FINANCE UPDATE OCTOBER RD FLOOR, LAW UNION & ROCK BUILDING 14 HUGHES AVENUE, ALAGOMEJI, YABA, LAGOS, NIGERIA.

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1 FINANCE UPDATE OCTOBER RD FLOOR, LAW UNION & ROCK BUILDING 14 HUGHES AVENUE, ALAGOMEJI, YABA, LAGOS, NIGERIA. 1

2 HIGHLIGHTS OF THE CIRCULARS AND GUIDELINES ISSUED BY THE CENTRAL BANK OF NIGERIA IN OCTOBER 2017 Dear Esteemed Clients, Introduction The Central Bank of Nigeria ( CBN ) issued the following Circulars/Guidelines for the month of October, We hope that you find some of the information useful in your operations. BPS/DIR/GEN/CIR/04/010: REGULATORY FRAMEWORK FOR BVN OPERATIONS & WATCH-LIST FOR THE NIGERIAN FINANCIAL SYSTEM PUBLISHED BPS/DIR/GEN/CIR/04/010: FURTHER CLARIFICATION ON THE ENFORCEMENT OF GIFMIS REVENUE REFERENCE NUMBERS PUBLISHED TED/FEM/FPC/GEN/01/013RE: REPATRIATION OF EXPORT PROCEEDS (OIL AND NON-OIL) DFD/DIR/GEN/NESF/02/001: GUIDELINES FOR THE NON-OIL EXPORT STIMULATION FACILITY (NESF) 1. BPS/DIR/GEN/CIR/04/010: REGULATORY FRAMEWORK FOR BVN OPERATIONS & WATCH-LIST FOR THE NIGERIAN FINANCIAL SYSTEM PUBLISHED The Central Bank of Nigeria ( CBN ) recently released the exposure draft on the Regulatory Framework for Bank Verification number (BVN) operations and watch list for the Nigerian Financial System to all deposit money banks, switches, mobile money operators (MMOs) payment terminal providers, Micro finance banks & others. The framework, seeks to develop and enhance the security of electronic payments systems in Nigeria. The implementation of this framework is with immediate effect. Some of the Salient points of the Regulatory Framework for Bank Verification number (BVN) operations and watch list for the Nigerian Financial System are as follows: S/N Item Provisions 1. Objectives The objectives of the regulatory framework are to define the roles and responsibilities of stakeholders and the operations of BVN in Nigeria; to define the access, usage and management of BVN operations; to provide a database of watch-listed individuals; to outline the process and operations of the watch list and to deter incidences of fraud in the Nigerian Banking Industry. 2. Participants: The participants are grouped into five categories: They include 1. The Central Bank of Nigeria (CBN): the CBN is charged with the responsibility of approving the regulatory framework for BVN operations, conducting oversight and revising the 2

3 framework for the operations of the watch list as the need arises. The director of Risk Management Department of the CBN is to review cases before the issuance of clearance for the purpose of delisting individuals from the watch list. 2. Nigeria Interbank Settlement system (NIBSS): the NIBSS is to collaborate with other stakeholders to develop and review the standard operating guidelines of the BVN and to maintain the watch list database on behalf of stakeholders and all other responsibilities associated with the maintenance of such watch list. 3. BVN operational processes and procedures 4. Eligibility for Access to BVN Information 3. Deposit Money Banks (DMBs) 4. Other Financial Institutions (OFIs) The DMBs and OFIs are to ensure the proper capturing of BVN data of customers account and to ensure that the customer s name on the BVN database is the same in his/her accounts across the banking industry and also to report fraudulent individuals BVN to NIBSS for update of the watch list database 5. Bank Customers: customers are required to abide by this framework and to report all suspicious or unauthorized activities on their accounts. The operational procedure and process are listed below: 1. Enrollment 2. Identification 3. Verification 4. Linking of customers unique Id 5. Fraud Management 6. Customer information update The following persons may have access to BVN information subject to the approval of CBN DMBs OFIs MMOs PSPs Law Enforcement Agencies Credit Bureaus Other entities as applicable Access fees are payable for accessing information on the database, subject to the approval of the CBN. Such fees are also to be determined from time to time. 5. Security and Data Protection/Risk Management Parties involved in BVN operations shall put in place secured hardware, software and encryption of messages transmitted through the BVN network, ensure that all information its employees have obtained in the course of discharging their duties are classified as confidential. BVN participants must also ensure that risks mitigation 3

