The Central Bank of Nigeria (CBN) and the commercial banks recently pledged to start channeling the Cash Reserve Requirement (CRR) kept in the apex bank vault to agricultural and manufacturing lending at single digit interest rate of nine per cent.
According to Mr. Ahmed Abdullahi, the CBN Director of Banking Supervision, the loans will only be available for job creation and expansion plans
His words: “The idea is to have job-creating activities in the economy and also to bring interest rates down within the economy. Although agriculture and manufacturing are the initial sectors that are being considered,a bank can apply if there is a job-creating sector that the bank is operating in, it may be considered.
“The whole idea is to bring down interest rates and create jobs. For CRR refund, that is part of the idea. At the moment, banks funds are held under CRR and they are not being used.The idea came up that we can refund the CRR to a bank that has engaged in lending for a new project or for the expansion of an existing one in the agricultural or manufacturing sector as a way of utilising the CRR.
“Any time a bank lends to manufacturing or agricultural business at a rate that the CBN has prescribed, it will have its CRR refunded, up to the amount that it has lent.”
Last Thursday, the apex bank released the guidelines for accessing the fund dubbed Real Sector Support Facility through CRR and Corporate Bonds.
According to the guidelines, the maximum amount accessible by a party is N10 billion.
The loans can be received from any bank which has contributory cash reserve with the CBN.
To access the loan, the company must be incorporated in Nigeria under the Companies and Allied Matters act of 1990.
According to the apex bank, loans must only be approved for new projects or expansion projects and “priority shall be accorded projects with high local content, import substitution, foreign exchange earnings and potential for job creation”.
The minimum loan tenor is seven years with a two-year moratorium.
Repayments must be spread across the period and shall be remitted to the CBN on a quarterly basis.
Banks will carry out due diligence based on normal business consideration and disburse funds in approved tranches within five working days of release by the CBN.
Borrowers must utilize the funds for the purpose for which it was granted and ensure that the projects and records are available for inspection and verification.
Corporate, Triple-A rated companies are also encouraged to issue long-term corporate bonds in which the CBN can invest.
Companies issuing corporate bonds must not have a non-performing loan with any financial institution.
The CBN said a corporate bond funding programme had already been put in place to enable the CBN and the general public invest.