Microfinance institutions (MFIs) have emerged as a cornerstone of financial inclusion in Nigeria, aiming to alleviate poverty and stimulate economic growth. Their goal is to uplift low-income earners, small businesses, and the underserved by providing them with access to credit and savings. 

However, the efficacy of these institutions in alleviating poverty and stimulating economic growth remains a subject of intense debate. This article delves into the impact of MFIs on poverty reduction and economic development in Nigeria, examining their successes and challenges.

Empowering the Poor or Creating a Debt Trap?

Proponents of microfinance argue that these institutions have been instrumental in empowering underbanked Nigerians, particularly women.

 By providing access to credit, MFIs have enabled countless individuals to start or expand businesses, generating income and lifting families out of poverty. 

Moreover, microfinance has fostered entrepreneurship, creating jobs and stimulating economic activity at the grassroots level. 

However, critics contend that microfinance has not been as effective as hoped. Some argue that limited financial literacy, high interest rates and stringent repayment terms can trap borrowers in a cycle of debt, exacerbating poverty rather than alleviating it. 

Over-indebtedness has led to distress and, in some cases, forced asset sales. 

Additionally, concerns have been raised about the sustainability of many MFIs, with some facing financial difficulties and inadequate infrastructure. 

To maximize their potential, MFIs should focus on expanding their reach to rural areas, offering a wider range of financial products, and strengthening partnerships with government and other stakeholders. 

By addressing these challenges and building on their successes, MFIs can continue to be a powerful force for poverty reduction and economic development in Nigeria.

Economic Growth or Marginal Impact? The impact of microfinance on overall economic growth in Nigeria is also a subject of contention. 

While some studies suggest that MFIs can contribute to job creation and increased economic activity, others argue that their impact is limited and overshadowed by broader economic challenges. 

Furthermore, the effectiveness of MFIs may vary depending on factors such as the target population, loan size, repayment terms, and the overall economic climate. It is essential to conduct rigorous evaluations to assess the true impact of microfinance on different segments of the population. 

Recommendations for Improvement:

To maximize the potential of microfinance banking in Nigeria, several recommendations can be considered:

Financial Literacy and Public Awareness: Extensive financial literacy campaigns should be conducted, so that the public can be educated about the benefits of microfinance and how to use it effectively. MFIs should also integrate financial education into their services to empower borrowers.

Interest Rate Regulation:

 The Central Bank of Nigeria (CBN) should review the existing interest rates of MFIs, in ways that can accommodate the current economic situation and inflation. 

This will protect businesses and individuals from excessive debt burdens.

*Strengthening MFIs: 

The Federal and State governments should provide more support for the development of sustainable and well-regulated MFIs.

*Enhance Supervision: 

CBN should implement robust supervision and monitoring of microfinance institutions (MFIs) to ensure compliance with regulations and protect depositors.

*Risk Management: 

Risk management practices should be strengthened within MFIs to mitigate credit and operational risks.

*Product Innovation: 

MFIs should develop innovative financial products tailored to the specific needs of micro-entrepreneurs.

*Human Capital Development: 

MFIs should invest in training and capacity building for their staff to enhance their skills and knowledge.

*Knowledge Sharing: 

CBN should facilitate knowledge sharing among MFIs to promote best practices.

*Business Development Services: 

MFIs should provide comprehensive business development services to micro-entrepreneurs, including training, mentoring, and market linkages.

Conclusion

Microfinance has the potential to be a powerful tool for poverty reduction and economic development in Nigeria. 

However, its effectiveness depends on various factors and requires careful consideration and implementation of appropriate policies and regulations. 

To maximize benefits and minimize risks, a multifaceted approach is required, encompassing financial literacy programs, access to affordable credit, and supportive government policies. 

By addressing the challenges and building on the successes, Nigeria can harness the full potential of microfinance to create a more inclusive and prosperous society.

About the Author

Ayooluwa Animashaun is a distinguished finance professional currently pursuing a PhD in Business Administration (Finance) at Morgan State University in Maryland, USA. 