4 6. Consumer Protection and dispute resolution techniques are put in place to minimize operational, technical, fraud risks. In the event of any complaints by a bank customer, disputes shall be resolved by banks or escalated to the CBN when unable to resolve 7. Stakeholders Watch list stake holders include: CBN Banks and other Financial Institution Nigeria Interbank Settlement System Bank Customers 8 Sanctions and Penalties for Banks Appropriate sanctions shall apply to any bank that fails to enlist individuals confirmed in fraudulent activity and another stakeholder who fails to perform its responsibilities will be penalized by CBN. 9 Sanctions and Penalties for Individuals This Penalty applies to customers on the watch list. They are as follows: 1. A watch listed individual shall not be allowed to enter into any new relationship with the bank; 2. A bank may choose not to continue business relationship with account holder on the watch list, and where the bank chooses to, the account holder shall be prohibited from all e-channels 3. A watch listed individual is to remain on the watch list for a period as specified in the penalty table 4. Penalties shall also apply to the other accounts that the watch listed individual is a signatory to. 10. Delisting from the Watch list All individuals aggrieved are to go to their bank to obtain formal request for delisting. The reasons for delisting should be one of the follo0wing Upon expiration of term in the watch list Erroneous listing of BVN on the watch list Please refer to the circular for comprehensive details at ncialsystem.pdf 2. BPS/DIR/GEN/CIR/04/010: FURTHER CLARIFICATION ON THE ENFORCEMENT OF GIFMIS REVENUE REFERENCE NUMBERS PUBLISHED This notice is in furtherance of the circular issued on the 25 th day of September referenced BSPD/DIR/GEN/CIR/04/009 requesting all Deposit money Banks (DMBs), to enforce the mandatory use of GIFMIS Revenue Reference Number (RRN) at the point of Revenue collection into the TSA. The following are the clarifications: It is not all payments by revenue payers that require the use of RRN, revenue collections that require the RRN will have a mandatory field for such on the Remita System; and 4

5 The use of RRN applies only to payments going to the Consolidated Revenue Fund (CRF) on behalf Ministries, Department and Agencies (MDAs) under the GIFMIS Platform. By the circular SystemSpecs Ltd has been directed to ensure that only MDAs whose names appear on the list provided by the OAGF are made mandatory on the Remita system for the use of GIFMIS Revenue Reference Numbers. For further enquires stakeholders are advised to contact the funds department, Office of the Accountant General. Please refer to the circular for comprehensive details at ISREVEUEREFERENCENUMBERS.pdf 3. TED/FEM/FPC/GEN/01/013: RE: REPATRIATION OF EXPORT PROCEEDS (OIL AND NON-OIL) This circular is in reference to a previous circular released on the 19 th day of February 2015 with Ref: TED/FEM/FPC/GEN/01/005. The circular is to serve as reminder to exporters that failure to repatriate their export proceeds within the stipulated 90 days for Oil & Gas proceeds and 180 days for Non-oil exports constitute a breach of the regulation and any exporter who defaults in the repatriation of export proceeds within the stipulated period will be denied access to banking services and the foreign exchange market. Please refer to the circular for comprehensive details at 4. DFD/DIR/GEN/NESF/02/001: GUIDELINES FOR THE NON-OIL EXPORT STIMULATION FACILITY (NESF) The CBN introduced the Non-Oil Export Stimulation Facility (NESF) in its desire to diversify the revenue base of the economy and to expedite the growth and development of the non-oil export sector. The Facility will help redress the declining export financing and reposition the sector to increase its contribution to economic development. S/N Item Provisions The objectives of the facility are to: 1. Objectives i. Improve access of exporters to concessionary finance to expand and diversify the non-oil export baskets; ii. Attract new investments and encourage reinvestments in value-added non-oil exports production and non-traditional exports; iii. Shore up non-oil export sector productivity and create more jobs; iv. Support export oriented companies to upscale and expand their export operations as well as capabilities; and v. Broaden the scope of export financing instruments. 2. Eligibility Criteria Eligible Borrowers/Beneficiaries Export-oriented enterprise that fulfills the underlisted conditions shall be eligible to participate under the NESF: i. Duly incorporated in Nigeria under the Companies and Allied Matters Act (CAMA). 5

