Relevant Provisions of The CBN Guidelines for the operations of the Agri-business Small & Medium Enterprises Investment Scheme(AGSMEIS)
The Agribusiness Small & Medium Enterprises Investment Scheme or AGSMEIS was founded on the 5th of April,2017 as an initiative of the banker’s committee to support the efforts of the Federal Government of Nigeria in its policy measures for the promotion of agricultural businesses and Small/Medium Scale Enterprises (SMEs) as vehicles for sustainable economic development & employment generation.
The scheme requires that all banks in Nigeria set aside 5% of their Profit After Tax (PAT) annually.
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The details of the guidelines issued by the Central Bank of Nigeria (CBN) governing this scheme will thus constitute the focus of this article.
What are the objectives of the scheme?
The objectives of the AGSMEIS are :-
– To ensure access to finance for Small & Medium Enterprises (SMEs) as these enterprises are the engine of growth of the Nigerian economy.
– To generate much needed employment opportunities in Nigeria.
– To develop agricultural value chain and ensure sustainable agricultural practices.
– To boost the managerial capacity of agri-business SMEs as pipelines of growing enterprises that can become large corporate organisations.
What are the activities to be covered by the scheme?
The scheme shall cover the following activities:-
– Agricultural investments which include production, storage, processing and logistics.
– SMEs in the real sector as well as service for sectors which are backward integrated into manufacturing/agriculture/mining/modular refineries including local initiatives in Information & Communication Technology (ICT).
– Other activities as may be determined by the Bankers Committee from time to time.
What exactly is a small and/or medium enterprise as defined by the scheme?
Under this scheme, a small and medium enterprise is defined as any enterprise that meets at least 2 of the following criteria subject to review by the Bankers committee from time to time :-
– Sales turnover not exceed 4.5 Billion Naira.
– Total assets not exceeding 4.5 Billion Naira.
– A number of tax paying employees not more than 250 staff.
What is the prescribed maximum investment amount under the scheme guidelines?
The investable amount in any enterprise shall be limited to a maximum of 2 Billion Naira. Investments in excess of the maximum allowable amount shall be subject to the approval of the CBN.
What are the available investment types under this scheme?
Investments under the scheme which could be for start-ups, expansion of established companies or reviving of ailing companies, shall be through equity in the form of fresh injection of capital.
It should be noted that debt of any form is not allowed under the scheme.
What is the prescribed investment vehicle under this scheme?
The Bankers Committee shall appoint a board of trustees which shall manage the scheme and report to the committee on a regular basis.
What are the available loan tenor/investment periods under this scheme?
Under this scheme, investments made shall be for a maximum period of 10 years.
There shall be a 3-year lock-up period before exiting in order to encourage value creation and boost managerial capacity of the SMEs unless there’s a material adverse event.
The scheme shall be operated for a period of 10 years in the 1st instance & be reviewed after 5 years of its operations.
What are the modalities of the scheme?
Under this scheme:-
– Participating banks shall set aside 5% of their PAT annually after their financial statements have been audited by external auditors and approved for publication by the CBN.
– Eligible applicants shall submit applications through any of the participating banks to the CBN.
– The fund shall be transferred to the CBN and warehoused in an account opened for the scheme within 10 working days after the Annual General Meeting of the participating bank.
– The Bankers committee shall be represented on the board of the investee company/project as may be appropriate.
What are the eligibility criteria for funding under the scheme?
In order to be eligible for funding under the scheme, a prospect investor shall:-
– Comply with the provisions of the Companies and Allied Matters Act (CAMA) 2020 regarding the filing of annual returns, including financial statements.
– Comply with all applicable tax laws and regulations and render regular returns to the appropriate authorities.
– Apply through a participating bank.
What are the provisions of the scheme guidelines regarding monitoring and reporting?
The scheme guidelines provide that there shall be joint monitoring of projects financed under the scheme by the CBN and the board of trustees appointed by the Bankers’ Committee. Reports of the monitoring exercise shall be submitted to the CBN and the Bankers Committee.
What are the prudential regulations outlined in the scheme guidelines?
Under the scheme, contributions by participating banks shall form part of the eligible capital in the computation of capital adequacy ratios.
Also, investments in SMEs shall be risk-weighted in line with extant regulations.
What are the outlined responsibilities of relevant stakeholders under this scheme?
The CBN
The CBN has the following responsibilities:-
– Articulating clear guidelines for the implementation of the scheme.
– Monitoring the implementation and gathering statistics to quantify the impact of the scheme.
– Ensuring banks comply with the guidelines of the scheme.
The Bankers’ Committee
The bankers committee has the following responsibilities under the scheme:-
– Appointing a board of trustees to manage the fund .
– Appointing a project review committee to appraise applications.
– Obtaining the cooperation of all stakeholders.
– Overseeing joint collaborative efforts under the scheme.
– Conducting capacity building.
The Board of Trustees
– Conducting due diligence on applications submitted.
– Approving eligible projects for release of funds by the CBN through the economic development sub-committee of the Bankers committee.
– Maintaining the database of all investments under the scheme.
– Preparing reports for the bankers committee on the activities of the scheme.
The Project Review Committee
– Conducting risk appraisal of applications received from the CBN.
– Preparing reports for the board of trustees on the activities of the scheme.
– Performing all other duties as may be prescribed by the bankers committee from time to time.
Individual Banks
– Providing funds for investment under the scheme.
– Complying with the guidelines of the scheme.
– Nominating representatives on the project review committee.
– Maintaining records of their investments in the appropriate books.
Beneficiaries
– Ensuring prudent utilization of funds.
– Complying with guidelines of the scheme.
– Providing monthly financial & operational reports to the SPV before the 15th of the next succeeding month.
– Keeping up-to-date records on the companies activities under the scheme.
What are the provisions of the scheme guidelines on compliance with existing laws and regulations?
The scheme guidelines provide that banks’ investments under the scheme shall be in compliance with the Banks and Other Financial Institutions Act (BOFIA).