By Babajide Komolafe

The Central Bank of Nigeria, CBN, yesterday, announced the establishment of N300 billion fund, which allows newly-established manufacturing companies to borrow up to N10 billion for 15 years at single digit interest rate.

The apex bank said the fund, called Real Sector Support Facility, RSSF, will be used to support large enterprises for start-ups and expansion financing needs of a minimum of N500 million up to a maximum of N10 billion.

The real sector activities targeted by the facility are manufacturing, agricultural value chain and selected service sub-sectors.

Objectives

The operational guidelines for the facility released yesterday stated: “The objectives of the facility are to improve access to Nigerian SMEs to fast-track the development of the manufacturing, agricultural value chain and services sub-sectors of the Nigerian economy:

“Increase output, generate employment, diversify the revenue base, increase foreign exchange earnings and provide input for the industrial sector on a sustainable basis.

Target sector

“The activities to be covered under the facility are new, startups and or expansion projects in manufacturing: any 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 manufacturers include Small and Medium Scale Enterprise, SMEs, defined as an entity with an asset base, excluding land, of between N5 million and N500 million and with labour force of between 11 and 300.

“Other activities covered under the facility are agricultural value chain (non-primary production) and services.”

Criteria

On criteria for accessing the loan, the guidelines stated: “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 by 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 organized private sector associations such as MAN, NASME, NACCIMA, NASSI, and so on.”

Payback

The guidelines stated further that the “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 facility shall be administered at an all-in interest rate of nine percent per annum, payable on quarterly basis.

“Specifically, the Central Bank of Nigeria, CBN, shall be entitled to earn three percent as interest and the banks, a six percent spread.

“Loans shall have a maximum tenor of 15 years, depending on the complexity of the project and shall terminate on 31st December 31, 2030. Each project tenor shall be determined in relation to its cash flow and life of the underlying collateral. Repayments under this facility shall be amortized.”