NANFeatures/Vol.11/No.155/2017 (Nov. 7)
The imperative of NERFUND’s proscription
A News Analysis by Racheal Ishaya, News Agency of Nigeria (NAN)
It is no longer news that the Federal Government on Oct. 31 closed down the National Economic Reconstruction Fund (NERFUND).
It was set up in 1989 after the failure of the Structural Adjustment Programmme to provide medium to long term financing to viable Micro Small and Medium Enterprises (MSMEs) in agriculture and agro-allied sectors of the economy.
The fund began operations in 1989 with N328.5 million paid-up share capital subscribed by the Federal Ministry of Finance with 67.83 per cent and the Central Bank of Nigeria with 32.12 per cent.
The Ministry of Finance also negotiated a 25-year African Development Bank loan of 144.2 million dollars in 1992 and also provided additional loan of N300 million as working capital support in 2015.
However, the agency had been in comatose since late 2013, losing its capacity to carry out its mandate due to bad management and mismanagement of funds to the tune of N17.9 billion.
The Permanent Secretary, Federal Ministry of Finance, Mr Mahmoud Isa-Dutse, who is also the Chairman, NERFUND’s Interim Management Committee, said the closure was based on the recommendation of the Nigeria Deposit Insurance Corporation (NDIC) and the CBN special examination report of Sept. 30, 2013.
He also recalled that the 2001 Ahmed Joda’s committee and the Stephen Orusanye’s 2014 Presidential Committee on the Restructuring and Rationalisation of Federal Government Agencies recommended the closure of the fund.
“People misunderstand the closing down of NERFUND. It’s not that government no longer cares about Micro Small and Medium Enterprises but rather, it’s the other way round.
“Government, especially the current administration, is very concerned about diversifying the economy as contained in the Economic Recovery Growth Plan.
“There is emphasis in the diversification of the economy and the promotion of MSMEs.
“However government has decided that NERFUND has to go because it has failed and there is BOI, CBN, DBN with bigger and better managed funds for intervention to MSMEs.
“ The Bank of Industry sometime last year, took over NERFUND but they only agreed to do that on a temporary basis, to manage and wind up.
“Initially, we wanted to merge NERFUND with BOI but BOI had its own objections,’’ he said.
Following the closure of NERFUND, Isa-Dutse said that the government would not just write off the bad loans of the fund which was currently in excess of N17 billion, noting that BOI had been commissioned to take over its recoveries.
He recalled that since BOI took over the management of the fund prior to the closure, it recovered about N500 million in one year.
He said BOI also helped to stabilise the fund, restored industrial harmony among the staff when there was disagreement among the management and other staff.
In spite of the accomplishments, Isa-Dutse said that the government took the decision to go ahead and close the office because it was too expensive to run it for recovery purposes only.
“No local or foreign bank would lend money to them because their balance sheet was so bad and they still had to pay salaries and overheads.
“So when government decided to wind up the company, one of the things we did was to cut on the number of staff.
“We gave them a very generous voluntary exit package to keep industrial peace; some of them — six contract staff and 33 senior management staff who had spent many years there — took advantage of the offer and voluntarily resigned and collected their benefits.
“But the younger ones of average age of 35 years stayed back and continued the recovery effort and as of the date of closure, we had 49 staff left.
“You see NERFUND was an intervention agency and not a regular or permanent one like the Central or the NDIC or the core civil service.
“In its terms of service, government is not obliged to transfer them to other ministries such as in the civil service where you are basically guaranteed employment till retirement,” he said.
However, Isa-Dutse said he had written to the Head of Civil Service of the Federation, Mrs Winifred Oyo-Ita in October soliciting her intervention with the remaining staff.
“We also contacted the office of the Vice-President where they have the social intervention programmes, in case they require the skills of these people; but it’s not a guarantee that they will be employed.
“We told them not to wait for another white collar job because there were hundreds of thousands of other Nigerians looking for jobs.
“But you have an advantage. You have worked and you have the experience and you have your exit package, we encourage you to go and start something,” he said.
Isa-Dutse said with the offices closed, the next step was to ensure that the National Assembly repealed the law establishing the fund.
“The request for the abrogation was placed before the National Assembly years ago.
“So what we will do is follow up and then explain to the National Assembly members so that they understand why government has taken this decision,’’ he said.
All in all, concerned citizens believe that winding down NERFUND’s operations was in a right direction going by the high ratio of non-performing loans that many people collected without collateral.(NANFeatures)
**If used, please credit the writer as well as News Agency of Nigeria (NAN)