The Central Bank of Nigeria (CBN) has pegged non-interest banks’ funding of agricultural programmes at a maximum N2 billion equity.
The investment is set at 40 per cent of investee company’s equity subject to a maximum of N2 billion and tenor of up to 10 years. It has an initial lock-up period of three years.
The new rule is contained in the guidelines for the Agri-Business, Small and Medium Enterprises Investment Scheme (AGSMEIS) for Non-Interest Financial Institutions (NIFIs) released by the apex bank.
The guidelines, signed by CBN Director, Financial Policy and Regulations Department, Kelvin Amigo, described AGSMEIS as an initiative of the Bankers’ Committee supporting government’s policy measures and efforts for the promotion of agricultural businesses.
“The AGSMEIS Non-Interest Fund will be domiciled in a dedicated account with the CBN while each Non-Interest Deposit Bank, full-fledged or window, shall set aside five per cent of its profit after tax (PAT) annually as contribution to the fund”.
“Also, each Non-Interest Deposit Bank shall transfer its contribution to the CBN not later than 10 working days after the Annual General Meeting (AGM) of the participating bank,” the guideline said.
The eligible activities under the scheme include businesses across the agricultural value chain, covering production, inputs
supply, storage, processing, logistics and marketing. Also captured in the scheme are (MSMEs) in the real sector including manufacturing, mining and petrochemicals; MSMEs in the service sector including information and communication technology (ICT) and the creative industry and other activities as the Central Bank of Nigeria (CBN) may determine from time to time.
A Special Purpose Vehicle (SPV) shall be established to manage and monitor investments/projects under the scheme. The guidelines also said the application of the fund shall be categorised into three broad components: debt ( 50 per cent), equity (45 per cent) and developmental components (five per cent).
The debt component shall constitute 50 per cent of the fund which shall be disbursed to eligible businesses through Non-Interest Deposit Money Banks.
The debt component shall comprise term financing (including equipment finance) and/or working capital where applicable.
On the equity/corporate debt financing component, the guideline indicated that the indirect component shall constitute 45 per cent of the fund which shall be channelled through SEC-licensed Islamic Fund Managers or Windows, for equity, quasi-equity and non-equity financing in agri-businesses and SMEs.
“The Articles of Association of the investee company shall not have a covenant prohibiting divestment of equity investment of the scheme. At the time of divestment, shareholders of the investee company shall have the right of first refusal. Other terms to be determined by the Fund Manager, subject to compliance with the principles of non-interest banking and financ.
It also backs government’s growth initiatives for transforming MSMEs as vehicles for sustainable economic development and employment generation.
According to the apex bank, the scheme would improve access to affordable and sustainable finance by Agri-businesses, MSMEs, create employment opportunities in Nigeria, boost the managerial capacity of agri-businesses and MSMEs to grow the
enterprises into large corporate organisations in line with Federal Government’s agenda to develop the real sector and promote inclusive growth.
The guidelines also said financing under the scheme shall be for start-ups, business expansion or revival of ailing companies and shall be in compliance with provisions of BOFIA (1991) as amended and the principles underpinning operations of NIFIs.