C.B.N Gas Value Chain Investment Stimulant Loan for Small Operations: This is how to apply – Central Bank of Nigeria is making this offer to small establishment. We had in a previous publication highlighted allis required for large operations. Here, we wish to concentrate on how small operations can access this facility. As a matter of fact, such establishments must be those interested in investing in the National Gas Expansion Program (NGEP).
Furthermore, of special importance are those operations in the retails and distributive segment of this value chain. This program intends to make CNG the fuel of choice for transportation and LPG, the fuel of choice for domestic cooking, captive power and small industrial complexes. The questions are, re you interested? Are you a start-up or an existing business outfit? If your answer is YES, then read on. Here are the requirements for obtaining the loan and other conditionalities.
THE NATIONAL GAS EXPANSION PROGRAMME:
In addition, CBN in her publications on the Framework for The Implementation of Intervention Facility for the National Gas Expansion Program expresses that non-viability of domestic commercial production and utilization of gas continues to severely constrain private investments within the industry. Consequently, the low level of investment within the industry has resulted within the minimal production and utilization of Compressed gas (CNG) and Liquefied Petroleum Gas (LPG) as clean alternative sources of domestic energy in Nigeria. Expressing further that, failure to harness its gas resources has had negative consequences for the country – economic, environmental, fiscal and social, particularly because the industry has the potential to engender rapid climb in Nigeria’s non-oil economy.
As a matter of fact, this is why the National Gas Expansion Program (NGEP) was introduced to form CNG the fuel of choice for transportation and LPG, the fuel of choice for domestic cooking, captive power and little industrial complexes. Equally, gas-based industries, above all the petrochemical (fertilizer, methanol, etc.) are to be enabled to support large industries, like agriculture, industrial applications, textile then on. I hope you now understand what investment opportunities you have within this gas value chain. Then, you’ve got to read on.
N250 billion intervention facility: C.B.N Gas Value Chain Investment Stimulant Loan for Small Operations: This is how to apply
Furthermore, as a part of its efforts at stimulating finance to critical sectors of the economy, the Central Bank of Nigeria (CBN) introduces the N250 billion intervention facility to assist stimulate investment within the gas value chain.
Under this arrangement, large-scale projects re going to be financed under the facility and Airlines Intervention Fund (PAIF). This is in line with existing guidelines regulating the PAIF. While, small-scale operators and retail distributors re going to be financed by the NIRSAL-Microfinance Bank (NMFB). And / or the other Participating financial organization (PFI) under the Agribusiness/Small and Medium and Medium Enterprises Investment Scheme (AgSMEIS).
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The National Gas Expansion Program Operational Modalities:
- Improved access to finance for private sector investments in the domestic gas value chain;
- Stimulate investments in the development of infrastructure to optimize the domestic gas resources for economic development;
- Fast-track the adoption of CNG as the fuel of choice for transportation and power generation, as well as LPG as the fuel of choice for domestic cooking, transportation and captive power;
- Furthermore, Fact-track the development of gas-based industries particularly petrochemical (fertilizer, methanol, etc) to support large industries, such as agriculture, textile, and related industries;
- Provide leverage for additional private sector investments in the domestic gas market;
- Boost employment across the country.
Establishments and activities eligible for the intervention fund include:
- Establishment of gas processing plants and small-scale petrochemical plants;
- Establishment of gas cylinder manufacturing plants;
- In addition, Establishment of L-CNG regasification modular systems;
- Establishment of auto gas conversion kits or components manufacturing plants
- And, the establishment of CNG primary and secondary compression stations;
- Establishment and manufacturing of LPG retail skid tanks and refilling equipment;
- Development/enhancement of auto gas transportation systems, conversion and distribution infrastructure,
- In addition, Enhancement of domestic cylinder production and distribution by cylinder manufacturing plants and LPG wholesale outlets;
- Establishment/expansion of micro distribution outlets and service centres for LPG sales, domestic cylinder injection and exchange; and
- Any other mid to downstream gas value chain related activity recommended by the Ministry of Petroleum Resources (MPR).
- Aggregators, manufacturers, processors, wholesale distributors and related activities shall be funded under the Power and Airline Intervention Fund (PAIF).
- Small and medium-scale enterprises (SMEs) and retail distributors shall be funded by NIRSAL Microfinance Bank (NMFB) under AgSMEIS.
Loan Type and Limit
- Manufacturers, Processors, Wholesale Distributors, etc
- Term loan: Shall be determined based on the activity and shall not exceed N10 billion per obligor.
- Working capital: Maximum of N500 million per obligor
Small & Medium Enterprises (SMEs) and Retail Distributors
- Term loan: Shall be determined based on the activity and shall not exceed N50 million per obligor.
- Working capital: Maximum of N5 million per obligor.
Interest rate under the intervention shall be at not more than 5.0% p.a. (all inclusive) up to 28th February 2021, thereafter, interest on the facility shall revert to 9% p.a. (all inclusive) effective from 1st March 2021.
Loan Tenor and Moratorium:
- Manufacturers, Processors, Wholesale Distributors, etc.