He holds a degree in Banking and Finance and an MBA in Finance. His strong academic background has equipped him with expertise in financial analysis, strategic planning, and leadership.

He is also an experienced banker, with a total of eight years of working experience.

Beyond his professional pursuits, Ayooluwa is a sports enthusiast with a passion for athletics track and field. 

With his unique blend of financial acumen and athletic zeal, Ayooluwa is a well-rounded individual poised for success in all aspects of life.

By Ayooluwa Animashaun 

(USA)

The Federal Government recently announced plans to allow a five-month duty-free window for staple food items like rice, wheat, and maize.

The government also expressed plans to partner with state governors and the military to cultivate arable lands and support smallholder farmers

These plans are designed to bring down the skyrocketing prices of food items, and moderate heightening food inflation, which, at 40 per cent, is the worst component of the 34.19 per cent headline inflation.

The government, therefore, intends to suspend duties, tariffs, and taxes for the importation of those food commodities through land and sea borders.

The move is also expected to drastically reduce demand for foreign exchange by food importers, from the 2.13billion dollars Nigerians spent to import food items from foreign countries in 2023.

Speaking at a recent forum on food security, the Minister of Agriculture and Food Security, Abubakar Kyari, said that 150 days of duty-free imports would be valid for commodities including maize, husked brown rice, wheat, and cowpeas.

Kyari said the initiative which is part of the Presidential Accelerated Stabilisation and Advancement Plan (PASAP), would also enable the Federal Government to import 250,000 metric tonnes of wheat and 250,000 metric tonnes of maize.

He said that the imported food commodities in their semi-processed state would target supplies to the small-scale processors and millers across the country.

“To ameliorate food inflation in the country caused by affordability and exacerbated by availability, the government has taken a raft of measures to be implemented over the next 180 days.

“This includes a 150-day duty-free import window for food commodities, suspension of duties, tariffs, and taxes for the importation of certain food commodities through and sea borders.

“These commodities include maize, husked brown rice, wheat, and cowpeas.

“Under this arrangement, imported food commodities will be subjected to a recommended retail price,” he said.

He assured that the foods to be imported would be subjected to thorough quality control measures to ensure safety.

“I am aware that some good citizens might be concerned about the quality of the would-be imported food commodities as it relates to the trending worries around the genetic composition of food.

“I am glad to reiterate that the government’s position exemplifies standards that would not compromise the safety of the various food items for consumption.

“These semi-processed commodities will be supplied to small-scale processors and millers across the country,” he said.

For a country like Nigeria, which has a large agricultural sector, the already high food import bill is a concern for stakeholders.

Experts say the directive is a clear demonstration that the Nigerian government is yet to put the nation on the right path of eradicating hunger by 2030 as stipulated by the United Nations Sustainable Development Goals.

Mr Akinwunmi Adesina, the president of the African Development Bank, said that the decision to allow large-scale food importation risks destroying the country’s agriculture sector.

Adesina, who is also Nigeria’s former minister of agriculture, said the announcement of the policy just to tackle short-term food price hikes, was depressing.

He warned that the policy could undermine private investments in Nigeria’s agriculture sector.

“Nigeria cannot rely on the importation of food to stabilise prices.

“Nigeria should be producing more food to stabilise food prices while creating jobs and reducing foreign exchange spending that will further help stabilise the Naira,” he said.

The All Farmers Association of Nigeria (AFAN) said the policy was not a sustainable approach to tackle food insecurity in the country.

The National President of AFAN, Kabir Ibrahim, said only guarantee to a sustainable solution was to ensure that farmers were given subsidies on all imports so that they would boost productivity in the country.

“We will patiently wait for the suspension of import duty to happen, but it is not sustainable.

“The sustainable solution is to ensure that farmers are given subsidies on all imports so that they will escalate productivity and have a sustainable food system.

“Importing anything will not give you sustainable food security,” he said.

According to Dr Muda Yusuf, CEO, Centre for the Promotion of Private Enterprise (CPPE), adopting this policy stance without addressing gaps in the domestic agriculture value-chain might not yield the needed output as envisaged by the Federal Government.

