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FINANCE UPDATE

AUGUST 2017

3RD FLOOR, LAW UNION & ROCK BUILDING 14 HUGHES AVENUE, ALAGOMEJI,

YABA, LAGOS, NIGERIA.

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HIGHLIGHTS OF THE CIRCULARS AND GUIDELINES ISSUED BY THE CENTRAL BANK OF NIGERIA IN AUGUST,

2017

Dear Esteemed Clients,

Introduction

We have collated for your information the Circulars/Guidelines issued by the Central Bank of Nigeria (“CBN”) for

the month of August 2017. We hope that you find some of the information useful for your operations.

The guidelines/circulars are as follows:

OFI/DIR/CIR/GEN/18/011: THE BANK VERIFICATION NUMBER ENROLLEMENT FOR OFI CUSTOMERS-

EXTENSION OF TIMELINE TO DECERMBER 31, 2017;

TED/FEM/FPC/GEN/01/011: PAYMENT OF PORT AND NIGERIAN MARITIME ADMIMNISTRATION AND

SAFETY AGENCY (NIMASA) CHARGES BY OIL MARKETING COMPANIES;

FPR/DIR/GEN/CIR/06/023: AMENDMENT TO THE COMMERCIAL AGRICULTURAL CREDIT SCHEME

(CACS) GUIDELINES; and

FMD/DIR/CIR/GEN/08/009: INTRODUCTION OF TWO NEW INSTRUMENTS-FUNDING FOR LIQUID

FACILITY AND INTRA-DAY FACILITY FOR NON-INTEREST BANKS.

1. BPS/DIR/GEN/CIR/04/005: OFI/DIR/CIR/GEN/18/011: THE BANK VERIFICATION NUMBER ENROLLEMENT

FOR OFI CUSTOMERS- EXTENSION OF TIMELINE TO DECERMBER 31, 2017;

This circular was issued to all Other Financial Institutions (“OFIs”) to inform them of the timeline extension for

the bank verification enrollment exercise for OFIs customers from 31st

July, 2017 to 31st

December, 2017. This

extension was granted by the CBN following appeals from the Financial Inclusion secretariat, the National

Association of Microfinance Bank (NAMB) and members of the Mortgage Bank Association of Nigeria (MBAN)

soliciting for an extension of the enrollment exercise. In view of this development, all OFIs are required to

ensure that all customers are enrolled on the BVN platform utilizing the appropriate Know Your Customer

requirements, submit the progress reports on BVN enrollment on a monthly basis to the CBN and also

sensitize their customers by displaying the notices of the information contained in this circular in the banking

hall among other channels.

Please note that all customers without BVN linked to their accounts will no longer be entitled to debit

operations from 1st

January, 2018.

Please refer to the circular for comprehensive details at: https://www.cbn.gov.ng/documents/circulars.asp;

2.TED/FEM/FPC/GEN/01/011: PAYMENT OF PORT AND NIGERIAN MARITIME ADMIMNISTRATION AND

SAFETY AGENCY (NIMASA) CHARGES BY OIL MARKETING COMPANIES;

This circular was issued to all authorized dealers and the general public to inform them that payments for port

charges by oil marketing companies to the Nigeria Ports Authority and the Nigerian Maritime Administration

and Safety Agency is now being accommodated by the CBN using Form “A”

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In addition, all authorized dealers are directed to accept the request for the payments of port charges from oil

marketing companies and forward same to the CBN foreign Exchange window.

Please refer to the circular for comprehensive details at:

https://www.cbn.gov.ng/Out/2017/CCD/ted%20circular.pdf;

3 FPR/DIR/GEN/CIR/06/023: AMENDMENT TO THE COMMERCIAL AGRICULTURAL CREDIT SCHEME (CACS)

GUIDELINE

The CBN recently reviewed the Guidelines for Commercial Agriculture Credit Scheme (CACS) 2010 and

introduced certain amendments resulting in the Commercial Agriculture Credit Scheme (CACS) of August, 2017.

The salient amendments are outlined below:

S/N Head lines CACS OCTOBER 2010 CACS AUGUST 2017

1. Funding The scheme is required to be

financed from the proceeds of the

N200billion seven (7) year bond

raised by the Debt Management

Office (DMO).

The scheme shall be financed from the

proceeds of the N200bliion three (3) year

bond raised by the Debt Management

Office (DMO).

2. Governance and

Scheming

The Programme Steering

Committee(PSC) consisting of the

Federal Ministry of Agriculture

and Water Resources and CBN

shall be responsible for the overall

administration of the funds and

scheme while day-to-day

implementation shall lie with the

Technical Implementation

Committee(TIC).The TIC shall

report to the PSC which is the

highest policy organ of CACs

The Scheme shall be under the

management of the Central Bank of

Nigeria through the Board of Directors

and the Committee of Governors shall be

responsible for the overall administration

of the Scheme while Development

Finance Department shall be in charge of

the day-to-day implementation of the

Scheme. The Development Finance

Department shall also report to the

Committee of Governors on all CACS

issues

4 Definition of

Commercial Agricultural

Enterprise

A commercial enterprise was

defined as any farm or agro-based

enterprise with agricultural

asset(excluding land) of not less

than N100 million naira for an

integrated farm with prospects of

growing the assets to N250 million

within the next 3years and N50

million for non-integrated

farms/agro-enterprise except in

the case of on-lending to farmer’s

cooperative societies.

