By Adaeze Okechukwu
The Central Bank of Nigeria (CBN) yesterday said that Non-Interest Financial Institutions (NIFIs) can now participate in the N200 billion Commercial Agricultural Credit Scheme (CACS).
The CBN disclosed this in the revised guidelines for the scheme released yesterday via a circular titled ‘Amendment to the Commercial Agriculture Credit Scheme (CACS) Guidelines’.
The apex bank explained that the extension of the scheme to NIFIs was part of its efforts to deepen access to finance and reduce exclusion rate.
“As part of the efforts by the Central Bank of Nigeria to deepen access to finance and reduce exclusion rate, the CBN has revised the existing Commercial Agriculture Credit Scheme (CACS) Guidelines to include Non-Interest Financial Institution (NIFIs). It is expected that the review of the Guidelines for other invention funds would follow in due course”, the CBN stated.
Among others things, the revised guidelines created a non-interest window for participation of NIFIs.
The guidelines stated: “The Non-Interest window shall be a two-tiered structure. The first is between the CBN and the NIFI. A restricted profit-sharing agreement shall be executed between the CBN and NIFI. 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 the following terms as follows: Investment shall only be for financing of projects under the target activities, commodities and value chains; the financing shall have an overall target profit rate of 9.0 per cent; the profit distribution ratio between the CBN as Capital Provider and the NIFI asthe Implementing Party shall be in the ratio of 2:7 (i. e. CBN 22 percent and NIFI 78 percent); and the NIFI commits itself to achieving a target profit rate of 2 percent accruing to CBN.
“The second tier is between the NIFI and the Investor. 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.”
The CACS was created in 2009 by the CBN in collaboration with the Federal Ministry of Agriculture and Water Resources (FMA&WR) established the Commercial Agriculture Credit Scheme (CACS) in 2009 to provide finance for the country’s agricultural value chain.
The scheme is financed through a N200billion Bond raised by the Debt Management Office (DMO), while loans under the scheme are disbursed at a maximum interest of 9.0 percent.
According to the CBN’s Economic report for the 4th quarter of 2017, “At end-December 2017, total amount released by the CBN under the Commercial Agriculture Credit Scheme (CACS) from inception to the participating banks for disbursement stood at N551.18 billion for 547 projects. The projects included sixty-five (65) state government projects under CACS and eight (8) Paddy Aggregate Scheme (PAS)”