The Central Bank of Nigeria (CBN) on Thursday unveiled new guidelines for accessing the Real Sector Support Facility (RSSF) through Cash Reserve Requirements (CRR) and Corporate Bonds (CBs) in furtherance of its policy drives targeted at enhancing the efficiency of the nation’s financial system and its stability.
The objectives of the facility include to improve access to affordable finance to the manufacturing, agricultural, and other related sectors that are employment and growth stimulating to the economy as well as stimulating growth in employment-elastic sectors.
Some of the key highlights of the new regulatory measure include the prohibition of trading operators from accessing its real sector support facility and also the refinancing of existing loans for funding under the programme
The apex bank warned banks that attempt to abuse the system through presentation of projects that do not meet the eligibility criteria/specified terms and conditions shall attract severe sanctions
According to the latest guidelines, the activities to be covered under the programme would be Greenfield (new) on which primary emphasis would be devoted and expansion (Brownfield) projects in manufacturing, agriculture and other related sectors approved by the regulatory banking institution.
The facility shall have minimum tenor of seven years and two years moratorium. Also, participating financial institution (PFI) shall bear the credit risk.
It would be recalled that the apex bank’s Monetary Policy Committee (MPC), had at its July meeting harped on the need to increase the flow of credit to the real sector of the economy in order to consolidate and sustain economic recovery.
However, the CBN under the new guidelines, required that banks interested in providing credit financing to Greenfield (new) and Brownfield (new/expansion) projects in the real sector (agriculture and manufacturing) may request the release of funds from their CRR to finance the projects, subject to such banks providing verifiable evidence that the funds shall be directed at approved projects by it.
CBN clarified further: “This programme involves investment by the CBN and the general public in CBs issued by Corporate subject to the intensified transparency requirements for Triple A-rated entities.
“Such requirements would include publishing through printing of an Information Memorandum spelling out the details of the projects for which the funds are required together with terms and conditions showing that these are long term projects that are employment and growth stimulating”, it added.
Another major requirement of the latest guidelines is that priority will be given to projects with high local content, import substitution, foreign exchange earnings and potential for job creation.
On the key components of the differentiated CRR (DCRR) system, the apex bank stated: “It shall comprise loans to Greenfield or expansion projects using CRR. Emphasis shall, however, be on new projects.”
Similarly, the guidelines stated in terms of CBs that “the tenor shall be as specified in the prospectus by the issuing corporate but not below seven years. Also, the moratorium for such CBs shall be as specified in the prospectus by the issuing corporate.
“The maximum facility shall be N10 billion per project. Facilities are to be administered at an all-in interest rate/charge of 9 per cent per annum. Bank customers are encouraged to report any bank to the CBN’s Director of Banking Supervision, where such DMB may have charged interest rates above the prescribed maximum of nine percent per annum.
“Repayments shall be amortised and remitted on quarterly basis to the CBN. Only CRR contributing DMBs shall be eligible to participate under the DCRR. For CBs, all financial institutions and general public are eligible to participate in investing in CBs.
“A borrower shall be an entity incorporated in Nigeria under the Companies and Allied Matters Act of 1990. Such borrower must not have a non-performing facility with any financial institution”, CBN added
Under the programme, the PFIs are expected to undertake due diligence based on normal business consideration; and forward an initial credit request on the proposed project to the CBN for pre-funding assessment/ approval-in- principle to proceed.
They are also required under the programme to forward final approved requests to CBN for funding after meeting all conditions precedent to disbursement of the facility; and disburse funds to obligors through their banks in agreed tranches, based on disbursement schedules submitted by the banks to the CBN within five working days of release from the apex bank.
In addition, the PFIs are also expected to render periodic returns as specified by the regulatory banking institution from time to time, monitor the projects and comply with the guidelines of the facility, amongst other requirements.
