since inception of the fund no periodic report has been prepared and or published detailing the operations of the fund, when we wrote the bank asking for evidence that it carried out the monitoring exercise as detailed above, it initially stalled our request and six months after, wrote to decline us the sought information.
Let it also be known that failing to carry out this mandatory obligation did not stop the bank officials from liquidating the expense line provided for same under the 10% grant and management expense it graciously allowed its officials to spend from for same and other related purposes.
The guideline further stated in sections 5:8 amongst the following that the states/FCT shall;
- f) Present a convincing annual framework/roadmap on their empowerment programme for prospective target groups, as a basis for measuring performance of the loan.
- g) Provide borrowers of the Fund with capacity building opportunities through State-owned skills acquisition/ vocational centres, CBN Entrepreneurship Development Centres (EDCs) or any such relevant agencies.
Our request asking the bank to furnish us with copies of the “convincing annual framework” that primarily was to justify the applications coming from state government was also declined. Our investigations revealed that rather than have the state governments prepare and forward the applications, a single format was developed for the states and then duplicated for each applying state for a fee. We challenge the bank officials to release for public scrutiny the documents as produced by each of the benefiting states.
CBN officials were to ensure that the states each provided borrowers with capacity building opportunities with a view to helping to ensure the borrowers make judicious use of the funds borrowed but how could it enforce same when it failed to conduct the pre-disbursement capacity building programmes for the state SPV’s and participating financial institutions (PFIs).
The guideline of the fund stated clearly in sections 5:9 that the state SPV’s shall carry out the following functions;
Render quarterly report on performance of the loans to the State Government and CBN.
The idea behind this was to enable CBN follow up on the disbursements as its concern isn’t only on the funds been repaid back by the states (if this was the case it would availed them other form of loan advances and not tag same as MSME development fund) but to strictly ensure that the funds are disbursed to MSMEs on a convincing annual framework that would ensure it spurs economic growth and development.
As is the case with other requests, the bank and its officials have declined us information as to evidence that this provisions of the guideline was adhered to and met by the benefitting states. We yet again, challenge the bank and its officials to publish this information as obtained from the benefiting states.
We are clearly at a loss as to the reasons behind the bank declining to release information made mandatory for disclosure by the guideline of the initiative, same guideline it developed and adopted as stating how the fund will be managed. We are also at a loss as to why the bank officials continue to claim expense from the fund under the guise of carrying out the responsibilities assigned them under the fund and yet won’t release information as relates to the outcomes of same activities.
Anyone who knows the CBN governor should please ask him to release information relating to the entire funding interventions targeting MSMEs as launched by the bank since 1999, he can, as the development finance department of the bank did, release just the list of the initiatives and not state how much was expended as management expense for the funding initiatives. We will understand.
In the part 3 of this series, we shall be publishing findings from the benefiting states, beginning with the FCT administration where a serving minister of state was the Managing Director of Abuja Enterprise Agency, the agency that was stated as the SPV that was to manage the fund for the FCT and cannot point to any disbursement made out to MSMEs in the FCT.
Thank you all for sparing your precious data and time to read this, kindly share with friends and keep asking questions so that hidden facts will be revealed and Nigeria can then begin the march, once again, to greatness.
INITIATIVE HEAD, MSMES ADVOCACY AND SUPPORT INITIATIVE
Ediitor: Opinion expressed in this article is strictly the views of the writer and does not necessarily reflect the views of the abusidiqu.com or its associates.