AFRIPRENEURS

GUIDELINES FOR COMMERCIAL AGRICULTURE CREDIT SCHEME (CACS)

CENTRAL BANK OF NIGERIA (CBN)

AND

FEDERAL MINISTRY OF AGRICULTURE AND WATER RESOURCES (FMA&WR)

1.0 Establishment of the Scheme

As part of its developmental role, the Central Bank of Nigeria (CBN) in collaboration with the Federal Ministry of Agriculture and Water Resources (FMA&WR) has established the Commercial Agriculture Credit Scheme, hereinafter referred to as CACS, for promoting commercial agricultural enterprises in Nigeria, which is a sub–component of the Federal Government of Nigeria Commercial Agriculture Development Programme (CADP). This Fund will complement other special initiatives of the Central Bank of Nigeria in providing concessionary funding for agriculture such as the Agricultural Credit Guarantee Scheme (ACGS) which is mostly for small scale farmers, Interest Draw-back scheme, Agricultural Credit Support Scheme, etc.

2.0 Funding

The scheme shall be financed from the proceeds of the N200billion seven (7) year bond raised by the Debt Management Office (DMO). The fund shall be made available to the participating bank(s) to finance commercial agricultural enterprises. In addition, State Governments could borrow up to 20% of the bond proceeds for on-lending to Farmers Cooperative Societies in their States.

3.0 Objectives of the Scheme

The objectives of the scheme are;

To fast track development of the agricultural sector of the Nigerian economy by providing credit facilities to commercial agricultural enterprises at a single digit interest rate.

To enhance national food security by increasing food supply and effecting lower agricultural produce and product prices, thereby promoting low food inflation.

To reduce the cost of credit in agricultural production to enable farmers exploit the potentials of the sector.

To increase output, generate employment, diversify the revenue base, increase foreign exchange earnings and provide input for the industrial sector on a sustainable basis.

4.0 Governance of the Scheme

The Central Bank of Nigeria and the Federal Ministry of Agriculture and Water Resources shall collaborate to ensure the success of the Scheme through a Programme Steering Committee (PSC). The PSC shall be responsible for the overall administration of the Funds and Scheme while the day-to-day implementation of the Scheme shall lie with the Technical Implementation Committee (TIC). The TIC shall report to the PSC which is the highest policy organ of CACS.

(a) PROGRAMME STEERING COMMITTEE (PSC)

The composition of the PSC shall be as follows:

(i) Honourable Minister of FMA&WR or Rep - Chairman

(ii) Governor, CBN - Vice Chairman

(iii) Federal Ministry of Finance - Member

(v) Representative of commercial farmers - Member

(vii) Programme Coordinator (CADP) - Secretary

(b) TECHNICAL IMPLEMENTATION COMMITTEE

The composition of the TIC shall be as follows:

(i) Director, Dev. Fin. Dept. CBN - Chairman

(ii) Consulting Group - Member

(iii) Head, Credit Guarantee Division (CBN) - Member

(iv) Programme Coordinator (CADP) - Secretary

The TIC shall regularly undertake verifications of CACS projects to ensure that banks operate in line with the objectives of the Scheme.

Target Agricultural Commodities and Value Chains

Key Agricultural commodities to be covered under the Scheme are:

PRODUCTION:
Cash Crops: Cotton, Oil Palm, Fruit Trees. Rubber, Sugar Cane, Jatropha Carcus and Cocoa.
Food Crops: Rice, Wheat, Cassava, Maize/Soya, Beans/Millet, Tomatoes and Vegetables
Poultry: Broilers and Eggs Production
Livestock: Meat, Dairy and Piggery
Aquaculture: Fingerlings and Catfish
PROCESSING: Feed mills Development, Threshing, Pulverisation and Other forms of transmutation for value addition.
STORAGE: Commodities & Agro-Chemicals
FARM INPUT SUPPLIES: Fertilizers, Seeds/Seedlings, Breeder Stock, Feeds, Farm equipments & Machineries.

Credit support to the target commodities shall be administered by banks for projects and on-lending to farmers’ cooperative societies by State Governments under the Scheme.

