CBN okays long term corporate bonds, as Nigeria seeks to drive real sector growth

By Ruth Olurounbi

Nigeria is seeking to improve flow of credit to the real sectors by giving incentives to deposit money banks (DMBs) to provide affordable, long-term bank credit to the manufacturing, agriculture, as well as other sectors considered as capable of proving employment and stimulating growth in the country.

The Central Bank of Nigeria (CBN) has, therefore, put in place a Corporate Bonds Funding Program that allows to  Corporate/Triple-A rated companies to issue long-term Corporate Bonds “subject to the intensified transparency requirements for participating corporates” including publishing “Information Memorandum spelling out the details of the projects for which the funds are required together terms and conditions showing that these are long term projects that are employment and growth stimulating,” in print.

Additionally, the CBN says it has put a new program in place that allows DMBs interested  in providing credit financing to greenfield (new) and brownfield (expansion) projects in the agriculture and manufacturing sectors to request for the release of funds from their CRR to finance the projects under what it calls Differentiated Cash Reserves Requirement (DCRR), subject to “providing verifiable evidence that the funds shall be directed at the approved projects by the CBN.”

The Differentiated CRR carries a minimum of seven years with a two-year moratorium, while the tenor and the moratorium for the CBs will be specified in the prospectus by the issuing corporate, Director of Corporate Communications of the bank, Isaac Okorafor, disclosed in an emailed written statement to PSN.

Okorafor, in the statement, said the central bank has okayed N10 billion as the maximu facility per project and “facilities are to be administered at an all-in Interest rate/charge of 9 per cent per annum.”

This program builds on the July CBN Monetary Policy Committee (MPC) in which a revised guidelines for Accessing Real Sector Support Facility (RSSDF) through Cash Reserves Requirement (CRR)/Corporate Bonds (CBs) was introduced; and seeks to consolidate and sustain the nation’s economic recovery, Okorafor said.