CBN unveils guidelines for N300b real sector fund

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•Facility to attract 9% interest, 15 years tenor

The Central Bank of Nigeria (CBN), on Wednesday published guidelines for its N300 billion Real Sector Support Facility (RSSF) to help large enterprises finance their expansion needs.

Beneficiaries, who must be engaged in manufacturing, agricultural value chain and selected service sub-sectors, can apply through participating banks for between N500 million and a maximum of N10 billion for a single obligor. Request for an amount above N10 billion requires the special approval of the fund’s management.

The CBN said the facility, part of efforts “to unlock the potential of the real sector to engender output growth, value-added productivity and job creation,” is to be administered at an all-inclusive interest rate of nine per cent per annum, payable on quarterly basis.

Specifically, the guideline further stated that for the loan with a maximum tenor of 15 years, depending on the complexity of the project, the CBN “shall be entitled to earn three per cent as interest and the banks, a 6 per cent spread,” while repayments shall be amortised.

The loan is therefore to terminate on December 31, 2030, but the tenor of each project would, “be determined in relation to its cash flow and life of the underlying collateral; working capital facility of one year with provision of roll over for a maximum of three years; (even as) the facility allows for moratorium of one year in the loan repayment schedule.”

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According to the guideline, Development Finance Department (DFD) at the CBN, the facility is aimed at improving the access by Small and Medium Scale Enterprises in the county to funding for fast-tracking the development of the manufacturing, agricultural value chain and services sub-sectors of the Nigerian economy.  It is also to raise “output, generate employment, diversify the revenue base, increase foreign exchange earnings and provide inputs for the industrial sector on a sustainable basis.”

The guideline issued by the Director, DFD, noted that the day-to-day management of the facility would be by the department, just as it listed activities covered under the fund to include new, start-ups and or expansion projects in a company engaged in manufacturing, particularly production and processing of tangible goods.

Other beneficiaries include those that fabricate or deploy “plants, machinery or equipment to deliver goods or provide infrastructure to facilitate economic activity in the real sector.

Such an entity, which “must not be involved in the financial services industry,” may also be a Small and Medium Scale Enterprise (SME) “defined as an entities with an asset base (excluding land) of between N5 million and N500 million and with labour force of between 11 and 300.”

It may also be one engaged in the agricultural value chain (non-primary production). The facility does not however accommodate entities engaged in services like trading activities.

The types of facilities on offer include long-term loan for acquisition of plant and machinery and working capital, which must be sourced through Deposit Money Banks and Development Finance Institutions (DFIs) like the Bank of Industry (BoI), which would serve as Participating Financial Institutions (PFIs).

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To be eligible to benefit from the facility, the guideline requires that a borrower must be an SME and/or manufacturer; wholly-owned and managed Nigerian private limited company registered under the Companies and Allied Matters Act of 1990. It may also be a legal business operated as a sole proprietorship; which must be a member of relevant Organised private sector Associations such as the Manufacturers Association of Nigeria (MAN), National Association of Small and Medium scale Enterprises (NASME), National Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA) and the National Association of Small Scale Industries (NASSI), among others.

Participating financial institutions are required to receive, process, approve and forward requests for the facility from their customers within I5 days, accompanying each request with documents like project business plans that state expressly, the financing plan, economic benefits, environmental impact; three-year audited accounts and statement of affairs for a start-up yet to commence operations.

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