The Central Bank of Nigeria has issued guidelines for the release of funds to banks for lending from their Cash Reserve ratio and the issuance of longer-term corporate bonds.
What kinds of projects will be funded?
The apex bank stated that it would lay emphasis on projects targeted at backward integration and those that would enhance Nigeria’s import substitution strategy.
Differentiated Cash Reserves Requirement (DCRR) Regime
Under this programme, deposit money banks interested in providing credit financing to greenfield (new projects) or brownfield (new/expansion projects) in the real sector (Agricuture/Manufacturing) may request for the release of their funds from their Cash Reserve Ratio (CRR) to finance the projects subject to the banks providing evidence that the funds shall be channeled towards projects approved by the CBN.
Objectives of the facility
- Improved access to affordable finance for the manufacturing, agricultural, and other related sectors that are employment and growth stimulating.
- Stimulate growth in employment elastic sectors
Activities to be covered
The activities to be covered will be greenfield projects and expansion projects in manufacturing, agriculture and other related sectors approved by the CBN. Emphasis will however be placed on greenfield projects.
Trading activities are prohibited under this facility and any attempt to by a bank to falsify through the presentation of projects that do not meet the eligibility will be met by severe sanctions from the CBN.
Features of the loan
Tenor: A minimum of seven years.
Moratorium: A moratorium of two years.
The participating financial institution shall bear the credit risk.
Refinancing of existing loans is prohibited under the programme and any attempt to falsify information shall be met with serious sanctions.
The loans are to go for an all interest rate/charge of 9% per annum. Individuals are encouraged to report banks that charge above the prescribed maximum of 9% per annum.
The maximum facility shall be N10 billion per project.
Repayments shall be amortized and remitted to the CBN on a quarterly basis.
Eligibility Criteria
Participating Financial institution
Only institutions contributing CRR can participate in the DCRR programme
All financial institutions and the general public are eligible to participate in corporate bonds
Borrowers
A borrower under the commercial bond programme shall be an entity incorporated in Nigeria under the corporate and allied matters act of 1990 and shall not have any non performing loan with any financial institution.
DOWNLOAD CBN GUIDELINES ON DCRR AND COMMERCIAL BOND