Banking Updates: Recent Landmark Regulations, Legislation & Case Law Affecting the Banking & Finance Sectors August 2017 Edition

This newsletter contains a review of:

• The Central Bank Of Nigeria’s (“CBN’s”) amendment to the Commercial Agricultural Credit Scheme (CACS) Guidelines;

• The CBN circular on payment of port and Nigerian Maritime Administration and Safety Agency (NIMASA) charges by oil marketing companies; and

• The CBN circular on the introduction of two (2) new instruments – “funding for liquidity” and “intra-day facility” for non-interest banks.

AMENDMENT TO THE COMMERCIAL AGRICULTURAL CREDIT SCHEME (CACS) GUIDELINES

The CBN has, pursuant to a circular dated August 15, 2017 (and referenced REF: FPR/DIR/GEN/CIR/06/023), amended certain provisions of the Commercial Agricultural Credit Scheme (“CACS”) Guidelines (the “Revised CACS Guidelines”). The Revised CACS Guidelines took effect from the date of this circular and supersedes the initial CACS guidelines issued in 2010, and subsequent amendments in respect thereof.

The CACS was established by the CBN in collaboration with the Federal Government of Nigeria, represented by the Federal Ministry of Agriculture and Rural Development (FMARD), primarily to promote commercial agricultural enterprises by providing credit facilities at single digit interest rates[2] to such enterprises. The CACS is financed from the proceeds of the N200 Billion (Two Hundred Billion Naira), three (3) year bond raised by the Debt Management Office. These funds are made available to participating bank(s), to finance commercial agricultural enterprises.

The Revised CACS Guidelines essentially expand the responsibilities of the borrower under the CACS by including a requirement for the borrower to insure the project being financed with the Nigerian Agricultural Insurance Corporation (“NAIC”). In addition, we note generally that the Revised CAC Guidelines now contemplate that the NAIC will play certain roles under the CACS including: (i) providing insurance cover for agricultural projects in the event of losses arising from the various hazards insured in the value chain; (ii) providing the pre-determined premium rate from time to time to the lending banks; and (iii) issuing and incorporating the financial interest of the lending bank as the first loss payee into the policy document to the extent of their rights and interests. Furthermore, in connection with the NAIC insurance cover, participating banks are, inter alia, required to: (i) educate and enlighten the borrower to take NAIC insurance policies for the various items across the agricultural value chain; and (ii) obtain NAIC insurance covers as a condition precedent to the draw down/disbursement of the loan. It should be noted that the CBN has directed, pursuant to this circular, that borrowers immediately commence insurance premium payments under the CACS.

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