The objectives of the Facility are, first: to improve access to finance by Nigerian Small and Medium Enterprises (SMEs). This is in order to accelerate the development of the aforementioned sectors.
Second, the Facility is intended to increase output for the business entity, generate employment, diversify the revenue base, increase foreign exchange earnings, and provide inputs for the sustainable development of the industrial sector.
As a result of these objectives, the Facility shall be managed by the Development Finance Department of the CBN.
The ‘activities’ to be covered are new, start-ups, and expansion projects in the manufacturing sector.
ELIGIBILITY
For a business in any of the sector to be considered eligible, such an entity must fulfill the definition of a manufacturer or SME (given above). Owned and managed by a Nigerian and being a private limited company registered under CAMA 1990, it must be a sole proprietorship registered under a relevant trade association.
STREAMS
Under the RSSF, there are two outlets of financing. One is a long-term loan for acquisition of plant and machinery while the other is a working capital.
SIZE
All commercial banks and development finance institutions (DFIs and DMBs) are to participate in the Facility. A minimum of N500 million up to a maximum of N10 billion is available for a single entity. However, for a loan request above N10 billion, the special approval of the Management is required.
INTEREST RATE
The loan will be administered at an interest rate of 9 per cent per annum and is payable on a quarterly basis. The CBN will disburse the Facility to the participating financial institutions at 3 per cent interest rate while the commercial banks will have a 6 per cent spread.
Loans will have a maximum duration of 15 years, depending on the complexity of the project. This, in effect, sets the termination date for any project to December 31st, 2030. However, the duration of each project will be determined in relation to its cash flow and the life of the collateral.
Working capital, on the other hand, will last for 1 year with the provision of a roll-over for a maximum of 3 years. In the event of any extenuating financial circumstances, the Facility allows for a moratorium of 1 year in the loan repayment schedule.
PROCESS
The PFIs will handle the process of vetting the eligible SMEs. This will commence when a PFI’s customer sends a request for processing and approval to the PFI which will then send it to the CBN. This should take only 15 days.
DOCUMENTS REQUIRED
In order for a request to stand any chance, it must be accompanied by certain documents including a comprehensive project business plans (this should contain estimated project costs, financing plan, economic benefits in terms of jobs, capacity, and environmental impact), audited accounts (3 years) and in the case of a start-up yet to commence operations, a Statement of Affairs, copies of duly executed offer documents between the bank and loan applicant, and a Certificate of Incorporation evidencing the incorporation of the Company with the CAC.
This is to be followed by a notification from the CBN to the PFI on the status of their application, within 7 days of receipt. If it is approved, a loan agreement will be executed. However, before the loan will be disbursed, each bank would be required to deposit with the CBN, securities with a minimum market value of 110% of the specified loan amount. Every project approved for financing under the Facility shall be subject to verification/monitoring by the CBN and PFIs once the loan kicks off.
RESPONSIBILITIES
It should be noted that the stakeholders mentioned in the RSSF Guidelines viz, the CBN, participating financial institutions, and the borrower all have responsibilities in order to ensure the effective implementation of the Facility in a way that promotes desired objectives of the Facility. The CBN has supervisory role on one hand and the provision of funds on the other while the PFIs have the middle-man role of approving requests based on normal business considerations and the granting of credit facilities at 9% per annum. In terms of monitoring and verification, both the CBN and the PFIs are responsible.
For more information about the CBN Real Sector Support Facility, download the document here.
