*Aggregators, manufacturers, processors can access N10bn
*SMEs, retail distributors get N50m
*Repayment in 10, 5 years respectively
As part of efforts to finance critical sectors of the economy, the Central Bank of Nigeria (CBN) has introduced a N250billion intervention facility to help stimulate investment in the nation’s gas value chain.
With proven gas reserves of 188 trillion cubic feet (tcf), the natural gas industry presents an opportunity to diversify the economy through domestic commercial utilisation of its natural gas. Historical non-viability of domestic commercial production and utilisation of gas continues to severely constrain private investments in the industry. Consequently, the low level of investment in the industry has resulted in the minimal production and utilization of Compressed Natural Gas (CNG) and Liquefied Petroleum Gas (LPG) as clean alternative sources of domestic energy in Nigeria. Failure to harness its gas resources has had negative economic, environmental, fiscal and social consequences for the country, particularly as the industry has the potential to engender rapid growth in Nigeria’s non-oil economy.
The Federal Government has also declared year 2020 as a year of gas with the launch of Nigerian Gas Transportation Network Code (NGTCN) to address gas infrastructure development in the country.
The apex regulatory body in guidelines issued and dated August 2020 titled: “Framework for the implementation of intervention facility for the National Gas Expansion Programme,” said that large-scale projects under the intervention would be financed under the Power and Airlines Intervention Fund (PAIF), in line with existing guidelines regulating the PAIF, while small-scale operators and retail distributors would be financed by the NIRSAL Microfinance Bank (NMFB) and/or any other Participating Financial Institution (PFI) under the Agribusiness/Small and Medium and Medium Enterprises Investment Scheme (AgSMEIS). The initiative is to be implemented in collaboration with the Ministry of Petroleum Resources (MPR). This framework outlines the operational modalities for the intervention.
In a further breakdown, CBN said that funding of aggregators, manufacturers, processors, wholesale distributors and related activities shall be funded under the Power and Airline Intervention Fund (PAIF). 4.2 Small and medium-scale enterprises (SMEs) and retail distributors shall be funded by NIRSAL Microfinance Bank (NMFB) under AgSMEIS.
Manufacturers, processors, wholesale distributors with a maximum of N500 million working capital, according to the guideline, shall access loans not exceeding N10 billion while Small and Medium Enterprises (SMEs) and Retail Distributors with N5 million working capital, shall access loan not exceeding N50 million at Interest Rate not more than 5.0 per cent per annum (all inclusive) up to 28th February 2021. Thereafter, interest on the facility shall revert to 9 per cent per annum (all inclusive) effective from 1st March 2021.
“Manufacturers, processors, wholesale distributors, etc. term loans shall have a maximum tenor of 10 years (not exceeding 31st December 2030), depending on the complexity of the project. Each project tenor shall be determined in relation to its cash flow and life of the underlying collateral. Term loans shall be allowed maximum of two years moratorium on principal repayment only.”
The guidelines also provide working capital facility of one year with a maximum roll-over of not more than twice, subject to prior approval.
For Small and Medium Enterprises (SMEs) and retail distributors, term loans shall have a maximum tenor of 5 years (not exceeding 31st December, 2030). Each project tenor shall be determined in relation to its cash flow and life of the underlying collateral. Term loans shall be allowed a maximum of two years moratorium on principal repayment only while working capital facility of one year with a maximum roll-over of not more than twice and subject to prior approval.
On repayment, Money Deposit Bank: CBN said that monthly interests on the facility shall be amortised and transferred to CBN monthly.
NMFB: Monthly interests on the facility shall be paid monthly after the moratorium period. Participating Banks (PBs), all Deposit Money Banks and the NMFB will be eligible as PBs under this Facility.
Eligible applicant or sponsor under manufacturers, processors, wholesale distributors, shall submit applications through any Participating Banks (PBs) to the CBN.
The PB shall carry out due diligence on the application based on business and credit considerations. Each request must be accompanied with documents as may be required by the PB under PAIF, including relevant endorsements and permits from the Ministry of Petroleum Resources (MPR) for the project and upon approval by appropriate Credit Committee, the PB shall forward approved application under the intervention to the CBN.
The CBN shall conduct internal review of the application to ensure compliance with the guidelines. All applications classified as Confidential that meet the specified requirements under the intervention shall be processed and the PB notified of the status of the request. (Note: The CBN reserves the right to reject any application from any lending bank that does not meet the requirements of the guidelines).
Upon approval, the CBN shall release the approved sum to the PB according to mutually agreed disbursement schedule tied to specific milestones; and
The Participating Bank, CBN said, shall, within five working days, disburse the approved sum to the enterprise.