The Non-Oil Export Stimulation Loan Facility (NESF) was introduced by the Central Bank of Nigeria (CBN) to diversify the revenue base of the economy and to expedite the growth and development of the non-oil export sector.
The Facility was conceptualized to help redress the declining export financing and reposition the sector to increase its contribution to economic development.
This article will be looking at the provisions of the framework governing the NESF loan, particularly with regard to its objectives, value, eligibility criteria and application procedure.
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What are the objectives of the NESF Facility?
The objectives of the Facility are to:
– Improve access of exporters to concessionary finance to expand and diversify the non-oil export baskets;
– Attract new investments and encourage re-investments in value-added non-oil exports production and non-traditional exports;
– Shore up non-oil export sector productivity and create more jobs;
-Support non-oil export-oriented companies to upscale and expand their export operations as well as capabilities; and
-Broaden the scope of export financing instruments.
What are the eligibility criteria as prescribed by the NESF guidelines?
Eligible Borrowers/Beneficiaries
Non-oil export-oriented enterprise that fulfills the under-listed conditions shall be eligible to participate under the NESF as long as they:
– Are duly incorporated in Nigeria under the Companies and Allied Matters Act (CAMA).
– Have verifiable export off-take contract(s).
– Provide satisfactory credit reports from at least two licensed indigenous credit bureaux in line
with the provisions of CBN Circular BSD/DIR/GEN/CIR/04/014 dated April 30, 2010.
Eligible Transactions
Eligible transactions that shall qualify for funding under the NESF shall include:
– The export of goods processed or manufactured in Nigeria;
– The export of commodities and services, which are allowed under the laws of Nigeria;
– Imports of plant & machinery, spare parts and packaging materials, required for export-oriented production that cannot be sourced locally;
– The resuscitation, expansion, modernization and technology upgrade of non-oil export industries;
-Export value chain support services such as transportation, warehousing and quality assurance infrastructure;
-Working capital/stocking facility; and
– Structured trade finance arrangements.
Participating Financial Institutions (PFIs)
The following shall be eligible to participate under the Facility:
– Deposit Money Banks (DMBs).
– Development Finance Institutions (DFIs).
What are the features of the NESF loan?
Lending Limit
Term loans under the Facility shall not exceed 70% of verifiable total cost of the project subject to a maximum of ?5,000,000,000.00.
Tenor
The NESF shall have a tenor of up to 10 years and shall not exceed the 31st of December, 2027.
Working capital/stocking facility shall be for one year with the option of roll-over once subject to the approval of the CBN.
Repayment
Repayments of principal and interest shall be quarterly and in accordance with the agreed repayment schedule.
Moratorium
-Moratorium shall be for one (1) year.
– In the case of construction projects, the option of roll over for a period of up to one (1) year may be allowed, subject to approval by the CBN.
What is the prescribed interest rate of an NESF credit facility? 9% annually.
What is the application procedure for a facility under the NESF guidelines?
Submission of Requests
-A PFI shall submit an application to CBN on behalf of its customer in the prescribed format.
-In the case of loan syndication, the lead bank shall submit an application on behalf of other banks. All correspondence with respect to the application shall be with the lead bank.
Documentation Requirements
-Each request for a facility is to be accompanied by the following documents:
– A written request from the project promoter to a PFI seeking funding under the NESF.
– A completed application form.
– Certified true copies of documents on business incorporation.
– The applicant’s preceding three (3) years tax clearance certificate.
– An audited statement of accounts for the last three (3) years (where applicable) or the most recent management account for companies less than three (3) years in operations.
– A feasibility study/ business plan of the project.
– Relevant permits/ licenses/ approvals (where applicable).
– Any other document requested by the CBN.
What are the roles and responsibilities of stakeholders in the NESF facility framework under the guidelines?
The Central Bank of Nigeria
– To provide loanable funds for the implementation of the scheme.
– To issue the NESF guidelines.
– To act as the managing agent.
– To determine lending limits and applicable rates.
– To provide regulatory and supervisory oversight.
– To sanction PFIs for infractions.
– To monitor and evaluate the projects.
The Participating Financial Institutions (PFIs)
– To disburse funds to eligible export companies at the approved rates.
– To ensure timely disbursement of funds to approved projects.
– To ensure due diligence is followed in the administration of credit facilities.
– To bear the credit risk on loans granted to beneficiaries under the NESF.
– To ensure timely remittance of principal and interest payments due to the CBN.
– To monitor and ensure proper utilization of funds.
The Beneficiary
The beneficiary shall:
– Utilize the funds for the purpose for which it was granted.
-Adhere strictly to the terms and conditions of the loan and comply with all relevant laws and regulations.
– To make the project site(s) and records accessible to CBN and PFIs for inspection.
– To provide periodic reports on the status of the project in prescribed format as well as periodic financial statements in line with extant company registration regulations.
What are the provisions of the guidelines on 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.
What is the penalty for defaults under the NESF guidelines?
-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.
– The failure of a PFI to disburse funds to the borrower 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.