SMEDAN Exposes Widespread Loan Diversion by Nigerian Entrepreneurs
The Small and Medium Enterprises Development Agency of Nigeria (SMEDAN) has raised serious concerns about the misuse of business loans by some Nigerian entrepreneurs, warning that this trend threatens the sustainability of funding schemes for small and medium-sized enterprises (MSMEs). According to the agency, many beneficiaries of MSME loans fail to repay them, often diverting the funds for personal expenses or disappearing after collection.
Poor Loan Repayment Culture Undermines Business Growth
SMEDAN's Director-General, Charles Odii, highlighted that a major challenge facing small businesses in Nigeria is a poor loan repayment culture. He made these remarks at the People's Roundtable Conference, where he was represented by Charity Abah, deputy director in the agency's Enterprise Development and Promotion Department. Odii emphasized that although SMEDAN does not directly disburse loans, it acts as a facilitator between MSMEs and financial institutions to improve access to funding under various programmes.
Odii stated, "One basic challenge we have had over the years with MSMEs is that when Nigerians take loans, they don't want to repay. Some people collect these loans and divert them." He further explained that many borrowers view these loans as their share of the national cake, leading to a mindset where they take the money and vanish, undermining the revolving nature of such funds designed to benefit multiple entrepreneurs over time.
Common Misuses of Business Loans Listed by SMEDAN
SMEDAN detailed several ways in which entrepreneurs misuse business loans, including:
- Purchasing cars and other personal assets
- Funding weddings and family ceremonies
- Marrying additional wives
- Spending on non-business lifestyle expenses
- Disappearing or changing addresses to avoid repayment
These actions have weakened funding schemes, as loan defaults reduce the availability of capital for genuine SMEs. Odii attributed the trend largely to issues of character and accountability, stressing that it hampers economic growth and limits opportunities for responsible business owners.
Broader Implications for Nigeria's Economy
The diversion of loans not only affects individual businesses but also poses a threat to Nigeria's broader economic development. Persistent defaults jeopardize the viability of revolving funds, which are meant to be repaid and re-issued to support other entrepreneurs. This cycle of misuse can lead to tighter lending conditions and reduced access to finance for SMEs, stifling innovation and job creation in the country.
In a related development, the Nigerian Consumer Credit Corporation (CREDICORP) has launched YouthCred, a scheme offering loans up to N5 million to Nigerian youths. Uzoma Nwagba, the managing director of CREDICORP, described this as a movement to foster a credit culture in Nigeria, highlighting the need for responsible borrowing to complement such initiatives.
Call for Accountability and Responsible Citizenship
At the same event, Rinsola Abiola, Director-General of the Citizenship and Leadership Training Centre (CLTC), lamented the widening gap between leaders and citizens. She urged Nigerians, especially young people, to move beyond complaints and take deliberate actions in nation-building, emphasizing that citizenship involves asserting power and responsibilities.
The convener of the People's Roundtable, Emmanuel Ayantayo, represented by Oladeji Adesola, noted that the forum aims to bridge Nigeria's knowledge gap through open dialogue and collaboration among policymakers, professionals, educators, and citizens. This underscores the importance of collective efforts in addressing challenges like loan diversion to ensure sustainable economic growth.
