CBN Reviews Guidelines For N200bn Commercial Agric Scheme, Includes Non-Interest Banks

The Central Bank of Nigeria (CBN), on Tuesday, February 20, 2018, announced a review of its Commercial Agriculture Credit Scheme (CACS) guidelines to include Non Interest Financial Institutions (NIFIs).
In a circular signed by Kevin N Amugo, the director, Financial Policy and Regulation Department, the CBN said the review is “to deepen access to finance and reduce exclusion rate.”

The CACS was established by the CBN and the Federal Government of Nigeria, represented by the Federal Ministry of Agriculture and Rural Development (FMARD), as part of its developmental role to promote commercial agric enterprises in the country, being a sub–component of government’s Commercial Agriculture Development Programme (CADP).
The scheme is being financed from the proceeds of the N200bn three-year bond raised by the Debt Management Office (DMO) to be made available through participating banks to finance commercial agric enterprises.

Specifically to the non-interest financial institutions, financing are to be long-term for projects under the target activities, agricultural commodities and value chains and the tenor “for the Restricted Profit Sharing Investment between the CBN and the NIFI shall be for the maximum term specified for financing of projects under the original scheme, which is seven years (but should not exceed the exit date of the scheme).”

According to the guidelines, the scheme is expected to “terminate on September 30, 2025.”
Also, “maximum tenor for financing of projects by NIFIs under the window is to run concurrently with the period described above,” while working capital facility shall have a one-year tenor with a provision of roll over not more than twice or a maximum of three years.
Furthermore, the guidelines specify a moratorium commensurate with the gestation period of the project, just as non-interest window shall be a two-tiered structure between the CBN and the NIFI on one side, with a restricted Profit-Sharing Agreement (Restricted Mudaraba) executed between both institutions.

“The CBN, as Capital Provider disburses the funds for investment by the NIFI as the Implementing Party, based on a Business Plan commitment to be signed by the NIFI committing itself” to such terms as that the investment shall only be for financing of projects under the target activities, commodities and value chains; have an overall target profit rate of 9%, with sharing ratio of 2:7, with the CBN taking 22%, and the NIFI, 78%.

The NIFI shall also commit itself to achieving a target profit rate of 2% accruing to CBN, while the “NIFI finances the customer (Client) using CBN approved non-interest financial contracts appropriate with the type of financing requested, like Murabahah, Salam, Istisna’, Ijara, Wakalah, etc.”
Repayments under the facility are to be amortized; even as the NIFI would bear the credit risk of repayment by investor, and the collaterals pledged by the borrowers are to mitigate that risk.
The guideline lists eligible collateral under the window to include FGN Sukuk; CBN Non-Interest Liquidity Management Instruments (such as CBN Safe Custody Account (CSCA), CBN Non-Interest Note (CNIN) and CBN Asset-Backed Securities (CABS); Sukuk backed by the guarantee of the Federal Government; Sukuk given regulatory treatment by the CBN; and any other securities acceptable to the CBN.

To become eligible for the funds which has been set up to complement the apex bank’s other special initiatives in providing concessionary funding for agriculture such as the Agricultural Credit Guarantee Scheme (ACGS) mostly targeted at small scale farmers, Interest Draw-back Programme, Agricultural Credit Support Scheme and other similar development initiatives, NIFIs are to sign Participation Agreement with the CBN.

http://investdata.com.ng/2018/02/cbn-reviews-guidelines-n200bn-commercial-agric-scheme-includes-non-interest-banks/#more