National Credit Guarantee Firm Begins Operations With N100bn Capital

The National Credit Guarantee Company Limited (NCGC) is set to begin operations with an initial capital of N100 billion. It promises to complement existing interventions by providing credit guarantees that unlock sustainable financing for the country’s underserved sectors.

The managing director/CEO, Bonaventure Okhaimo, who spoke at the ‘Stakeholders’ Engagement on the Take-off of the NCGC’, said the company was created to strengthen ongoing efforts by Development Finance Institutions (DDFIs), financial institutions, and government initiatives in tackling credit constraints.
Stating that it will play the crucial role of a loan guarantor, thereby reducing the risks for lenders and encouraging increased credit availability, he added, “We do not lend directly; rather, we provide partial credit guarantees, covering a portion of potential loan defaults. This innovative approach incentivises financial institutions to extend more credit, confident in the knowledge that a part of the risk is borne by the NCGC.”

By providing this much-needed safety net, he said, the company aims to expand access to finance to Micro, Small, and Medium Enterprises (MSMEs), local manufacturers, and credit consumers. Thus, the company aims to minimise the risk exposure of Participating Financial Institutions (PFIs), lower default rates, and ultimately drive economic growth and promote financial inclusion.

To achieve this, he stressed that ‘we will partner with PFIs, leverage data and technology, engage industry groups, build capacity, raise public awareness, and advocate for enabling credit policies.’
Delivering a paper at the event, founder of B. Adedipe Associates Limited, Dr. ‘Biodun Adedipe said, NCGC is a long-awaited institutional intervention in the Nigerian credit market and it is that component of the credit market that can strongly drive inclusive growth and deepen industrial manufacturing.

He charged all stakeholders with collaborating to make it work, adding that, ‘perhaps the greatest risks are moral hazard and political interference. It has the potential to operate profitably.’

“The company has started on a good note with a well-defined modus operandi and mechanics, and it has a solid leadership team.

This has been a major constraint in the Nigerian credit market for decades. The terms and conditions of credit grantors are central in this, though standard requirements in commercial lending,” he stressed.

To him, “Yet, we cannot change the institutions because they are profit-seeking entities that have a return responsibility to their owners and the needs/expectations of other stakeholders. As such, we see situations where a transaction is attractive to the credit grantor but deficient in fallback. This is the crux of credit guarantee.”