6 ii. Have verifiable export off-take contracts. iii. Satisfactory credit reports from at least two Credit Bureaus in line with the provisions of CBN circular BSD/DIR/GEN/CIR/04/014 dated April 30, Eligible Transactions Eligible transactions that shall qualify for funding under the NESF shall include: i. Export of goods processed or manufactured in Nigeria; ii. Export of commodities & services, which are allowed under the laws of Nigeria. iii. Structured trade finance arrangements; iv. Working capital/stocking facility; v. Import of plant& machinery, spare parts and packaging materials, required for export-oriented production that cannot be sourced locally. vi. Resuscitation, expansion, modernization, and technology upgrade of non-oil export industries; vii. Export value chain support services such as transportation, warehousing & quality assurance infrastructure. 4. Participating Financial i. Deposit Money Banks (DMBs) Institutions (PFIs) ii. Development Finance Institutions (DFIs) 5. Features of the NESF i. Lending Limit Term loans under the facility shall not exceed 70% of the verifiable total cost of the project subject to a maximum of N5, 000,000, ii. Tenor The NESF shall have a tenor of up to 10yearsand shall not exceed 31 st December, Working capital/stocking facility shall be for one year with the option of roll-over once subject to CBN s approval. iii. Repayment Repayment of principal and interest shall be quarterly and in accordance with the agreed repayment schedule. iv. Moratorium Moratorium shall be for one (1 ) year. In case of construction, option for roll over for a period of up to one (1) year may be allowed subject to CBN s approval. v. Interest Rates The facility shall be granted at an all-inclusive interest rate of 9% per annum. vi. Interest charges during Project Implementation/Construction This shall be dependent on the status and transactional structure of the projects. They shall be categorized as follows: a) Capitalization of interest: interest payable during 6

7 the implementation and construction period shall be added to the total facility, subject to the 70% limit on the total cost of project. b) Pre-funding of interest: Interest payable during implementation shall be from a pre-funded Debt Service Account. 6. Application Procedures i. Submission of Requests A PFI shall submit application to CBN on behalf of its customer in the prescribed format. In the case of loan syndication, the lead bank shall submit the application on behalf of other banks. All correspondence with respect to the application shall be with the lead bank. ii. Documentation of Requirement Each request for facility is to be accompanied by the following documents: a) Written request from the project promoter to a PFI seeking funding under the NESF. b) Completed application form. c) CTC of incorporation documents. d) 3years tax clearance certificate. e) Audited statement of accounts for the last 3years (where applicable) or the most recent management account for companies less than 3years in operations. f) Feasibility study/ business plan of the project. g) Relevant permits/licenses/approvals (where applicable) h) Verifiable export orders/contracts or other export agreement and arrangements/commitments. i) Environmental Impact Assessment (EIA) report (where applicable). j) Draft letter of offer by PFI, loan repayment schedule and credit risk report of the customer. k) Any other document(s) that may be required by CBN. iii. Collateral Requirement PFIs shall submit an Irrevocable Standing Order (ISPO) in respect of all projects approved under the scheme. iv. Participation Agreement A participation agreement shall be signed between CBN and PFI. v. Monitoring & Evaluation (M& E) M &E projects funded under the facility shall include onsite and off-site verification and routine monitoring of projects by CBN & PFIs. 7

8 7. Roles and Responsibilities of Stakeholders. i. CBN The CBN shall : a) Provide loanable fund for the implementation of the scheme. b) Act as managing agent. c) Determine lending limits and applicable rates. d) Conduct impact assessment from time to time. e) Sanction PFIs for infractions. ii. The Participating Financial Institutions (PFIs) shall be responsible for the following - a) Disburse fund eligible export companies at the approved rates. b) Ensure timely disbursement of funds to approved projects. c) Comply with operating guidelines of the Facility. d) Monitor and ensure proper utilization of funds. iii. Beneficiary shall amongst others - a) Utilize the funds for the purpose for which it was granted. b) Make the project(s) and records accessible to CBN and PFIs for inspection. c) Adhere strictly to the terms and conditions of the loan and comply with all relevant laws and regulations. d) Repay maturing loan obligations in line with approved repayment schedule. 8. Discontinuation of the Facility All undisbursed funds, repaid amounts or discontinued facility shall be reported and funds returned to CBN within 5 working days giving details of the facility and reasons for discontinuation. 9. Infractions and Sanctions Penalty for Defaults a) In the event of default in loan repayment of principal and /or interest by the borrower, the PFI shall have the right to charge its prevailing interest rate on the amount in default. b) Failure of PFI to disburse funds within the period agreed in the loan agreement shall attract a penal charge of the maximum lending rate of the PFI for the period that funds were not disbursed. c) Failure to remit principal and interest to the CBN shall attract a penal charge of the maximum lending rate of the PFI for the period that funds were not remitted. d) Non-rendition of returns or rendition of false returns shall attract the penalty stipulated by section 60 of the Banks and Other Financial Institutions Act (BOFIA). 8

9 10 Amendments These Guidelines shall be subject to review from time to time as may be deemed necessary by the CBN. The Amendment would not have any retroactive effect Please refer to the circular for comprehensive details at 9

CENTRAL BANK OF NIGERIA NON-OIL EXPORT STIMULATION FACILITY (NESF)

CENTRAL BANK OF NIGERIA NON-OIL EXPORT STIMULATION FACILITY (NESF) GUIDELINES 1.0 Introduction The Non-Oil Export Stimulation Facility (NESF) was introduced by the Central Bank of Nigeria (CBN) to diversify