The definition of a “commercial

enterprise” has now been extended to

refer to any farm or agro-based

enterprise with agricultural asset

(excluding land) of not less than N100

million naira for an integrated farm with

prospects of growing the assets to N250

million within the next 3years and N50

million for non-integrated farms/agro-

enterprise with prospects of growing the

assets to N150 million except in the case

of on-lending to farmer’s cooperative

societies.

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5 Eligibility for

Participation in the

scheme

N/B: Concessionary

approval for State

Governments was not

contained in 2010 CACS

The single obligor limit for any

project from a participating bank

under the scheme shall be N2.0

billion while for State

Governments is N1.0 billion.

The single obligor limit for any project

from a participating bank under the

scheme shall be N2.0 billion while for

state Governments shall be N1.0 billion.

However, State Governments may now

be granted concessionary approval for

special schemes and programmes for

more than N1.0 billion.

4. Modalities and scheme

Interest on loan shall not exceed

9.0 percent inclusive of all

charges.

Interest on loan shall not exceed 9.0

percent inclusive of all charges to be

shared between the participating bank

and the CBN: 7% and 2% respectively;

and also the Scheme shall terminate on

September 30, 2025. This exit date does

not apply to the tenor of individuals loans

and overdrafts which are based on their

gestation period.

5. Loan tenor Loans shall have a maximum of

seven (7)years and or working

capital facility of one year with

provision for roll over.

Loans shall have a maximum tenor that

is based on gestation period of the

enterprise /or working capital facility of

one year with provision for roll over.

6. Verification And

Monitoring On Projects

All projects shall be verified by the

TIC after drawdown to ensure that

banks fully comply with objectives

of the Scheme. The Development

Finance Department of the CBN

and the CADP Secretariat of FMA

& RD shall periodically monitor

the projects funded under the

scheme and report to the PSC.

All projects shall be verified by the

Central Bank of Nigeria after release of

fund and draw down to ensure banks

fully comply with the objectives of the

scheme. The Development Finance

Department of the CBN shall periodically

monitor the projects funded under the

scheme, and report to the Committee of

Governors.

7 Alteration in other

Terms and Conditions

of CACS Loan

Participating banks shall be

required to secure a written

consent of the TIC and approval of

the PSC before making alterations

to the stipulated terms and

conditions governing any ongoing

CACS facility.

Participating Banks are now required to

secure the written consent of the CBN

before making any change(s) to the

stipulated terms and conditions

governing any on-going CACS facility.

8 Infractions and

Sanctions.

N/B: Some additional

Participating Banks were issued

sanctions for any infractions

committed under the CACS 2010

including but not limited to

charging of higher interest rate.

The scope of the sanctions and

infractions has been extended to include

the following:

i. Failure to disburse funds in

line with the agreed

disbursement schedule shall

attract penalty at the bank’s

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sanctions were made to

the 2017 CACS as

amended

lending rate as at the time of

infraction.

ii. Any participating bank that

fails to repatriate expired

project funds within 5

working days to the CBN

shall be charged a penalty

interest rate of MPR + 300

basis points for the period

the fund was not repatriated.

8. The Key Stakeholders of

the Scheme.

The key stakeholders include:

i) Federal Government of Nigeria

(FGN);

ii) Central Bank of Nigeria (CBN);

iii) Federal Ministry of Agriculture

and Rural Development (FMA&

RD);

iv) Debit Management Office

(DMO);

v) Participating Banks ( PBS); and

vi) Borrowers

i) Federal Government of Nigeria (FG)

represented by Federal Ministry of

Agriculture and Rural Development

(FMA& RD);

ii)Central Bank of Nigeria (CBN);

iii) Debit Management Office (DMO;

iv) Participating Banks ( PBS);

v) Borrowers; and

Vi.) Nigerian Agricultural Insurance

Cooperation (NAIC)

9. The responsibilities of

the stakeholders

a) THE FGN

The Federal Government of

Nigeria shall be the issuer of the

Bond.

b) The CBN

i) Specify the rate at which PBs

lend borrowers under the scheme.

ii) absorb the subsidy which may

arise in the pricing of the loan to

borrowers .

THE FGN

i) the President of the Federal Republic of

Nigeria shall grant approval for the

scheme

ii) The Federal Government of Nigeria

shall be the issuer of the Bond.

Following the amendments, the CBN

shall in addition :

i) Arbitrate between PBs and

project promoters.

