Nigeria’s real sector may not enjoy a N300 billion facility provided by the Central Bank of Nigeria (CBN) to help it unlock its potentials and stimulate output growth and value-added productivity due to tough conditions attached to it.
The CBN had in a circular to announce the initiative explained that the facility would be used to support large enterprises for startups and expansion financing needs of N500 million and above.
The real sector activities targeted by the facility are manufacturing, agricultural value chain and selected service sub-sectors, the bank said.
According to the circular, the objectives of the facility are to improve access to Nigerian Small and Medium Enterprises (SMEs) to fast-track the development of the manufacturing, agricultural value chain and services sub-sectors of the economy. This is also expected to increase output, generate employment, diversify the revenue base, increase foreign exchange earnings and provide inputs for the industrial sector on a sustainable basis.
The CBN said its Development Finance Department should be responsible for the day-to-day administration of the facility. It said activities to be covered under the facility are new, startups and expansion projects in the manufacturing, agricultural value chain (non-primary production) and services.
“An entity is adjudged to be a ‘manufacturer’ if it is involved in the production and processing of tangible goods; fabricates, deploys plants, machinery or equipment to deliver goods or provide infrastructure to facilitate economic activity in the real sector; and such entity must not be involved in the financial services industry,” the CBN said.
According to the bank, the manufacturers include SMEs defined as entities with an asset base (excluding land) of between N5 million and N500 million and with labour force of between 11 and 300 staff.
“Trading activities shall not be accommodated under this facility,” the CBN said. The participating financial institutions are all deposit money banks and Development Finance Institutions, according to the bank.
“A borrower shall meet the following criteria to be eligible: any entity falling within the definition of an SME and/or manufacturer; an entity wholly-owned and managed as a Nigerian private limited company registered under the Companies and Allied Matters Act of 1990; a legal business operated as a sole proprietorship; be a member of the relevant organised private sector associations including MAN, NASME, NACCIMA, NASSI, among others.
“Loan amount is minimum of N500 million up to a maximum of N10 billion for a single obligor. Any amount above N10 billion requires the special approval of management.” The CBN said the facility shall be administered at an all-in interest rate of 9 per cent per annum payable on quarterly basis.
“Specifically, the CBN shall be entitled to earn 3 per cent as interest and the banks, a 6 per cent spread. Repayments under this facility shall be amortised.
“Loans shall have a maximum tenor of 15 years depending on the complexity of the project and shall terminate on December 31, 2030. Each project tenor shall be determined in relation to its cash flow and life of the underlying collateral.”
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