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CBN’s guidelines on N500bn bail-out for industries out

*Loan fixed at maximum N1bn per firm

By Omoh Gabriel,
Business Editor

LAGOS—The Central Bank of Nigeria, CBN, has said that industries operating in the country which seek to refinance or restructure their operations can access a maximum of N1 billion from its sponsored N500 billion industry revival funds.

The regulatory bank announced this in its guidelines issued at the weekend.

CBN guidelines issued to the industry revival fund stated: “Loan amount is a maximum of N1 billion for a single obligor in respect of refinancing/restructuring. The Fund shall be administered at an all-in Interest rate/charge of seven per cent per annum payable on quarterly basis. Specifically, the Managing Agent, Bank of Industry, BOI, shall be entitled to a one  per cent management fee and the banks, a six per cent spread.”

Criteria for eligibility

To be eligible to access the fund, the CBN said: “A borrower shall be any entity falling within the definition of an SME and/or manufacturer; an entity wholly-owned and managed 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 such as MAN, NASME, NACCIMA, NASSI.”

The CBN guidelines specified that “any entity as defined above with an existing facility on the books of the participating banks can access the facility but emphasis will be on facilities that are indicating weakness arising from tenor, structure as well as facing cash flow difficulties.’

“Activities to be covered under the Fund are manufacturing and an entity will be 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.”

CBN said that “such manufacturers will include Small and Medium Scale Enterprise, SMEs, defined as entities with asset base (excluding land) of between N5 million and N500 million and with labour force of between 11 and 300.”

The guidelines noted that in its bid to unlock the credit market, the CBN had approved the investment of N500bn Debenture Stock to be issued by BOI.

It said that in the first instance, N300bn would be applied to power projects and N200bn to the refinancing/restructuring of banks’existing loan portfolios to Nigerian SME/Manufacturing Sector, adding that the guidelines related to the N200bn re-financing and restructuring of banks’ loans to the manufacturing sector with those for the power sector to be issued at a later date.

Objectives of bail-out funds

Objectives of the funds, the apex bank said, were to fast-track the development of the manufacturing sector of the economy by improving access to credit by manufacturers; improving the financial position of banks in the country, and increasing output. It added that other objectives include generation of employment, diversification of the revenue base, increasing foreign exchange earnings and provision of input for the industrial sector on a sustainable basis.

The guideline stated that BOI shall be the Managing Agent and be responsible for the day-to-day administration of the Fund.

Under the fund, it stressed that trading activities would not be accommodated, and that the would be used for long-term loan for acquisition of plant and machinery; refinancing of existing loans; resuscitation of ailing industries; refinancing of existing lease and working capital. It added that all banks and Development Finance Institutions, DFIs; excluding BOI were participating in the exercise.

Loans repayable within 15 years

The loans, the apex bank said, shall have a maximum tenor of 15 years and or working capital facility of one year with provision for roll over and that the fund allowed for moratorium in the loan repayment schedule. Bank of Industry, BOI, would be required to send out notices to all banks and development finance institutions for submission of refinancing/restructuring requests.

The banks, it further said, should submit requests in the prescribed format within 14 days of the notice from BOI. Each request must be accompanied by the following documents: request from the customer seeking for such refinancing and/or restructuring; latest financials of the obligor (management accounts will be acceptable in lieu of updated accounts; copies of duly executed offer documents between the bank and the loan obligor evidencing existence of a facility.

Others are, six months account statements showing the current exposure; an abridged business plan or feasibility study of the underlying project for which the facility was initially approved.

According to the guidelines, the plan must include the projects cash flow projections detailing the repayment schedule; Certificate of Incorporation evidencing the incorporation of the company with the Corporate Affairs Commission; a letter of commitment indicating that the requesting bank shall on or before 31 December 2010, book new loans to the manufacturing / SME sectors in an amount not less than 50 per cent of the amount accessed under the Fund.

All applications for refinancing/restructuring facilities can be made directly or by way of syndication, club arrangement or any other means involving two or more banks on the books of a bank. Within seven days of the receipt of the banks’ requests, BOI is expected to inform the banks of the status of their applications and also advise each bank on the amount of its facility that shall be refinanced/restructured under the Fund.

An on-lending agreement shall be signed between BOI and each bank at this time. Within receipt of funds from CBN, BOI shall require each bank, to pledge securities with face value of not less than 100 per cent of its specified refinanced amount to BOI through the Discount office of CBN.


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