CBN warns banks against diversion of non-interest intervention funds

THE Central Bank of Nigeria (CBN) has warned that Participating Financial Institutions (PFIs) in the non-interest intervention programmesthat engage in diversion of funds risk a penalty at its maximum financing rate at the time of the infraction and such (PFIs)

shall be barred from further participation under the scheme by the Banks and Other Financial Institutions Act (BOFIA), section 60.

The CBN gave this warning as it announced guidelines targeted at various intervention programmes.

This is part of the apex bank’s efforts in supporting the development of the non-interest finance in Nigeria.

In a circular published on Tuesday, July 21, 2020, and signed by the Director, Financial Policy and Regulation Department, Kevin Amugo, the guidelines would provide an opportunity for non-interest finance institutions to broaden their activities.

According to the CBN, the schemes include:non-interest guidelines for the Accelerated Development Scheme (AADS), non-interest guidelines for intervention in the textile sector; guidelines for the operations of the Agri-Business, Small and Medium Enterprise Investment Scheme (AGSMEIS) for Non-Interest Financial Institutions (NIFIs);

guidelines for Micro Small and Medium Enterprises Development Fund for (NIFIs); Non-interest Financial Institutions (MSMEDF for NIFIs); guidelines for non-oil Export Stimulation Facility (ESF), among others.

Speaking on the purpose of each scheme, the CBN described the AADS programme as an initiative designed to engage a minimum of 370,000 youths in agricultural production across the country over the next three years to reduce the rate of unemployment.

The AADS programme has the mandate of increasing the promotion of national food security in each state through sustained interactions amongst stakeholders in the agricultural value chain.

From pages 99 of the CBN circular, the report showed deliberate targeting of Nigerian youths between the ages of 18 to 35.

On the operational framework, it showed that state governments would mobilize prospective young farmers with representation from all senatorial zones while state governments/FCT is to provide agricultural land in a contiguous location in all senatorial zones with a minimum of 100 hectares per cluster for the beneficiary.

From the circular, business owners/entrepreneurs who meet the requirement will be grouped into a segment. It also states that the state governments will allocate 2-5 hectares of land per beneficiary, state governments are to provide access roads, water sources and other infrastructure that will enhance agricultural production on the land.

States may charge rent on the land of N10,000 per hectare for clearing and other infrastructure provided, while rental charges would be embedded in the economics of production (EoP) of the farmer.

In terms of financing, the Central Bank of Nigeria explained in the circular that the participating financial institutions (PFIs) will act as agents of the CBN in disbursing the financing to the beneficiaries by using the CBN approved non-interest financing contract of Murabaha and Istina at an all-inclusive rate of return of nine per cent.

For the financing tenor, the CBN approved six months for grains and boiler production which includes rice, maize, and soybean amongst others. It also earmarked 18months for cassava, 24months for egg production and five years for plantation crops.

It further stated that on the side of average financing, N250,000 will go for a size per acre for arable crops, with N500,000 per unit for livestock and N1.5million for plantation crops like cocoa, cashew and oil palm.

The beneficiary must be a Nigerian youth between the ages of 18 and 35 years and must sign an undertaking to abide by the terms of agreement of the scheme. It also explained that the Federal Government of Nigeria (FGN) will provide strategic direction for the implementation of the scheme through the Presidential Task Force.

Speaking on insurance cover for the beneficiaries, the Nigeria Agricultural Insurance Corporation (NAIC), will provide insurance cover for agricultural enterprises.

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