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High interest rate loans threaten SMEs’ operations in Nigeria – NICA

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The National Institute of Credit Administration (NICA) has raised concerns about the detrimental effects of high-interest-rate loans on the viability of Small and Medium Enterprises (SMEs) across the country.

In a statement released by its Chief Executive Officer, Prof Chris Onalo, NICA highlighted the urgent need for more accessible loans with lower interest rates and flexible repayment terms to enhance the profitability and sustainability of SMEs.

According to NICA, the key to fostering a robust environment for the growth and expansion of SMEs lies in the provision of business-friendly loans.

Such financial products would encourage new and existing business owners to embark on entrepreneurial ventures and facilitate the expansion of established enterprises.

The institute points to the comparative advantage businesses enjoy in advanced economies, attributing their competitive edge to the availability of low-interest rate loans, often in the single digits.

Onalo advocates for access to single-digit interest rate loans with flexible repayment options as the ideal solution to bolster a business-friendly climate and empower businesses to thrive and expand.

The statement said:

Highlighting the broader socio-economic implications, NICA emphasised that SMEs are a vital source of livelihood for a significant portion of the Nigerian population. As such, improving access to affordable financing is not just a matter of business support but also a critical factor in enhancing the quality of life for many Nigerians.

Access to cheaper loans would allow SMEs to save more, alleviate the burden of debt repayment, and secure more capital for expansion, ultimately contributing to the country’s Gross Domestic Product (GDP).

The institute also addressed lending institutions’ hesitance to offer long-term loans under current conditions, advocating for more flexible loan solutions to alleviate financial strain on business owners.

It also noted that by improving access to loans with favourable terms, entrepreneurs would be less likely to turn to predatory lending practices and more likely to find repayment plans that align with their financial capabilities and goals.

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