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N/B: the major

amendment which was

made was the inclusion

of the responsibilities of

the NAIC which were

not contained in the

iii) Absorb all

incidental/administrative

expenses.

iv) Select the participating banks

under the scheme, with due

considerations of the general

ability of the banks.

v) Release funds to PBs after

confirmation of intent/readiness

of banks to disburse funds.

vi) Receive and process monthly

returns made by PBs in relation to

their loans under the scheme.

vii) Conduct spot audit on the PBs

as well as monitor and evaluate

the borrowers’ enterprises in

order to ascertain the

performance of the scheme.

viii) Retrieve funds when

guidelines are not strictly adhered

to by the participating banks.

ix) Prepare monthly returns to

National Economic Council, TIC

and PSC.

x) Retrieve loans from the PBs at

the expiration of the loan tenure.

xi) make provision for the N200

billion bond repayment.

xii) serves as the chairman of TIC.

ii) Conduct impact assessment

of the scheme.

iii) Review guidelines from time

to time.

iv) Prepare monthly reports to

the Committee of Governors

and Board of CBN (no longer

to TIC, NEC AND PSC).

v) Release funds to PBs at 2%

interest rate after

confirmation of intent/

readiness of banks to

disburse funds.

Participating Banks are now required in

addition to their responsibility educate

and enlighten borrowers to take National

Agricultural Insurance Corporation (NAIC)

cover for various items across the

agricultural value chain.

Borrowers are in addition to its

responsibilities under CACS 2010

guidelines now required to:

i) Insure the project being

financed with NAIC.

ii) Also, a farmer whose crop or

livestock is covered by

Section 7 of this Decree may

take out an insurance under

the scheme but where the

farmer is also a beneficiary of

an agriculture loan or

Government credit facility, or

bank or other financial

institution (referred to as

lending institution in the

Decree)

A. Nigerian Agriculture Insurance

Corporation (NAIC) : The NAIC

has been introduced under the

CACS 2017 and their

responsibilities are as follows:

THE RESPONSIBILITIES OF THE NAIC

i) Provision of insurance cover for all the

agricultural projects in the vent of losses

arising from the various hazards insured

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2010 CACS in the value chain.

ii) To ensure that the subsidized portion

of the premium in the production is

collected from both the Federal and state

Government

iii) issue and incorporate the financial

interest of the lending bank as the first

loss payee into the policy document to

the extent of their right and interests

e.t.c

PBs under NAIC insurance cover shall:

i)Educate and enlighten the borrower to

take NAIC insurance policies for the

various item across the agricultural value

chain.

ii) Calculate the premium due, in

consultation with NIAC, in respect of the

various insurances that would be affected

on the projects of the borrower and

deduct the premium from the approved

loan on behalf of NAIC. The lending bank

shall apply the pre-determined premium

rate supplied by NAIC from time to time.

E.tc.

9 Repayment of

Discontinuation of a

Credit Facility

Whenever a credit facility is

discontinued, the Participating

Bank shall advise the PSC

immediately, giving particulars of

the credit facility.

Provisions relating to repayment

of proceeds on quarterly basis not

contained in the CACS 2010

Additional provisions with respect to the

repayment of credit facility is now

included. They are as follows:

i) Repayment proceeds from CACS

projects shall be repatriated on quarterly

basis to the CBN. Whenever a credit

facility is discontinued, the PB shall

repatriate the funds within 5 working

days to the CBN, Giving details of the

credit facility.

ii) Repayment proceed shall be

ploughed back under the scheme as loans

for new projects or enhancement for

participating projects

Please refer to the circular for comprehensive details of the amendment to the Commercial Agricultural Credit

Scheme (CACS) for the Nigerian financial system

https://www.cbn.gov.ng/Out/2017/FPRD/AUGUST%202017%20CIRCULAR%20%20ON%20THE%20AMENDME

NT%20TO%20THE%20CACS%20GUIDELINE%20MERGED.pdf

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4. FMD/DIR/CIR/GEN/08/009: INTRODUCTION OF TWO NEW INSTRUMENTS-“FUNDING FOR LIQUIDITY

FACILITY” AND “INTRA-DAY FACILITY” FOR NON-INTEREST BANKS

The CBN, through this circular introduced two new financial instruments, for access by Non-Interest Financial

Institutions (NIFIs) namely, “Funding For Liquidity Facility (FfLF) and the “Intra-day Facility (IDF) at its window,

licensed by the CBN.

Some of the key features of FfLF and IDF include but are not limited to the following :

Funding for Liquidity Facility (FfLF)

Intra-Day Facility (IDF

• CBN to provide liquidity facility on

overnight basis to be terminated on

next business day.

• Authorized Non-Interest Financial

Institution (NIFI) to provide eligible

securities to the CBN as collateral for

the facility.

• The value of collateral to be a

minimum of 110 percent of the value

of the facility.

• CBN to provide an Intra-Day Facility for

settlement same business day.

• Authorized NIFI shall provide eligible

securities as collateral for the security.

• At termination, the transaction

unwinds and the CBN receives back its

funding and returns the collateral

securities to the NIFI.

Please refer to the circular for comprehensive details at -

https://www.cbn.gov.ng/Out/2017/FMD/Introduction%20of%20Two%20New%20Instruments%20for%20Non%

20Interest%20Banks.pdf;

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