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SBL32–5 Benefits of the CBN Healthcare Loan

Welcome to SBL32 (Sycamore Business Lab): our periodic blog post where we address issues affecting you and your business.

The on-going pandemic has affected several industries in different ways. Video conferencing and remote work tools have no doubt gained popularity. Companies like Zoom have seen their stock price appreciate more than 100% since the beginning of the year. The aviation industry, on the other hand, is not doing too great and some airlines are already going bankrupt.

The healthcare industry has received renewed attention this period understandably. The situation is even more pronounced in Nigeria, where about 4% of the annual budget is allocated to healthcare (compared to the 15% as recommended by the WHO), and with a ratio of 1 doctor to 2500 people. But the Nigerian government through the Central Bank of Nigeria (CBN), is determined to improve this situation through the introduction of a N100 billion-naira healthcare fund, which will provide loans to the following eligible participants:

a. Healthcare product manufacturers

b. Medical facilities like hospitals, clinics, laboratories, fitness, and wellness centres, etc.

c. Pharmaceutical products distribution and logistics services

d. Other healthcare service providers as may be prescribed by the CBN from time to time

If you fall into any of these categories, you should apply for this loan. So what are the benefits of this loan and what makes it so special:

1. Low-interest rate

The CBN loan is an extremely low-interest loan which charges about 5% up to February 2021, and 9% annually every year after. Given that the inflation rate is about 12%, this means that the loans are costing the CBN money in terms of real interest rate and value of money. We explained this in more detail in our article on inflation here. It is an incredibly good deal! You should take it if you are eligible

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2. Up to two billion Naira accessible

You can apply for either N500 million as working capital, or N2 billion as a term loan. The medical business is capital intensive given the kind of sophisticated equipment required. The amount available under this fund seems reasonable enough to fund the acquisition of such equipment.

3. Encouraging tenor

The working capital loan is available for a tenor of up to one year but can be rolled over for up to 3 years. The term loan, on the other hand, is available for as long as 10 years.

This timeframe (especially for the term loan), is quite supportive by the government and should provide ample time for the business to utilise and payback appropriately

4. Moratorium inclusion

In financial terms, a moratorium is a period under which loan repayment is suspended. It may be for the interest, the principal or both. The term loan offered by the CBN for this healthcare fund comes with a maximum of a one-year moratorium. This time provides the business with the opportunity to focus on the business without worrying about loan repayments.

5. Helps with planning

One of the requirements for the CBN loan is that the applicants submit a business plan for the number of years that the loan will be repaid. That is, if you need a 10-year loan, you will be required to submit a 10-year business plan. So just like our advisory service does for some of our customers, you will have to prepare a business plan and financial projections too. We find that this level of planning helps businesses to better utilise resources while having a big picture and long-term view of their businesses.

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Of course, there are other requirements to get the loan like adequate security, and guarantors. The objectives of the fund are to minimise travel healthcare tourism, provide low-cost financing to the sector, and raise Nigeria’s healthcare facilities to world-class standards. Do you think this fund would help achieve this? What are the reasons for your answers? Let us know in the comments, and any thoughts you have on this initiative.

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