“Insecurity across the agrarian belt remains a significant catalyst to the prevailing food crisis.

“Over the years, states such as Benue, Nasarawa, and other regions in Northeastern and Northwestern Nigeria, traditionally key agricultural areas, have become increasingly unsafe due to the presence of bandits and terrorists.

“Farmers in these regions face extortion, with bandits demanding taxes before farming and at harvest time,” he said.

The food importation policy appears to negate past government initiatives to support local food production.

Stakeholders agree that intervention in the agriculture sector, as done in the recent past, would be more rewarding than encouraging importation of food.

They cited the Anchor Borrowers’ Programme (ABP), which was launched in 2015 to provide farm inputs in cash and kind to Small Holder Farmers (SHFs).

The programme was intended to create a linkage between Anchor Companies involved in food processing and SHFs of the required key agricultural commodities through the commodity associations.

The ABP was designed to help the nation achieve self-sufficiency in food by, at least, “growing what we eat,” and then, putting a stop to the reckless importation of food items.

This was supposed to help save scarce foreign exchange, which can then be used for other more pressing needs.

The ABP was funded and managed by the Central Bank of Nigeria, (CBN), through its development finance initiative.

It commenced with a take-off grant of N220 billion Micro, Small and Medium Enterprises Development Fund, MSMEDF, through which farmers got loans at nine per cent interest. They were expected to repay based on the gestation period of their commodities.

Two initial beneficiaries of the agriculture revolution of the federal government, and the ABP were Kebbi and Lagos states.

The two states went into a collaboration that birthed the LAKE Rice initiative. That initiative has now resulted to the construction of a multi-billion Naira 32 metric tons per hour capacity rice mill by the Lagos state government.

By 2022, the Central Bank of Nigeria (CBN), which was the major driver of the ABP revealed that at least 4.8 million farmers had benefitted from the programme.

But the programme was marred by loan default, even as food prices rose significantly within the years it took effect.

According to the International Monetary Fund (IMF), 76 per cent of the loans collected by beneficiaries were yet to be repaid.

The IMF in a report said that agricultural credit in the country had not succeeded in increasing production due to the difficulty in reaching the targeted farmers.

It said that although the CBN allowed farmers to pay in cash or give the central bank produce of the same value under the ABP, repayments had been very low.

“For the ABP, repayment is also low at 24 per cent, especially since repayment can be made in kind, thereby limiting the tenor of the loans to one year.

“Part of the problem is that the incentive structure for repayment is weak, the recipient loans are not always well targeted and occasionally the funding is used for other purchases,” it said.

Various farmers associations also said that the loans were not disbursed adequately, hence the difficulty in ensuring repayment.

The various challenges of running the ABP saw the new leadership of CBN led by its Mr Yemi Cardoso discarding it and other such interventions.

However, Nigerians express preference for an initiative that would encourage massive local food production as against importation.

– By Kadiri Abdulrahman

 NANFeatures

In what some analysts have described as a “`fall from grace to grass”, former Deputy Senate President of Nigeria, Ike Ekweremadu was on May 5, sentenced to nine years and eight months in jail after a United Kingdom (UK) court found him, his wife, and his doctor culpable in a case of organ trafficking.

The Old Bailey, London’s Central Criminal Court also sentenced his wife, Beatrice, to four years six months in prison while the medical doctor Dr Obinna Obeta, who acted as a ‘middleman’ in the plot was sentenced to 10 years and his medical licence suspended.

The News Agency of Nigeria (NAN) reports that the Ekweremadus were convicted of trafficking a street trader from Lagos to Britain to illegally harvest his kidney for a transplant on their sick daughter, thus violating British laws on kidney donation and transplant

The conviction came on the heels of pleas by the Nigerian Senate, the Federal House of Representatives, the ECOWAS Parliament, government officials, and notable Nigerians, including former President Olusegun Obasanjo who had written to the court to tamper justice with mercy.