- Term loans shall have a maximum tenor of 10 years (not exceeding 31st December 2030) depending on the complexity of the project. Each project tenor shall be determined in relation to its cash flow and life of the underlying collateral.
- Term-loans shall be allowed maximum of two years moratorium on principal repayment only.
- Working capital facility of one (1) year with a maximum roll over of not more than twice, subject to prior approval.
2. Small & Medium Enterprises (SMEs) and Retail Distributors
- Term loans shall have a maximum tenor of 5 years (not exceeding 31st December, 2030). Each project tenor shall be determined in relation to its cash flow and life of the underlying collateral.
- Term loans shall-be allowed a maximum of two-year moratorium on principal repayment only.
- Working capital facility of one (1) year with a maximum roll over of not more than twice and subject to prior approval.
- Deposit Money Banks: Monthly interests on the facility’ll be amortized and transferred to CBN monthly.
- NMFB: Monthly interests’ll be paid after the moratorium period.
Participating Banks (PBs)
All Deposit Money Banks and the NMFB will be eligible as PBs under this Facility.
Transaction Dynamics for the Facility for C.B.N Gas Value Chain Investment Stimulant Loan for Small Operations
- Manufacturers, Processors, Wholesale Distributors, etc
- Eligible applicant or sponsor shall submit applications through any Participating Banks (PBs) to the CBN;
- The PB shall carry out due diligence on the application based on business and credit considerations;
- Each request must be accompanied with documents as may be required by the PB under PAIF. This, including relevant endorsements and permits from the Ministry of Petroleum Resources (MPR) for the project;
- Upon approval by appropriate Credit Committee, the PB shall forward approved application under the intervention to the CBN;
- The Central Bank of Nigeria shall conduct internal review of the application to ensure compliance with the guidelines. Applications that meet the specified requirements under intervention shall be processed. And then, the PB notified of the status of the request.
(Note: The CBN reserves the right to reject any application from any lending bank that does not meet the requirements of this Guidelines);
- Upon approval, the CBN shall release the approved sum to the PB according to mutually agreed disbursement schedule tied to specific milestones; and
- The PB shall, within 5 working days, disburse the approved sum to the enterprise.
2. SMEs and Retail Distributors
- Eligible SMEs shall approach NMFB with bankable proposals.
- The NMFB shall carry out due diligence on applications based on business and credit considerations.
- .Applications that meet disbursement criteria’ll be forwarded to CBN for review. And then, the release of funds to NMFB;
- The Central Bank of Nigeria shall conduct internal review of applications to ensure that laid down criteria re met.
As a matter of fact, if your application meets the specified requirements under the interventions, it shall be processed and the NMFB notified of the status of the request. However, the CBN reserves the right to reject any application from any lending bank that does not meet the requirements of this Guidelines; and
- Upon approval, the CBN shall release the approved sum to NMFB for disbursement to the obligor according to the disbursement schedule not later than 5 working days after receipt of funds from the CBN
Collateral Requirements for C.B.N Gas Value Chain Investment Stimulant Loan for Small Operations: This is how to apply
- The collateral acceptable for these projects, shall’ be as may be acceptable by the PB under PAIF.
- The collateral acceptable for SMEs will be as determined by the NMFB.
Verification/Monitoring of Projects:
Periodic monitoring of projects financed under the Scheme shallbe conducted jointly by the PB, MPR and CBN.
Management of the Facility:
The Development Finance Department of the Central Bank of Nigeria shall be responsible for the management of the intervention facility.
Responsibilities of Stakeholders:
For the effective implementation of the intervention facility,the responsibilities of the stakeholders shall include:
Central Bank of Nigeria
The Central Bank of Nigeria shall:
- Provide the funding for the intervention facility;
- Release funds to the DMBs and NMFB for disbursement to approved financing requests;
- Carry out periodic verification and monitoring of projects financed;
- Furthermore, Provide periodic reports to the CBN Management on the performance of the intervention;
- Ensure compliance with the provisions of the Guidelines; and
- Review the Guidelines as may be necessary from time to time.
C.B.N Gas Value Chain Investment Stimulant Loan for Small Operations
Participating Banks (PBs):
The PBs shall:
- Appraise and approve requests under the Facility based on normal business consideration and due diligence;
- Forward such approved requests to CBN for verification and final approval;
- Monitor financed projects and render periodic returns as may be specified by the CBN from time to time;
- Ensure repayments of facilities by obligors; and
- Comply with the Guidelines of the Facility.
Ministry of Petroleum Resources (MPR):
The Ministry of Petroleum Resources shall:
- Receive and endorse project proposals for financing under the intervention;
- Ensure first-class independent diligence’s undertaken. That is to to ascertain the economic impact andcommercial viability of proposed projects;
- Partner the CBN and Participating Bank in monitoring the project till full repayment;
- Comply with the provisions of the Guidelines.
- Adhere strictly to the terms and conditions of the Facility;
- Ensure prudent utilisation of facility forthe purpose for which itwas granted;
- Keep up-to-date records of the enterprise’s activities under the intervention;
- In addition, Allow access to the project and records by the CBN and PB;
- Repay the facility in accordance with the approved repayment schedule; and
- Comply with the provisions of the Guidelines.
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