Banks to support exports with N25bn annual equity contribution

Banks have agreed to dedicate five percent of their annual profit-less tax balances as equity capital for export driven businesses, as well as those which commit to helping government’s import substitution drive.

This was one of the high points of the first bankers committee meeting in the year, which held in Abuja on Thursday.

Briefing on the outcome of the meeting, Ahmad Abdullahi, new director, Banking Supervision, at the Central Bank of Nigeria (CBN) said the five percent contribution would amount to about N25bn annually, looking at the industry’s profits in the last three years.
Implementation will start from 2017 using 2016 financials of banks and the pool of funds will be domiciled at the CBN, Abdullahi noted.

According to him, the funding support will not be disbursed as ‘loans’, but will allow each bank take up an equity holding in the scheme, based on its annual contribution from annual profit.
“The consortium of banks which contribute in the businesses will then take part-ownership of such businesses,” he said.

Abdullahi also explained that the members of the bankers’ committee would control scheme, but there would be a project review committee that would review submissions by entrepreneurs that require funding, and make recommendation to a board of trustees of the bankers committee.

“There was a new initiative of the bankers committee in funding agribusiness as well as Small and Medium Enterprises (SMEs). The committee felt that it should support the effort of the Federal Government to diversify the economy, by coming up with an initiative
that will help the export drive, as well as import substitution.

“The committee has decided that it is going to be contributing five percent of each bank’s Profit After Tax to a pool of funds that will be kept in the Central Bank of Nigeria, and it will be used to finance eligible, bankable projects that are meant for export drive, or import substitution.
“Based on the banks’ P&L in the last three years, we estimate that up to N25 would be contributed by the banks annually,” the director stated.

He assured that the initiative will not duplicate efforts of the Development Finance Institutions (DFIs), insisting rather, “the more, the merrier.”

He said the scheme would provide long term funding for businesses, since the plan is a maximum 10 years for the exit period for any business that is benefitting from this.

Chidi Umeano, head of the Shared Services Office of the CBN, also briefing on the outcome of the meeting announced that the four-year old cashless policy would now be re-introduced and rolled out in the remaining 30 states within the year, beginning in May.

The cashless policy, which was introduced in 2012, has been implemented in six states- Lagos, Abia, Kano, Anambra, Rivers, Ogun, including the Federal Capital Territory.

It was suspended in 2014 but Umeano says it is now time to reintroduce the scheme, based on availability of massive payment infrastructure and a lot of awareness which can now support nationwide implementation.

“We have very interesting statistics to show that there has been a lot of shift from cash to other electronic forms of payment.

“We have figures to show that a lot of those activities in certain channels have up to trillions of naira on yearly basis. So we think it is now time to review and restart the cashless policy.”

He said the scheme would however be reintroduced gradually. By May 1, they will take on the first 10 states, August 1, the second ten states, and by October 1, take on the remaining ten states to complete a nationwide rollout.

He said the policy would ensure that the vulnerable are well protected, arguing that the nationwide cashless policy roll-out will help in financial inclusion, sustainability goals of the country and increased security in transactions.

 

Onyinye Nwachukwu