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Survey: 75% businesses to default in loan payment

#EndSARs protests, COVID-19’s impact severe, says LCC

 

With the assurance by Central Bank of Nigeria (CBN) to increase access to credit this year, a new survey on the stable of Lagos Cham-ber of Commerce and Industry (LCCI) has showed that 75 per cent of Nigerian businesses, mostly micro, small and medium scale enterprises (MSMEs), will not be able to service their debts to banks following disruptions from #End- SARS protests, second wave    of COVID-19, as well as weak economic activities.

 

Consequently, there is high expectation that nonperforming loans (NPLs) would rise astronomically over payment default.

 

In addition, the LCCI survey also showed that 65 per cent of Nigerian businesses (MSMEs) were out of capital and now struggling to access credit from the apex bank’s N50 billion credit facilities slated for SMEs mostly affected by disruptions.

 

Likewise, the survey pointed out that 35 per cent of Nigerian businesses that   have had opportunity to take loans from either the commercial banks or CBN intervention funds for their trade were currently facing challenges arising from effects of COVID-19 on the business environment, #EndSARS and other disruptions.

 

The survey report, titled: “Impact of the #EndSARS Looting on Businesses in Nigeria,” indicated the pivotal role of credit in the growth process of Nigerian businesses, saying that this was, however, impaired by activities of #EndSARS protests, COVID-19 lockdown and weak economic conditions and business activity disruptions.

 

The LCCI survey, which was coordinated by Dr. Mathew Ojo, an Assistant Director, Research and Advocacy, LCCI and three other senior officials, is meant to measure how the #EndSARS protests, specifically the looting, affected businesses in the country.

 

According to the survey, “most respondents (75 per cent) that currently have access to loans from banks are not able to meet their debt obligation due to weak economic and business activities, even as they struggle in order to break even.

 

“The inability of most businesses to meet their loan obligation has led to rise in the non-performing loans (NPLs) of banks. The banking industry witnessed a 14 per cent rise in NPLs as increased by N1.212 trillion at the end of June 2020. This translates to increased credit risks with negative implication for banks access quality.

 

“Despite the increase in loan to deposit ratio and the reduction in monetary policy rate aimed at reducing borrowing costs, most businesses, especially, micro and small business owners, find it difficult to get bank loans.

 

This also reflects why banks find it difficult to give out loans due to the high risk of default. Therefore, it is critical to formulate policies that allows for a more conducive business environment to spur lending in the real sector. “Government needs to improve on the ease of doing business as the current business environment stifles businesses and the weak purchasing power of consumer makes it tough for businesses to survive and thrive.”

 

The LCCI survey also showed that most businesses (72 per cent) have resumed activities, but below level of the pre-lockdown of the economic activities. It stated that this was due to weak consumer demand as most Nigerians are yet to recover from the tough economic conditions following the ripple effects from the lockdown.

 

According to LCCI, just 14 per cent of the respondents have fully resumed their business activities as most of these businesses have not been able to adapt to technology.

 

Similarly, LCCI also said that about 15 per cent respondents are yet to resume  their business activities, which depicts that these businesses might have been badly disrupted by the lockdown.

 

This also reflects the weak purchasing managers’ index, which endured six months of contraction from May till October and only recently gained momentum in November 2020 at 50.2 per cent. The survey further reported that 18 per cent of the respondents were attacked and looted.

 

These businesses are part of those currently operating below the pre-lockdown capacity. LCCI added that this had further deteriorated their current state as most of them will be forced to face difficulties in terms of continuing with their businesses.

 

Although LCCI stated that 82 per cent of those interviewed claimed their businesses were not looted, the curfew imposed by the state governments, however, disrupted their business activities for the period it lasted.

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