Friday, June 17, 2016 10:55AM /CBN
Introduction To ensure continuous flow of credit to the export sector at competitive rates, especially against the background of declining export loans and the need to promote sustainable non-oil exports, the Central Bank of Nigeria (CBN) has expanded the Export Credit Rediscounting and Refinancing Facilities (RRF) by N50 billion to support the Deposit Money Banks (DMBs) in the provision of pre- and post-shipment finance to exporters to undertake export transactions.
To implement the facility, CBN will invest in a N50 billion debenture to be issued by the Nigerian Export – Import Bank (NEXIM) in line with Section 31 of CBN Act. Accordingly, this guideline describes and outlines the revised operational modalities of the RRF towards the provision of a discount window to liquefy the export credit transactions of Deposit Money Banks, thereby improving exporters’ access to export credit at any given time.
Objectives of the RRF
The RRF objectives are: (a) To encourage and support DMBs to provide short-term pre- and post-shipment finance in support of exports by providing a discount window to exports financing banks and therefore improving their liquidity and exporters’ access to export credit.
(b) Moderation and indirect influence on the cost of export credits to the non-oil sector in order to enhance competitiveness of Nigeria’s exports and thereby assist in export production and marketing.
(c) To enhance the continuous flow of export credits for non-oil exports toward facilitating the diversification of the productive base of the economy and ensuring sustainable external sector development;
Pre-Shipment Rediscounting Facility The objective is to encourage banks to finance incidental expenses necessary to undertake and perform export contracts as well as procurement of inputs / exportable goods, e.g. raw materials / commodities, semi-processed and finished goods for either processing and/or direct exports.
Post-Shipment Rediscounting Facility The objective is to encourage banks to provide finance to exporters awaiting receipts of export proceeds of their shipments and/or encourage the provision of deferred payment arrangements by exporters to their counter-parties to enhance competitiveness.
Refinancing Facility The objective of the Refinancing Facility is to encourage banks to provide longer term export credit in support of export activity than is available under the Rediscounting Facility, which is transaction specific. The Refinancing Facility provides a mechanism that relieves export financing banks and export credit guarantors on their longer than expected export lending commitments. It also provides financial accommodation to the export financing banks in the event of commercial lending difficulties.
Features of the RRF
Highlighted below are the specific features of these facilities:
Eligibility Participating Banks
All the DMBs who have sanctioned /extended export credits are eligible as Participating Banks under the RRF Window in order to improve their liquidity and expand their export credit portfolios.
Beneficiary Clients / Transactions
All existing / potential export-oriented companies duly incorporated / registered in Nigeria and undertaking non-oil exports transactions of goods and services that are not under a subsisting Exports Prohibition List shall be eligible to benefit under the scheme. However, facilities availed under any of the existing CBN funding schemes are not eligible under the RRF Window.
Tenor The tenor in respect of the RRF shall be a maximum of 360 days as follows;
a) Pre-shipment Shipment Rediscounting shall be transaction specific / period specific but subject to a maximum of 180 days; IV IV
b) Post-shipment Rediscounting tenor shall be in accordance with extant policies on repatriation of export proceeds from time to time. It currently shall not exceed 180 days in line with the existing CBN Circular dated July 17, 2009 - “Guidelines on Repatriation of Export Proceeds for Non-Oil Commercial Exports – Ref: TED/FEM/FPC/GEN/01/116
c) For combined Pre- and Post-Shipment finance, a tenor not exceeding a 270 days shall apply but on the basis of specificity of underlying transaction
d) The Refinancing Facility availed shall not exceed 360 days and shall cover installments of short-term financing of long-term transactions such as export debentures, export finance guarantees, export term loans, etc. falling due within a year of the date of application.
Rate Export bills / transactions shall be discounted / refinanced at an “all-in” rate of a maximum of 6% per annum with the pricing structure as follows; a) CBN / NEXIM would provide the RRF at a rate of 3% per annum b) Participating Banks shall have a maximum spread of 3% per annum
Exposure Limit Each Participating Bank will have a transaction exposure limit under the RRF Window of a maximum of N2 billion to N5 billion as may be determined from time to time based on Participating Banks’ credit ratings and volume of non-oil exports transactions / beneficiary clients being supported.
At the end of the first quarter of each financial year (31st March), the Participating Banks seeking to benefit from the Rediscounting and/or Refinancing Facility shall forward an application to this effect to NEXIM accompanied by its most recent audited accounts.
To avail the Rediscounting and/or Refinancing facilities, the Participating Bank shall apply in the prescribed RRF format for the benefit of its export – oriented transaction(s).
Application for Rediscounting Facility
A Participating Bank may at any time during the year apply for bills rediscounting under the Rediscounting Facility and would be granted approval on the basis of individual export transaction.
An application for rediscounting covering either pre-shipment, post shipment or combined pre- and post-shipment periods shall be made to NEXIM by means of a request letter signed by at least two authorised signatories of the Participating Bank as per executed signature mandates with CBN / NEXIM and be supported by the following documents;
(a) Evidence of an underlying export order, e.g. letter of credit, sales contract, confirmed order by a reputable local buying agent of an established buyer on Incoterm basis -“DAT Delivered At Terminal / DAP Delivered At Place - Warehouse “
(b) Evidence of export credit: This should be an accepted Letter of Offer of an existing export credit facility or a bill of exchange drawn by the bank on, and accepted by the exporter covering export credit facility provided by the Participating Bank. The bill shall be for an appropriate tenor with the discount rate clearly stated on the bill.
