The Central Bank of Nigeria (CBN) has issued new operational guidelines for participants and operating institutions in its Agricultural Credit Guarantee Scheme Fund, which was formed by the federal military government in 1977 and updated on June 13th, 1988 and June 26th, 2019.
The Fund’s purpose is to guarantee loans made by lending banks for agricultural purposes under the plan, with the goal of boosting bank credit to the agricultural sector. Under the modified statute, “loan” covers advances, overdrafts, and other credit facility, and should be interpreted as such in these guidelines and subsequent circulars.
The guidelines were published on the apex bank’s website on Friday.
Concerning the application process, the bank stated that all applications to lending banks for loans under the scheme will be made on the form prescribed for the purpose; individual accounts opened by the lending bank for each beneficiary under the scheme and accounts opened for the purpose of lending under the scheme for co-operative or group loans.
As a condition antecedent to guarantee, all loans under the plan must be insured.
According to the guideline, the ACGSF board will determine the fund’s maximum responsibility in respect of any guarantee provided under the plan on a case-by-case basis.
The said that the single obligor limit for non-tangible collateral is N100,000, while the obligor maximum for secured loans is N50,000,000 for individuals, groups/cooperatives, or corporate societies.
According to the Act, the Fund’s responsibility shall be 75% of the amount in default net of any amount realized by the bank from the security obtained from the borrower, subject to a limit of N50,000 in the case of a loan to a person, a co-operative society, or a corporate body.
Revised regulatory and supervisory standards for MFBs must be rigorously followed, as it states that the maximum principal amount for a microloan shall not exceed N500,000.00 or 1 percent of the shareholders’ fund unimpaired by losses, or as determined by the CBN from time to time. This must be followed when ensuring their facilities.
When two or more banks co-finance a project, the Fund’s guarantee liability is limited to the total loan issued to the borrower (s) by all of the banks.
While emphasizing that the current National Housing Programme is a pilot or demonstration scheme intended, among other things, to galvanize private sector participation, Mr Fashola went on to say, “We applied for land from the states, and we set out to do a demonstration or a pilot programme because we then wanted to validate what we saw and build a pilot scheme.”