CBN Launches New Schemes for Non-interest Financial Institutions

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Obinna Chima

 The Central Bank of Nigeria(CBN) has introduced intervention schemes to cater for non-interest financial institutions (NIFIs).

It said in a circular signed by its Director, Financial Policy and Regulation Department, Kevin Amugo, a copy of which was posted on its website yesterday, that the initiative was part of efforts to increase access to NIFIs and promote financial inclusion.

The schemes include Non-interest Guidelines for the Accelerated Development Scheme (AADS); Non-interest Guidelines for Intervention in the Textile Sector; Guidelines for the Operations of the Agri-Business, Smal and Medium Enterprise Investment Scheme (AGSMEIS) for NIFIs; Guidelines for MSME Development Fund for NIFIs; Non-interest Guidelines for Non-oil Export Stimulation Facility; Non-interest Guidelines for Anchor Borrowers’ Programme and Non-interest Guidelines for Real Sector Support Facility Revised Guidelines.
Others are Non-interest Guidelines for the operation of the Credit Support for the Healthcare Sector; Modalities for the implementation of the Creative Industry Financing Initiative (Non-interest version); Non-interest Guidelines for the implementation of the N50 billion Targeted Credit Facility.

Shedding light on some of the schemes, the CBN, in a 99-page document, explained the framework for each of the scheme.
For instance under the AADS, it listed the objective to include engaging a minimum of 370,000 youths in agricultural production nationwide over the next three years in order to reduce youth unemployment.

It said the broad objective of the AADS was to increase agricultural production towards food security, job creation and economic diversification.

“The specific objectives are: promotion of national food security in each state through sustained interactions amongst stakeholders in the agricultural value chain; collaboration amongst state governments, the CBN and relevant other stakeholders to create jobs in the agricultural sector, with strong focus on crops where states have comparative advantage; and provision of short and medium term funding windows for the implementation of the scheme,” it stated.

According to the CBN, the target group is Nigerian youths within the ages of 18 to 35 years and the focus would be on two agricultural commodities where the state has comparative advantage.

Under this scheme, the state government is expected to mobilise prospective young farmers with representation from all senatorial zones while state governments/FCT are to provide agricultural land in contiguous locations in all the senatorial zones.
A minimum of 100 hectares per cluster are to be provided.

“Prospective entrepreneurs (that meet the eligibility criteria) shall be grouped into clusters by commodity to be produced. State government to allocate 2-5 hectares of land per beneficiary.
“State government to provide access roads, water sources and other infrastructure that will enhance agricultural production on the land

“States may charge a rental on land (maximum. of N10,000 per ha) to defray the cost of land clearing and other infrastructure provided. Rental charged will be embedded in the Economics of Production (EoP) of the farmer,” it added.

The guidelines also stated that the participating financial institutions (PFIs) would act as agents of the CBN in disbursing the financing to the beneficiaries, which shall be in kind.

The PFIs shall purchase the inputs for on-selling to the beneficiaries, using CBN approved non-interest financing contract of Murabaha, Istisna’, etc at an all-inclusive rate of return of nine per cent per annum.

“For the financing of labour, the PFI shall use Service Ijarah or any other appropriate CBN approved contract for NIFIs with the same all-inclusive rate of return of nine per cent.

“Financing tenor is six months for grains and broiler production (rice, maize, soy bean etc); 18 months for cassava; 24 months for egg production and ruminants; five years for plantation crops, etc

“Average financing size of N250,000 per ha for arable crops; N500,000 per unit for livestock; and N1.5 million
for plantation crops like cocoa, cashew and oil palm,” it said.

It explained that diversion of funds by the PFI shall attract a penalty at its maximum financing rate at the time of infraction, among other penalties.