CENTRAL BANK OF NIGERIA Regulatory Update July REGULATORY UPDATE, JULY 2016 Central Bank of Nigeria, 2016 Regulatory update, June 2016.
1. FPR/DIR/GEN/CIR/06/001: CIRCULAR TO BANKS AND OTHER FINANCIAL INSTITUTIONS - SECURED TRANSACTIONS AND NATIONAL COLLATERAL REGISTRY FOR MSME FINANCING IN NIGERIA 1.1 The CBN, on the 29 th of June 2016, issued a circular on secured transactions and national collateral registry for Micro, Small and Medium Enterprises ( MSMEs) financing in Nigeria; further to its statutory mandate of promoting a sound financial system in Nigeria. The CBN had earlier issued and gazetted in February 2016, the Registration of Security Interests in Movable Property by banks and other Financial Institutions (Regulation No.1, 2015) in Nigeria. 1.2 The Regulation is aimed at providing a regulatory framework for accessing credit secured with movable property, providing for the establishment and operation of the collateral registry and stimulating lending to MSMEs by providing an efficient mechanism for the registration of Security Interests in movable assets and realization of such interest in the event of a default. 1.3 In the fulfillment of the foregoing, the CBN sought to inform all banks and other Financial Institutions that the National Collateral Registry ( NCR) is now operational. Therefore, there is now requirement for Banks and other Financial Institutions to register their Security interests in movable assets with NCR from July 4, 2016 and also conduct searches on these assets to ascertain the encumbrance status of the assets to be used as collateral for credit facilities. 1.4 The circular also requires each bank to nominate a staff not below the status of a Senior Manager to serve as the institution s Administrator on the Registry s platform. The nomination should be sent to: mmuhammad2@cbn.gov.ng and eaoffiong@cbn.gov.ng by Friday, 8 th July, 2016. 2. DFD/DIR/GEN/NEX/01/004: NIGERIAN EXPORT-IMPORT BANK (NEXIM) OPERATING GUIDELINES FOR THE EXPORT REDISCOUNTING & REFINANCING FACILITY (RRF) 2.1.1 The CBN, in its bid to ensure the continuous flow of credit to the export sector at competitive rates, issued the guidelines on Export Rediscounting & Refinancing Facility. ( RRF Guidelines ).The RRF Guidelines, dated 16 th June 2016, expanded the Export Credit Rediscounting and Refinancing Facilities (RRF) by N50 billion to support the Deposit Money Banks (DMBs) in the provision of pre and post-shipment finance to exporters undertaking export transactions. 2.1.2 To implement the facility, the CBN will be responsible for investing in a N50 billion debenture to be issued by NEXIM. 2.1.3 The RRF Guidelines describe and outline the revised modalities of the RRF for the provision of a discount window for the finance of export credit transactions of DMBs. The RRF Guidelines amend the previous guidelines on Export Rediscounting & Refinancing Facility. 1
Some of the salient provisions of the revised RRF Guidelines are as follows: 2.2 The objectives of the NESF Guidelines are: a) To encourage and support DMBs to provide short-term, pre and post-shipment finance in support of exports: by providing a discount window to exports financing banks and therefore improving their liquidity and exporters access to export credit; b) Moderation and indirect influence on the cost of export credits to the non-oil sector in order to enhance competitiveness of Nigeria s exports and thereby assist in export production and marketing; and c) To enhance the continuous flow of export credits for non-oil exports; and facilitating the diversification of the productive base of the economy and ensuring sustainable external sector development. 2.3 Categorization of Facilities Three types of facilities are anticipated under the RRF Guidelines. These include: 2.3.1 Pre-Shipment Rediscounting Facility This is a type of facility granted to enable banks finance incidental expenses necessary to undertake and perform export contracts as well as procurement of inputs / exportable goods, e.g. raw materials / commodities, semiprocessed and finished goods for either processing and/or direct exports. 2.3.2 Post-Shipment Rediscounting Facility This is a type of facility granted to enable banks provide finance to exporters awaiting receipts of export proceeds of their shipments and/or encourage the provision of deferred payment arrangements by exporters to their counter-parties to enhance competitiveness. 2.3.3 Refinancing Facility This also a type of facility granted to enable banks provide longer term export credit in support of export activity than what is available under the Rediscounting Facility, which is usually transaction specific. This Facility provides a mechanism that relieves export financing banks and export credit guarantors on their longer than expected export lending commitments. It also provides financial accommodation to the export financing banks in the event of commercial lending difficulties. 2.4 Eligibility a) Eligible companies qualified to participate in the RRF must be export oriented companies which have been duly incorporated and registered under CAMA. These companies must however deal with non-oil exports transactions of goods and services that are not under a subsisting Exports Prohibition List and have not been availed any facility under any of the existing CBN funding schemes. 2
b) In respect of participating banks, all the DMBs who have sanctioned /extended export credits are eligible as Participating Banks under the RRF Window in order to improve their liquidity and expand their export credit portfolios. 2.5 Exposure/Tenor 2.5.1 The exposure limit of each participating bank under the RRF Window is a maximum of N2 billion to N5 billion as may be determined from time to time based on Participating Banks credit ratings and volume of non-oil exports transactions / beneficiary clients being supported. 2.5.2 The tenor in respect of the RRF is to be a maximum of 360 days. Pre-shipment Rediscounting shall be transaction specific / period specific but subject to a maximum of 180 days while the Post-shipment Rediscounting tenor shall be in accordance with extant policies on repatriation of export proceeds from time to time which currently shall not exceed 180 days. For combined Pre- and Post-Shipment finance, a tenor not exceeding a 270 days shall apply depending on the terms of its underlying transaction. 2.6 Interest rates Export bills/transactions shall be discounted / refinanced at an all-in rate of a maximum of 6% per annum. CBN/NEXIM would provide the RRF at a rate of 3% per annum while Participating Banks shall have a maximum spread of 3% per annum. 2.7 Application Procedure/Operational Stages 2.7.1 To participate in the RRF, the Participating Banks seeking to benefit from the Rediscounting and/or Refinancing Facility are to forward an application to this effect to NEXIM accompanied by its most recent audited accounts at the end of the first quarter of each financial year; 2.7.2 Application process for the Refinancing facility as well as Rediscounting Facility are to be made to NEXIM by means of a letter signed by at least two authorised signatories of the applicant Participating Bank; 2.7.3 NEXIM reviews request/latest audited accounts and assigns Exposure Limit; 2.7.4 Participating Bank applies to discount bills/refinance credit (100%) of eligible export credit is re-financeable); 2.7.5 NEXIM advises approval of application to bank; 2.7.6 Participating Bank thereafter submits accepted offer letter and supporting documents to NEXIM; 2.7.7 NEXIM then advises CBN to credit Participating Bank s Account and subsequently the participating bank is advised on credit; 2.7.8 Participating Bank informs beneficiary client of RRF availability / funds exporter; 2.7.9 Participating Bank renders periodic returns; 2.7.10 Participating Bank repays; and in concluding the transaction, NEXIM cancels debt instruments and returns to Participating Bank. 3
Key Contacts Olaitan Oladejo Associate Olaitan.oladejo@advocaat-law.com Ola Alokolaro Partner ola.alokolaro@advocaat-law.com 4