The Nigerian Senate had urged the court for clemency in delivering judgment against the Ekweremadus as first offenders and considering the former senator’s contributions to humanity.

“Distinguished Senator Ike Ekweremadu served for 12 years as Deputy Senate President and he put in so much effort to the development of the Parliament across Africa, and in the world.

“He was not found wanting and so what has happened is very unfortunate.

“I have written a letter to the British judicial authorities about three weeks ago on behalf of the Senate seeking Clemency, given the history of Senator Ekweremadu.

“We are now using this particular intervention to seek clemency in the sentencing.

“The conviction has been done, but we are seeking clemency because this is the first time, our colleague, a patriot, a leader, a great leader, a very peaceful man is getting involved in this kind of thing.

“Had we all known that this would be the case, certainly we would not have gone into that kind of situation because we are law-abiding citizens and we respect our country and its laws and laws of other countries,” Ahmad Lawan, President of the Senate said.

The Federal House of Representatives had also written a similar letter to the court for lenience.

A member of the House, Mr Toby Okechukwu had moved a motion for clemency on the floor of the parliament based on the long-standing history and cordial ties between Nigeria and the United Kingdom.

The House highlighted Ekweremadu’s contributions to the Commonwealth of Nations and his innocent intention to save the life of his sick daughter, Sonia, while calling for back channels for diplomatic interventions.

*Chief Obasanjo

Obasanjo in his letter pleaded for mercy and profiled Ekweremadu with a sense of responsibility, stressing that though he recognised the act as illegitimate, the UK court should be magnanimous in mercy.

“Ekweremadu’s conferment with the coveted national honour of Commander of the Federal Republic (CFR) is further testimony to his selfless service to our country, Nigeria.

“Mr Chief Clerk, I am very much aware of the current travails and conviction of Ike Ekweremadu and his wife in the United Kingdom resulting from their being charged with conspiring to arrange the travel of a 21-year-old from Nigeria to the UK in order to harvest organs for their daughter.

“I do realise the implications of their action and I dare say, it is unpleasant and condemnable and cannot be tolerated in any sane or civilised society.

“However, it is my fervent desire for very warm relations between the United Kingdom and the Federal Republic of Nigeria; for his position as one of the distinguished senators in the Nigerian Parliament, and also for the sake of their daughter in question whose current health condition is in danger and requires urgent medical attention, you will use your good offices to intervene and appeal to the court and the government of the United Kingdom to be magnanimous enough to temper justice with mercy and let punishment that may have to come to take their good character and parental instinct and care into consideration,’’ the letter read in part.

In spite of all the pleas for clemency from various quarters including diplomatic contacts, the Court gave what many have described as a harsh sentence. Is this then a test of Nigeria’s diplomatic dexterity?

Constitutional Lawyer, Kayode Ajulo while reacting to the sentence, urged the Federal Government to explore diplomatic means to get a pardon for the senator.

He said he had written to King Charles III, pleading for a Prerogative of Mercy for the Ekweremadus.

“Your Majesty, though invigorated by your coronation, I witnessed the same with mixed emotions.

“Ekweremadu and his wife have been convicted and sentenced accordingly and I plead that you graciously and mercifully invoke the Royal Prerogative of Mercy in favour of the couple,” he said.

Mr Frank Tietie, a Human Rights lawyer described the judgement as harsh, insisting that more diplomatic channels could have been explored by the Nigerian government to get a shorter sentence for the Ekweremadus.

Lawyers and analysts like Ajulo and Tietie are of the opinion that while not condoning crime in any form, the Federal Government’s citizen diplomacy policy thrust should be re-activated regardless of the status of Nigerians across the world.

The citizen diplomacy policy places priority on the protection of the interest of Nigerian citizens both at home and abroad.

It also seeks to protect the rights, dignity, and privileges of Nigerian citizens in their countries of residence abroad.

Experts say the policy implies that individual citizens are not just the centre-piece of state policies but also have the right and even the responsibility to help realise the country’s national interests through their interactions to complement official diplomatic activity.

-By Muhyideen Jimoh

(NAN Features)