6.0 Definition of Commercial Agricultural Enterprise;

For the purpose of this Scheme, a commercial enterprise is any farm or agro-based enterprise with agricultural asset (excluding land) of not less than N350 million for an integrated farm with prospects of growing the assets to N500 million within the next three years and N200 million for non-integrated farms/agro-enterprise, except in the case of on-lending to farmers’ cooperative societies.

7.0 Eligibility for Participation in the Scheme

(A) Participating Bank (PB)

The Central Bank of Nigeria has approved the participation of all deposit money banks (DMBs) under the Scheme. All participating banks are required to sponsor projects from any of the target areas in the Guidelines and bear all the credit risk associated with the loans.

Borrower:
- Corporate and Large Scale Commercial Farms/Agro-Enterprises

The borrower shall:

Be a limited liability company with asset base of not less than N350 million and having the prospect to grow the net asset to N500 million in the next three years and complies with the provision of the Company and Allied Matters Act (1990)
Have a clear business plan
Provide up-to-date record on the business operation if any.
Have out growers programme, where appropriate
Satisfy all the requirement specified by its lending bank

(ii) Medium Scales Commercial Farms/Agro-Enterprises

To participate in the Scheme the borrower shall:

Be a limited liability company with asset base of not less than N200 million and having the prospect to grow the net asset to N350 million in the next three years and complies with the provision of the Company and Allied Matters Act (1990)
Have a clear business plan
Provide up-to-date record on the business operation
Have out growers programme, where appropriate
Satisfy all the requirement specified by its lending bank

(iii) State Government /FCT

To participate under the Scheme, the States shall;

Submit an expression of interest
Sign an Irrevocable Standing Payment Order (ISPO) in favour of the participating bank.
Have appropriate/functional structures on ground or set up structures for the deployment of the funds, which must include existing, registered Cooperative Societies/Unions. The cooperatives must be at least six (6) months old with proven track records of repayment
Clearly specify the areas/projects to which these funds would be deployed
Satisfy all the requirement specified by the lending Bank

8.0 Modalities of the Scheme

(i) Agricultural credit from the participating banks shall be in the form of loans.

(ii) Interest on loan shall not exceed 9.0 per cent inclusive of all charges.

9.0 Acceptable Collateral

The security which may be offered to a participating bank for the purpose of any loan under the scheme may be one or more of the following:

(i) A charge on land in which the borrower holds a legal interest or a right to farm, or a charge on the land including fixed assets, crops or livestock.

(ii) A charge on the movable property of the borrower.

A life insurance policy, a promissory note or other negotiable security
Stocks and shares; and
Any other collateral acceptable to the participating bank(s).

10.0 Loan Tenor

(i) Loans shall have a maximum tenor of seven years and/or working capital facility of one year with provision for roll over

(ii) The Scheme allows for moratorium in the loan repayment schedule.

11.0 Limit of Liability under the Scheme

(i) The maximum interest rate to the borrower under the scheme shall not exceed 9 per cent, inclusive of all charges.

(ii) The interest subsidy of the scheme shall be borne wholly by the Central Bank of Nigeria

12.0 Procedure for Applying for the Loan

All applications for loans under the Scheme shall be made to the participating banks (PBs). All applications under the Scheme shall be treated by PB’s with due diligence.

13.0 Verification and Monitoring on Projects

All projects shall be verified by the TIC after drawdown of all approved loans to ensure that banks fully comply with the objectives of the Scheme.. Both the Development Finance Department of the CBN and the CADP Secretariat of FMA&WR shall ensure periodic monitoring of the projects funded under the Scheme, and report to the PSC.

14.0 Verification in Other Terms and Condition of CACS Loan

Participating banks shall be required to secure a written consent of the TIC and approval of the PSC before making alterations to the stipulated terms and conditions governing any on-going CACS facility.

