Non- Interest Banking: Equity for Agric Deals Hits N2b

Non interest Banks are only allowed to invest a maximum of N2 billion equity in agriculture businesses under the Agri-Business, Small and Medium Enterprises Investment Scheme (AGSMEIS).

The Central Bank of Nigeria (CBN’s) guidelines on AGSMEIS for Non-Interest Financial Institutions (NIFIs) signed by CBN Director, Financial Policy and Regulations Department, Kelvin Amigo, said AGSMEIS as an initiative of the Bankers’ Committee  supporting government’s policy measures and efforts for the promotion of agricultural businesses. 

“The  AGSMEIS Non-Interest Fund will be domiciled in a dedicated account with the CBN while each Non-Interest Deposit Bank, full-fledged or window, shall set aside five per cent  of its profit after tax (PAT) annually as contribution to the fund”. 

“Also, each Non-Interest Deposit Bank shall transfer its contribution to the CBN not later than 10 working days after the annual General Meeting (AGM) of the participating bank,” the guideline said.

The guideline allows Special Purpose Vehicle (SPV) to be established to manage and monitor investments/projects under the scheme. The guideline also said that the application of the fund shall be categorised into three broad components: debt ( 50 per cent), 

equity (45 per cent) and developmental components (five per cent). 

The debt component shall constitute 50 per cent of the fund which shall be disbursed as financings to eligible businesses through Non-Interest Deposit Money Banks. The debt component shall comprise term financing (including equipment finance) and/or working capital where applicable. 

The eligible activities under the scheme include businesses across the agricultural value chain, covering production, inputs
supply, storage, processing, logistics and marketing. Also captured in the scheme are MSMEs in the real sector including manufacturing, mining and petrochemicals; MSMEs in the service sector including information and communication
technology (ICT) and the creative industry and other activities as the Central Bank of Nigeria (CBN) may determine from time to time. 

On the equity/corporate debt financing component, the guideline indicated that the indirect component shall constitute 45 per cent of the Fund which shall be channelled through SEC-licensed Islamic Fund Managers or Windows, for equity, quasi-equity and non-equity financing in agri-businesses and SMEs. 

“The Articles of Association of the investee company shall not have a covenant prohibiting divestment of equity investment of the Scheme.  At the time of divestment, shareholders of the investee company shall have the right of first refusal. Other terms to be determined by the Fund Manager, subject to compliance with the principles of non-interest banking and financ

It also backs government’s growth initiatives for transforming Micro, Small and Medium Enterprises (MSMEs) as vehicles for sustainable economic development and employment generation. 

According to the apex bank, the scheme would improve access to affordable and sustainable finance by Agri-businesses, MSMEs, create employment opportunities in Nigeria, boost the managerial capacity of agri-businesses and MSMEs to grow the
enterprises into large corporate organizations in line with Federal Government’s agenda to develop the real sector and promote inclusive growth.