CBN pegs loan to 100 for 100 initiative at N5bn

Companies that will participate in the 100 for 100 initiative of the Central Bank of Nigeria (CBN) will access a maximum loan of N5 billion per obligor, the banking sector regulator said in a guideline released at the weekend.

“Any amount above N5 billion shall require the special approval of CBN’s management, the guideline stated.

In an effort to stimulate the flow of credit to the real sector of the economy in order to reverse the nation’s over-reliance on import, the CBN established the 100 for 100 Policy for Production and Productivity (100 for 100 PPP), said Philip Yila Yusuf, director, development finance department.

Consequently, the apex Bank issued the guideline for implementation by eligible private companies with the potential to immediately transform and catalyze the productive base of the economy.

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The interest rate under the intervention, according to the guideline, shall be at not more than 5.0 percent per annum, (all-inclusive) up to February 28, 2022, thereafter, interest on the facility shall revert to 9 percent p.a. (all-inclusive) effective from 1st March 2022.

The initiative is a long-term loan for the acquisition of plant and machinery and working capital. The 100 for 100 policy shall be funded from the CBN’s Real Sector Support Facility – Differentiated Cash Reserve Requirement (RSSF-DCRR) window or any other funding window as may be determined by the CBN.

Only Cash Reserve Ratio (CRR) contributing Deposit Money Banks (DMBs) are to be eligible to participate under the initiative.

The collateral acceptable under the intervention facility shall be as may be acceptable by the PFI under the RSSF-DCRR. The guidelines stated that monthly interests on the facility shall be amortized and transferred quarterly with principal repayments to the CBN.

The initiative, 100 for 100 PPP, is a financial instrument designed to create the flow of finance and investments to enterprises with the potential to catalyze sustainable economic growth trajectories, accelerate structural transformation, promote diversification, and improve productivity.

Quarterly, starting from November 1, 2021, the initiative shall select 100 private sector companies with projects that have the potential to significantly increase domestic production and productivity, reduce imports, increase non-oil exports, and overall improvements in the foreign exchange generating capacity of the Nigerian economy.

The initiative, which shall be bank-led, will be rolled over every 100 days (that is, quarterly) with a new set of companies selected for financing under the initiative. The initiative shall be implemented in collaboration with relevant stakeholders with a focus on micro and macroeconomic impacts, in terms of contribution to GDP and exports, sustainable jobs created, local content development, production output, and capacity utilization and integration into the global value chain.

On the exit date, the CBN said the initiative shall be operated in the first instance for a period not exceeding December 31, 2031, depending on the complexity of the project.

“The infractions and sanctions, stipulated in the RSSF guidelines, shall be applicable under this intervention facility,” the guideline stated.