The Apex bank recently released the CBN guideline for deposit money bank (DMBs) to access their Cash Reserve Ratios (CRRs) with CBN for onward lending to the Agric and Manufacturing sector at a single digit rate of 9%.The guideline also includes corporate bond programs for corporates and triple-A rated companies.
The release of the lending guideline tagged “Real Sector Support Facility (RSSF) was sequel to decision taken at the 119th Monetary Policy Committee (MPC) meeting held on 23rd and 24th July 2018.
1.Differentiated CRR (DCRR)
Project Finance Facilities targeted at real sectors of the economy is the main target of the Guideline. Agricultural and Manufacturing industry and other sectors considered by CBN as employment and growth stimulating. The facility under this CBN Guideline will not be available for trading businesses as well as refinancing of existing projects.
The Real Sectors Loan/Project Finance which must be approved by the CBN can be availed to both new projects tagged – greenfield and as expansion facility request for existing businesses tagged – brownfield, Emphasis will however be placed on new projects.
2.Corporate Bonds (CBs) Program
Financing instrument issued by corporates and triple-A rated companies for project finance that meets the eligibility criteria as specified by CBN in the guideline. The CBN will lay emphasis on projects with high local contents, foreign exchange earnings capacity in addition to job creation and enhancement Nigeria’s import substitution strategy.
For Corporate Bonds, Corporates and Triple-A rated companies will be encouraged to issue corporate bonds for project finance. The bonds will be available to apex bank and the general public. They will however be required to publish in the print media, details of such project/s with terms and conditions showing that the projects are long term in nature and are employment and growth stimulating.
Facility Conditions for the new CBN Guideline
Maximum amount: N10billion per project.
DCRR – minimum of 7 years
CBs – As specified in the prospectus bathe issuing corporate but not below 7 years
DCRR – 2 years moratorium on principal
CBs– As specified in the prospectus by the issuing corporate
DCRR – participating financial institutions bears the credit risk
CBs – The guideline is silent about this, but the risk for CBs are always on the subscribers
DCRR – Al in interest rate of 9% per annum
CBs – Not specified in the guideline
Responsibilities of the CBN
– Articulate and review guideline for the facilities
– Appraise, monitor and evaluate projects and the facilities
– Determine the limits of DCRR and CBs
– Invest in CBs issued by corporates
– Disburse funds for DCRR In agreed tranches
Responsibilities of participating DMBs
– Undertake due diligence based on normal business considerations.
– Forward customers credit request to CBN for pre-funding assessment and approval in principle to proceed.
– Forward approval to CBN after the customer has met all conditions for disbursement for final approval.
– Disburse to customer in agreed tranches based on approvals within 5 working days of release of funds to them.
– Comply with all facility conditions, monitor and render periodic returns to the apex bank.
Responsibilities of the borrower in the CBN Guideline
– Adhere strictly to the terms and condition of the facility
– Utilize funds for the purpose for which it was availed.
– Make the project and records available for periodic inspections.
– And comply with all the facility guidelines.