Author: Edmund Higenbottam


Date: 4 April 2017

Fund Raising for Inclusive Financial Institutions in Nigeria from International Markets

Current challenges in raising funding for inclusive financial institutions in Nigeria from international markets include, the uncertainty around the foreign exchange policy and risk of central bank rationing of US Dollars when the time comes to service the debt. International investors who have invested over the last few years and have executed offshore currency hedges have been impacted by rationing of US Dollars. International investors today who are looking at the market, are exploring different hedging mechanisms, including back-to-back facilities with local banks, or even providing unfunded guarantees, but many specialist inclusive finance investors are maintaining a watching brief for now.

Government entities in Nigeria have sought to support micro finance and SME lending institutions in recognition of the important role micro enterprises and SMEs perform in providing a livelihood for individuals and creating employment. The current initiatives include, the Central Bank SME Fund (Naira 220 billion), borrowers from which can include microfinance banks, banks as well as state governments. Interest is charged at 2%, but there is a cap on the on-lending rate by the institutions. Institutions who have benefited from this scheme have on-lent the funds to their best repeat clients. The Bank of Industry has a Naira 75 billion for bottom of the pyramid enterprise lending. The Lagos State government has a Naira 25 billion scheme for institutions in its state, the Lagos State Employment Trust Fund.

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