Baba Maina Gimba, is a lawyer and a banker, who has been presiding over the affairs of the National Economic Reconstruction Fund, NERFUND, for over a decade. In this interview with Soni Daniel, Binta Adulazeez Idris and Ruth Choji, Gimba speaks on the role of the fund in the industrialisation process of the country and the challenges it is grappling with.
Where does NERFUND stand in our economic process?
Our mandate is basically to extend financial assistance (credit) to Nigerians in the manufacturing sector to grow their business.
What is the difference between NERFUND and the Bank of Industry BOI?
We are all development financial institutions, complementing each other. But the difference is that the other agencies are bigger than us by way of their scope and what they do. For instance, BOI has offices across the country while we concentrate all our operations in Abuja.
Why should an investor or entrepreneur come to you for funds or the other agencies?
The difference lies in the amount of money required by the entrepreneur. We can provide funds ranging from N5 million to N100 million to entrepreneurs but those who need more than that should go to the BOI because they have the mandate to provide more funding than us.
What does a Nigerian investor need to do in order to qualify for your funding?
First the enterprise must be owned by a Nigerian and it must be involved in the manufacturing sector.We don’t patronise agriculture because there is the bank of agriculture; you must also come up with a bankable project, a thorough feasibility report to be able to draw down our funding.
However, whatever it is, comes down to our ability to accommodate such request because everything boils down to money because we borrow our money for all that we do.
Are you saying that you operate like a bank?
Yes, by definition we are a financial institution yes, we are a bank.
Is it cheaper to get funding from the bank or NERFUND?
It is much cheaper to get funding from NERFUND because we are non-profit oriented. NERFUND is not established to make profit but we should be able to break even and take care of our overhead since we don’t receive budgetary allocations from the government. That notwithstanding, our interest rates are lower than that of commercial banks.
For instance, our interest rate for small and medium enterprises is about 13% and the interest rate stagnates throughout the tenor of the loan. We have also introduced a second window of borrowing, which is the micro credit.
That ranges from one naira to N5,000 000 and the interest rate is 8% and we don’t demand collateral as a condition for granting the loan. All we demand from an entrepreneur is for them to provide two acceptable guarantors in order to draw down.
How much has NERFUND disbursed so far to Nigerians?
NERFUND started in 1989 and between 1989 and year 2000 it has gave out over N3 billion to 266 projects. No fewer than 560 projects were approved for funding but we were only able to finance 266 of such projects spread across the country.
Unfortunately, between 2000 and 2010 NERFUND was virtually comatose in that there was no serious activity. We were not lending. However, lending picked up in late 2010 such that between then and February 2012 we gave out about N1.6billion to micro entrepreneurs who needed between N1 million to N5 million each.
What has been the recovery rate of these loans?
In the first phase of our existence, the organisation had some hiccups. By that time, we were lending through commercial and merchant banks most of which were closed down due to some unforeseen circumstances.
All the monies we leant through these banks were trapped in the banks that went under and we had to liaise with the National Deposit Insurance Corporation, NDIC, which took over the management of such institutions to recover the money. Although we lost some money, we were able to recover over N3 billion. In terms of number, we have been able to recover all our money from 228 out of the 266 firms that borrowed money from us within the period under review.
What are the major challenges of NERFUND in trying to save Nigerian investors?
Like I told you, we are not entitled to budgetary allocations and as a result, our major constraint now is funding. We have to source for our funds because the law establishing us does not allow us to access money from the treasury free of charge. We have to go to the treasury to borrow for our operations.
Before now, we were accessing loans from African Development Bank (ADB) but lately these monies are being guaranteed by the federal government with a lot of restrictions placed on external borrowings. We have not been able to borrow any more from ADB and we depend on the Nigerian treasury to borrow in order to service our customers. Thus, our major challenge is funding.
How can the funding challenge be solved?
We are having some structural problems. NERFUND started as a body during the tenure of President Obasanjo. But around 2000 there was a move to merge our operations with the Nigerian Industrial Development Bank, NIDB and other bodies to establish the Bank of Industry. But they quickly discovered that NERFUND, being a product of an Act of the parliament could not just be disbanded like that until an enabling law was put in place.
The National Assembly will need to repeal the law establishing the fund before it can be absorbed by another body.
Unfortunately for us the matter was tabled before the House of Representatives but it was stepped down and a decision was thereafter taken to merge us with the BOI. A White Paper was issued to that effect but to give legal backing to the white paper, the National Assembly has to give its nod to it.
But having rejected the move to merge us, the NASS left the matter hanging till date and we are in a quagmire, unable to make progress: the government said we should be closed but the National Assembly rejected the move. So, for ten years, we have been battling to know where we really belong and we are not getting serious funding from the treasury and not doing much in the past ten years.
Till today that matter has not been resolved and that has really restricted our ability to expand our operations. We had planned to establish zonal offices all over the country but since our fate has not been finally decided we couldn’t do it. That has been our major constraint over the years.
Given your experience as one who has presided over the affairs of this agency what do you think Nigeria should do to accelerate industrialisation?
There are so many factors depending on who you are talking to. From my experience as the chief Executive of NERFUND, we must make funds available for investment and make amends, if we really want to attract foreign investors who would come here and establish industries.
Secondly, government must do everything possible to check policy somersault, which has the potential of discouraging investors from coming into the country to invest.
We started funding projects like the production of tooth pick and vegetable oil but suddenly, the policy to allow the importation of these items came into place and the local producers lost the market to the importers through policy reversal.
Our local manufacturers could not compete so they were unable to service their loans we gave them and we made the presentation to the government praying that high levies should be placed on importations to protect our local industries.
Another problem is weak power base. No industrialist can successfully operate without constant power supply.
One cannot break even or make real profit running on generating set.
If he succeeds in producing at all, such products would be higher in prices that even the imported ones and the manufacturer cannot hope to compete favourably with their counterparts.