(c) Completed Return on Export Finance Portfolio, specimen of which is in Appendix I
4.1.3 For a Rediscounting Facility specifically covering the post-shipment period, the following documentations shall apply:
(a) Evidence of an export order, e.g. Letter of Credit; sales contract, confirmed order by a reputable local agent of an established buyer.
(b) Evidence of export credit - This should be an existing accepted export credit facility, executed guarantee receivable finance instrument or a bill of exchange drawn by the bank on, and accepted by the exporter covering export credit facility provided by the Participating Bank. The bill shall be for an appropriate tenor with the discount rate clearly stated on the bill.
(c) Evidence of shipment, e.g. clean on-board Bill of Lading.
(d) Copy of NXP Forms / Clean Certificate of Inspection
(e) Copy of Bank’s Remittance Letter and Exporter’s Final Invoice
Application for the Refinancing Facility
A Participating Bank may at any time apply for financing under the Refinancing Facility and would be granted approval on the basis of individual export finance transaction;
An application for the Refinancing facility shall be made to NEXIM by means of a letter signed by at least two authorised signatories of the applicant Participating Bank. The application shall be supported with the following documents:
(a) Evidence of export order for appropriate products such as letter of credit, export contract and/or medium term export off-take arrangements
(b) Evidence of export credit - This should be an accepted letter of offer, executed guarantee receivable finance instrument, other debt instruments - e.g. export debentures or long term export loan installments falling due for repayment within one year of application date are qualified for refinancing.
(c) Returns on Export Finance Portfolio
(d) Evidence of capacity to perform in the form of the following
(i) Evidence of existence and capacity of installed plant or toll processing agreement.
(ii) Evidence of security taken by the Participating Bank.
(iii) Summary of exports undertaken in the current request period and preceding year
NEXIM shall process all applications received from Participating Banks to confirm the completeness of documentation and eligibility.
NEXIM shall appraise the applications and provide its status report to the Participating Bank within 5 working days of receipt.
Applications that meets the eligibility criteria and documentation requirements under the Rediscounting and Refinancing Facility (RRF) shall be approved and communicated to the Participating Bank in writing, stating amongst others, the face value of the facility, discounted value, tenor, rediscount rate and beneficiary exporter involved.
Upon acceptance of the approved RRF, the Participating Bank shall request for disbursement vide a letter duly signed by two authorised signatories forwarding the following:
(a) Accepted duplicate copy of letter of offer (see Appendix)
(b) Promissory Note with face value equal to principal plus interest (see Appendix).
(c) An Irrevocable Transfer Order (ITO) addressed to Central Bank of Nigeria (see Appendix)
Applications that fulfilled all conditions precedent to drawdown under the RRF Window shall be forwarded to the Central Bank of Nigeria for disbursement of the VII VII proceeds of the bill i.e. the discount value (see Appendix for the formula for computing the proceeds to be credited to the Participating Bank).
Rendition of Returns / Monitoring
All benefitting Participating Banks are expected to provide monthly / periodic returns on exports and foreign exchange earnings of their RRF beneficiary exporters on the prescribed format whose specimen is in Appendix VIII
Being essentially an interbank facility, it is the Participating Bank’s responsibility to monitor their beneficiary exporters. However, CBN / NEXIM reserve the right to conduct a monitoring visit to beneficiary exporter in company of Participating Bank officials.
At maturity of the facility, the Participating Bank shall repay the face value of the availed RRF or NEXIM shall cause the Irrevocable Transfer Order given by the PB to be invoked by CBN. The Promissory Note shall then be marked “Cancelled” and returned to the beneficiary Participating Bank.
Other Aspects of the RRF
Security Under the Rediscounting and Refinancing Facility (RRF), NEXIM shall have full recourse to the Participating Banks who are primary obligors. Participating Banks are therefore expected to fully secure their lending.
Penalties / Sanctions
(a) If an exporter benefits from either the Rediscounting or Refinancing Facility but fails to perform the export order both the company and its directors shall be blacklisted for one year.
(b) Where there is an infraction by the Participating Bank under any of the facilities, it shall be blacklisted for one year and the facility shall be recalled immediately.
(c) In addition to Items (a) and (b) above, additional charges equivalent to the PB’s spread shall be charged to the account of the defaulting Participating Bank.
In the context of the above, an infraction is defined to include, but not limited to;
1. False declaration
2. Falsification of documents
3. Deliberate breach of the provisions of this Guideline
4. And the issuance of bills that are irregular and therefore delay repayments to NEXIM.
Notwithstanding the penalties prescribed above, NEXIM reserves the right to recall any of these facilities if it finds out that:
(a) Funds were not disburse to the exporter
(b) Funds have been diverted by beneficiary exporters
(c) There were incidences of Non-Repatriation / Repatriation status has been falsified
Effective Date and Review of Guidelines
These guidelines supersede the earlier RRF guidelines, and shall become effective 13 June 2016.
These Guidelines are subject to review and amendment by NEXIM to qualify and make clear the basis upon which such reviews and amendments might be made.
Click Here to Download PDF