CENTRAL BANK OF NIGERIA Regulatory Update July REGULATORY UPDATE, JULY Central Bank of Nigeria, Regulatory update, June 2016.

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1 1. CENTRAL BANK OF NIGERIA Regulatory Update July REGULATORY UPDATE, JULY Central Bank of Nigeria, Regulatory update, June

2 3. FMD/DIR/GEN/07/001: EXTERNALISATION OF DIFFERENTIALS ON OTC FX FUTURE CONTRACTS FOR FOREIGN PORTFOLIO INVESTORS The CBN, on the 24th June 2016, issued the operational guidelines for the externalisation of differentials on OTC FX futures Contracts for Foreign Portfolio Investors ( FPI ); to improve the operational efficiency of the OTC FX Futures Market, which is beginning to emerge in the light of the new flexible foreign exchange policy recently launched by the CBN. According to the guidelines, FPIs, in addition to the requisite Certificate of Capital Importation, are required to present OTC FX Futures Settlement Advice to be issued by the FMDQ to facilitate the externalistion of the settlement amount of OTC FX Futures Contracts. It is important to note that any requests for repatriation of settlement amount of OTC FX Futures Contracts by FPIs not backed with the Settlement Advice from FMDQ and the CCI will not be processed by any deposit money bank. 4. DFD/PFO/FPC/GEN/01/003: RETURNS ON NIGERIAN INVESTMENTS OFFSHORE FOR THE PERIOD OF The CBN, on the 24th of June 2016, requested all authorised dealers to submit their returns on all foreign investments by Nigerian entities offshore from the year 2006 to This requirement would serve as a means of monitoring foreign investments by authorized dealers as well as ensuring compliance of the authorised dealers with the relevant policies and guidelines set out in respect of foreign investments. 5. DFD/DIR/GEN/NEX/01/004: NON-OIL EXPORT STIMULATION FACILITY (NESF) OPERATING GUIDELINES The Central Bank of Nigeria ( CBN ) issued this circular in respect of Non-Oil Export Facilities on the 16 th day of June, Pursuant to the circular, the CBN is to establish the Non-Oil Export Stimulation Facility ( the NESF ) to facilitate diversification in the Nigerian economy from oil to non-oil export sector of the economy In the implementation of the NESF, the CBN will invest in a N500 billion debenture which will be issued by Nigerian Export-Import Bank (NEXIM) Some of the salient provisions of the Non-Oil Export Facility Stimulation Operating Guidelines ( NESF Guidelines ) are as follows: 5.2. The objectives of the NESF Some of the objectives of the NESF are to: 2

3 (i) Improve access of exporters to concessionary finance to expand and diversify the non-oil export baskets; (ii) Attract new investments and encourage re-investments 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) Diversify and increase the level of contribution of non-oil exports revenue towards sustainable economic development; 5.3. Management of the Facility The NEXIM shall be the managing agent of the NESF and shall be responsible for its day-to-day administration as well as rendering of periodic reports on its performance to the CBN from time to time Eligibility Criteria Eligible Borrowers and Beneficiaries Only export-oriented enterprises in Nigeria are to be eligible borrowers/beneficiaries under the NESF. However, for any enterprise to be eligible, (i) It must have been duly incorporated under the Companies and Allied Matters Act, LFN 2004; (ii) It must have verifiable export take-off contract(s) ; and (iii) It must also possess satisfactory credit reports from at least two CBN-licensed Credit Bureaus. Also, Eligible Bank Asset ( EBA ) purchased by Asset Management Corporation of Nigeria (AMCON), may by special approval of the CBN Management, be allowed to participate with respect to acquired projects of national economic importance, proven potentials to export, good prospects to attract new investors and ability to repay EBA obligations to AMCON Eligible Transactions The NESF Guidelines also provide for transaction which may qualify for funding under the NESF. These include: a) Export of goods wholly or partly processed or manufactured in Nigeria; b) Export of commodities and services, which are permissible and excluded under existing export prohibition list; c) Imports of plant & machinery, spare parts and packaging materials, required for export oriented production that cannot be produced locally; d) Export value chain support services such as transportation, warehousing and quality assurance infrastructure; e) Resuscitation, expansion, modernization and technology upgrade of non- oil exports industries; and 3

4 f) Stocking Facility/Working capital; The eligible Participating Financial Institutions ( PFIs ) under the facility are to be Deposit Money Banks ( DMB ) and Development Financial Institutions ( DFIs ) except NEXIM Lending Limit/Tenor The Facility shall not exceed 70% of the total cost of the project or transaction subject to a maximum of Five (5) Billion Naira. The NESF is to have a tenor of up to ten (10) years and shall not exceed the 28 th of December, Repayment/Interest Rates Repayments of principal components of loans and interest are to be quarterly. The NESF is to be made available at an all-in Interest rate provided by the CBN. Facilities with a tenor of up to three (3) years would be granted at a maximum all-in interest rate of seven and half percent (7.5%) per annum while facilities with tenor of over three (3) years would be granted at a maximum all-in interest rate of nine percent (9%) per annum 5.7. Application Procedures To participate in the NESF, a PFI is required to submit a request to NEXIM on its behalf or on behalf of other parties in the case of syndication or other arrangements. It is pertinent to note that in the case of syndication, NEXIM is to deal directly with the lead bank on all issues relating to such application. The request is to be accompanied by the following documentation: a) Written request from the project promoter to a PFI seeking funding under the NESF; b) Completed Application Form; c) Certified true copies of Documents on Business Incorporation; d) Audited Statement of Accounts for the last three (3) years (where applicable); e) Most recent Management Account for existing Companies where the last audited account is not more than 3 months old; f) Statement of Affairs for Start-ups (where applicable); g) Feasibility Study/Business Plan of the project; h) Relevant Permits/Licenses/Approvals (where applicable); i) Verifiable Export Orders/Contracts or other Export Agreement & Arrangements/Commitments; j) Environmental Impact Assessment (EIA) Report (where applicable); and k) Any other document(s) that may be required by CBN and NEXIM. The above application will be processed by NEXIM who will appraise same and provide its status report to the PFI within 20 working days of receipt. Thereafter, all appraised applications by NEXIM will be forwarded to CBN for consideration and approval Collateral Requirement/Participating Agreement 4

5 The PFIs are required to submit Irrevocable Standing Payment Order ( ISPO ) in respect of all projects approved under the scheme. A participating agreement is required to be signed between NEXIM and each PFI Penalty and Default In the event of default in the loan repayment by the borrower, the PFIs shall have the right to charge its prevailing interest rate on the amount in default. Where the PFIs diverts funds under the NESF for other purpose, the amount diverted shall be recovered by NEXIM and the PFI would be barred from further participation under the facility and access to official foreign exchange window. Non-rendition of returns or rendition of false returns is to attract the penalty stipulated by Section 60 of the Banks and Other Financial Institutions Act ( BOFIA ) Pursuant to Section 60 of BOFIA, where a bank or any other financial institution fails to comply with any rules, regulations, guidelines or directives made, given or issued by the CBN under the BOFIA, the Governor of CBN may impose a fine not exceeding N2,000,000 or suspension of any licence issued to the defaulting bank or financial institution Discontinuation of the Facility In the event of 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. 5

6 Key Contacts Olaitan Oladejo Associate Ola Alokolaro Partner

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

CENTRAL BANK OF NIGERIA NON-OIL EXPORT STIMULATION FACILITY (ESF) OPERATING GUIDELINES June, 2016 1 1.0 Introduction The Non-Oil Export Stimulation Facility (ESF) was established by the Central Bank of