CBN Publishes Revised Guidelines on Real Sector Support Facility

Regulators
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Thursday, March 10, 2016 09:36 AM / CBN

Introduction

The Central Bank of Nigeria, as part of efforts to stimulate output growth, enhance value addition and engender productivity in the economy established the Real Sector Support Facility (RSSF). The Facility will be channeled towards increasing credit to priority sectors of the economy with sufficient employment capabilities, high growth potentials, increase accretion to foreign reserves, expand the industrial base and consequently diversify the economy. The RSSF will be used to support start-ups and expansion financing needs of enterprises.

 

Objectives of the Facility

The objectives of the Facility include:

 

i.                    Improve access to finance by the agricultural value chain, manufacturing, mining, solid minerals activities and other strategic sub-sectors of the Nigerian economy.

 

ii.                 Increase output, create jobs, diversify the economy, increase accretion to foreign reserves and provide inputs for the industrial sector on a sustainable basis.

 

Activities to be covered under the Facility

The activities to be covered under the Facility are new and expansion projects in the real sector.

 

(a) Trading activities shall not be accommodated under this Facility.

 

(b) Priority will be given to projects with high local content, import substitution, foreign exchange earnings and huge potentials for job creation.

 

Type of Facilities

i.                    Term loan

ii.                 ii. Working capital

 

Loan Tenor

 

i.                    Loans shall have a maximum tenor of 10 years depending on the complexity of the project. Each project tenor shall be determined in relation to its cash flow and life of the underlying collateral.

 

ii.                 Working capital facility of 1 year with a maximum roll over of 1 year subject to approval.

 

iii.                The Facility allows for moratorium of 1 year in the loan repayment schedule.

 

Modalities of the Facility

 

i.                    Interest Rate - The Facility shall be administered at an all-in interest rate/charge of 9 per cent per annum payable on quarterly basis.

 

ii.                 Draw down will be subject to banks contribution to the Special Intervention Reserve (SIR) with the CBN.

 

iii.               The CBN shall release the fund to DMBs at 1% interest rate. 7.

 

Repayment

Repayments under this facility shall be amortized and quarterly principal repayments shall be remitted to the Special Intervention Reserve (SIR) Account domiciled in the CBN.

 

Eligibility Criteria for Participation in the Facility


1.        Participating Financial Institutions (PFIs)


Only contributing Deposit Money Banks will be eligible as PFIs under this Facility.


2.      Borrower

A borrower shall be an entity registered in Nigeria under the Companies and Allied Matters Act of 1990 to be eligible to borrow from the Facility.

 

Mechanism for the Facility

 

i.                    Lending banks shall receive, process, approve and forward requests for the facility from their customers to the CBN.

 

ii.                 Each request must be accompanied with the following documents:

 

a.      Business plan which should state expressly, the financing plan, economic benefits, environmental impact assessment report, etc.

 

b.      Audited Accounts (3 years) for existing company.

 

c.       Statement of Affairs for startups and companies with less than 3 years of existence.

 

d. Copies of duly executed offer documents between the bank and the loan applicants.

 

e. Certificate of Incorporation

 

f. Brief on directors

 

g.  At least two (2) Credit Report of the company and directors

 

h. Proposed schedule of fund disbursement.

 

iii.               Within 5 working days of the receipt of the banks’ requests, Central Bank of Nigeria shall inform the banks of the status of their request. 3

 

iv.                Upon disbursement of the Fund by CBN, the lending bank shall within 5 working days disburse the approved limit according to the proposed disbursement schedule.

 

Verification/Monitoring of Projects

 

i.                    Projects under the Facility shall be subject to verification by the CBN. Acceptance or rejection of an application for the facility shall be communicated to the PFIs and the borrower within 5 working days after verification.

 

ii.                 Central Bank of Nigeria reserves the right to reject an application from any lending bank that does not meet the requirements of the Guidelines.

iii.               The Project shall be monitored and impact evaluation conducted by the CBN periodically.
 

Management of the Facility  

The Development Finance Department of the Central Bank of Nigeria shall be responsible for the management of the Facility.

 

Responsibilities of Stakeholders

For the effective implementation of the Facility, the responsibilities of the stakeholders shall include:

1.       Central Bank of Nigeria

 

The Central Bank of Nigeria shall:

 

i.                    Articulate clear Guidelines for the implementation of the Facility

ii.                 Determine the limits.

 

iii.               Carry out verification and monitor projects financed.

iv.                Conduct impact evaluation.

v.                  Generate periodic reports on its performance.

vi.                Sensitize stakeholders

vii.             Review the Guidelines as may be necessary from time to time 12.

 

 

2.      Deposit Money Banks (DMBs)

 

The DMBs shall:

 

i.                    Appraise and approve requests under the Facility based on normal business consideration and due diligence.

 

ii.                 Forward such approved requests to CBN for verification and final approval.

 

iii.               Consider the grant of credit ONLY to real sector projects at an interest rate of 9% per annum all inclusive.

 

iv.                Monitor the Projects during the loan period.

 

v.                  Render periodic returns as may be specified by the CBN from time to time

 

vi.                 Comply with the Guidelines of the Facility.

 
3.      Borrower

 

The borrower shall:

 

i.                    Adhere strictly to the terms and conditions of the Facility.

ii.                 Utilize the funds for the purpose for which it was granted.

iii.               Make the Project and records available for inspection/verification by the CBN.

iv.                Comply with the Guidelines.

 

 

Discontinuation of a Credit Facility

Whenever a loan is repaid or the Facility is otherwise discontinued, the lending bank shall return the fund to the SIR Account in the CBN within 3 working days, providing the details of the credit Facility.

 

Infractions

 

The following among others shall constitute infractions under the Guidelines:

 

i.                    Loan diversion

ii.                 Delay in disbursement to beneficiaries

iii.               Delay in remittance of quarterly repayments.

 

(a) For items (i) to (iii) above, penalty shall be Monetary Policy Rate (MPR) plus 2 per cent of the amount outstanding.

 

(b) In cases of two (2) quarterly defaults by the beneficiary, the lending bank shall be liable to pay back the amount outstanding within two (2) weeks, failing which the CBN shall debit the lending bank.

 

Amendments

These Guidelines shall be subject to review from time to time as may be deemed necessary by the CBN.

 

Enquiries and Returns

All enquiries and returns should be addressed to:

Director,

Development Finance Department,

Central Bank of Nigeria, Corporate Headquarters

Central Business District, Abuja.

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