15.0 Infractions and Sanctions

PB(s)

Diversion of funds by the PB(s) shall attract a penalty at the bank’s average lending rate at the time of infraction. In addition, such PBs shall be barred from further participation under the scheme,
Non- rendition or false returns shall attract the penalty stipulated by BOFIA section 60,
Charging interest rate higher than prescribed shall attract the penalty stipulated by BOFIA section 60,
Any PB that fails to follow the agreed disbursement schedule with the borrower after the receipt of the fund will be charged the prevailing interest rate for the period the fund was not disbursed,
Any other breach of the guidelines as may be specified from time to time, and
Not withstanding the agreement between the PB and the project promoter, the CBN has the right to reject a request from any PB that contravenes any section of the Guidelines.

16.0 The Key Stakeholders of the Scheme are;

(i) Federal Government of Nigeria (FGN),

(ii) Central Bank of Nigeria (CBN),

(iii) Federal Ministry of Agriculture and Water Resource (FMA&WR),

(iv) Debt management Office (DMO),

(v) Participating Banks (PBs), and

(vi) Borrowers (State Governments and Farmers).

17.0 Responsibilities of Stakeholders

For effective implementation of the scheme and for it to achieve the desired objectives, the responsibilities of the stakeholders shall include:

The FGN

The Federal Government of Nigeria shall be the issuer of the Bond

The CBN

The Central Bank of Nigeria (CBN) shall:

(i) Specify the rate at which PBs lend to borrowers under the Scheme
(ii) Absorb the subsidy which may arise in the pricing of the loan to borrowers
(iii) Absorb all other incidental expenses
(iv) Select the participating banks under the scheme, with due considerations of the general ability of the banks
(v) Release funds to participating banks after confirmation of intent/readiness of banks to disburse funds
(vi) Receive and process the monthly returns made by the PBs in relation to their loans under the Scheme
(vii) Conduct spot audit on the PBs as well as monitor the borrowers’ enterprises in order to ascertain the performance of the Scheme
(viii) Retrieve funds when guidelines are not strictly adhered to by the participating banks
(ix) Prepare monthly reports to the National Economic Council (NEC), the TIC and PSC
(x) Retrieve the PBs at the expiration of the bond tenor, CACS funds whether or not the PBs has recovered the disbursed funds from the promoter
(xi) Serve as the Chairman of TIC

(c) The Federal Ministry of Agriculture and Water Resources FMA&WR

The FMA&WR shall:

Conduct monitoring and evaluation of the Scheme, and
Undertake periodic review of the enterprises financed under the Scheme
Serve as the Secretary to TIC and PSC

The Federal Ministry of Finance (FMF)/ Debt Management Office (DMO)

The FMF/DMO shall:

Issue the Bond on behalf of the FGN, and
Raise money from the market

(e) The Participating Banks

The participating banks shall:

Ensure due diligence is followed in the administration of credit facilities
Guarantee safety and purposeful application of funds for on-lending,
Bear 100 per cent credit risk
Lend funds under the Scheme at the specified rate
Submit Letter of Offer, Letter of Acceptance, Evidence of Approval from Credit Committee of the bank or its Management Team and disbursement schedule for CBN to release funds to the PB; and.
Render monthly returns under the Scheme to the CBN.

Borrower

The borrower shall:

Utilize the funds for the purpose for which it is granted
Insure the project being financed
Adhere strictly to the terms and conditions of the Scheme
Make the project and records available for inspection and verification by the TIC
Render periodic returns to the PBs as may be required
State Governments/FCT shall agree to utilize the funds for on-lending to existing, registered farmers’ co-operative societies/unions that are at least six (6) months old.

18.0 Returns by Banks should be made to the address below:

The Chairman TIC,

c/o Office of the Director,

Development Finance Department,

Central bank of Nigeria,

Central Business district

Abuja

Tel: No.: +234 9 4623 8600

Fax No.: +234 9 4623 8655

19.0 Repayment or Discontinuation of a Credit Facility

Whenever a credit facility is otherwise discontinued, the PB shall advise the PSC immediately, giving particulars of the credit facility.

20.0 Disbursement of Fund

(i) PBs and borrowers should strictly adhere to agreed disbursement/repayment schedule. Any deviation from the schedule should be mutually agreed between the parties and the PSC informed accordingly.

(ii) Disbursement of funds must be in accordance with the due diligence of the Participating bank.

21.0 Amendments

These Guidelines are subject to review from time to time as may be deemed necessary by the Project Steering Committee