How to Access the CBN N10 Billion Intervention Fund for Manufacturers, Processors, Wholesale Distributors of CNG and LPG

How to Access the CBN N10 Billion Intervention Fund for Manufacturers, Processors, Wholesale Distributors of CNG and LPG

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How to Access the CBN N10 Billion Intervention Fund for Manufacturers, Processors, Wholesale Distributors of CNG and LPG

 
One of the functions of the Apex bank is to ensure the growth of the Nigerian economy through the productive sectors of the economy. This is done by providing financial assistance and technical aid, also to play advisory role and monitoring role to ensure that fund disbursed targets the specified sectors for economic development in Nigeria. In pursuance of this, and in line with the National Gas Expansion Programme (NGEP), the central bank of Nigeria plans to disburse N10 billion to facilitate the production and distribution of CNG for transportation and LPG for domestic use and lighting of factories that rely on gas for product and services processing. This disbursement targets the Aggregators, manufacturers, processors, wholesale distributors and related activities that shall be funded under the Power and Airline Intervention Fund (PAIF). The initiative is to be implemented in collaboration with the Ministry of Petroleum Resources (MPR). The operational modalities for the intervention of the fund facility include:

  1. The Stated Objectives

The objectives of the CBN N10 Billion intervention fund for manufacturers, processors, wholesale distributors of CNG and LPG include:

  1. Better access to financing for investment in the domestic gas value chain in the private sector;
  2. Stimulate investment in infrastructure development aimed at maximizing domestic gas supplies for economic development;
  3. Facilitate the rapid adoption of CNG as the preferred fuel for transport and power generation, as well as LPG as the preferred fuel for domestic cooking, transport and captive power
  4. Ensure speedy growth of the gas-based and petrochemical industries (fertilizers, methanol, etc.) to support large industries such as agriculture, textiles and related industries;
  5. Offer incentives for increased investment from the private sector in the domestic gas market;
  6. Improve jobs across the nation.
  1. Eligible activities

The eligible activities under the CBN N10 Billion intervention fund for manufacturers, processors, wholesale distributors of CNG and LPG include:

  1. Setting up of gas processing plants and small-scale petrochemical plants;
  2. Setting up of gas cylinder manufacturing plants;
  3. Setting up of L-CNG regasification modular systems;
  4. Setting up of auto gas conversion kits or components manufacturing plants
  5. Establishing of CNG primary and secondary compression stations;
  6. Formation and manufacturing of LPG retail skid tanks and refilling equipment;
  7. Development/enhancement of auto gas transportation systems, conversion and distribution infrastructure,
  8. Enhancement of domestic cylinder production and distribution by cylinder manufacturing plants and LPG wholesale outlets;
  9. Establishing/expanding LPG sales, domestic cylinder injection and trade micro-distribution outlets and service centers;
  10. Any other mid to downstream gas value chain related activity recommended by the Ministry of Petroleum Resources (MPR).
  1. Funding:   The Power and Airline Intervention Fund (PAIF).will fund aggregators, manufacturers, processors, wholesale distributors, and related operations
  1. Loan type and limit
  1. The term loan shall be assessed on the basis of the activity and shall not exceed N10 billion per obligator.
  2. Working capital shall amount to a maximum of N500 million per obligator

 

  1. Interest rate: The interest rate under the intervention shall not exceed 5.0% p.a. Until 28 February 2021, (all inclusive) interest in the facility shall subsequently be reversed to 9% p.a. (all inclusive) effective March 1st, 2021.

 

  1. Loan tenor and moratorium
  1. Term loans have a maximum duration of 10 years (not exceeding 31 December 2030), depending on the complexity of the project. The tenor of each project is calculated in relation to its cash flow and the lifetime of the underlying collateral.
  2. Term loans shall be issued with a moratorium of not more than two years on principal repayment only.
  3. Working capital facility, subject to prior approval, of one (1) year with a maximum roll-over of not more than twice.
  1. Repayment:  The monthly interest in the facility will be amortized and passed monthly to CBN via the Deposit Money Banks.
  2. Participating banks (pbs): Under this facility, all deposit money banks and the NMFB will count as PBs.
  3. Transaction dynamics for the facility
  1. Eligible applicants or sponsors must submit applications to the CBN through any Participating Banks (PBs);
  2. Due diligence on the application will be carried out by the PB on the basis of business and credit considerations.;
  3. Each application must be accompanied by documentation, including relevant endorsements and permits from the Ministry of Petroleum Resources (MPR) for the project, as may be required by the PB under PAIF;
  4. Upon approval by the applicable Credit Committee, the PB shall transmit the authorised application to the CBN in the sense of the intervention;
  5. In order to ensure compliance with the requirements, the Central Bank of Nigeria shall conduct an internal review of the application. All applications meeting the prescribed criteria under the intervention shall be processed and the status of the application shall be reported to the PB. ***However, it should be noted that CBN reserves the right to reject any application from any lending bank that does not meet the requirements of this Guidelines. ***
  6. Upon approval, the CBN shall, in compliance with the mutually agreed disbursement schedule linked to particular milestones, release the approved amount to the PB;
  7. The PB shall disburse the authorised amount to the enterprise within 5 working days,
  1. Collateral requirements: As acceptable by the PB under the PAIF, the collateral acceptable for projects to be funded under the intervention shall be as acceptable.
  1. Verification/monitoring of projects:      Periodic monitoring of projects financed under the Scheme shall be conducted jointly by the PB, MPR and CBN
  1. Management of facility:  The Development Finance Department of the Central Bank of Nigeria shall be responsible for the management of the intervention facility.
  1. Responsibilities of Stakeholders

For the effective implementation of the intervention facility, the responsibilities of the stakeholders shall include:

  1. Central Bank of Nigeria
  1. Offer the funding for the intervention facility;
  2. Issue funds to the DMBs and NMFB for payout to approved financing requests;
  3. Carry out periodic verification and monitoring of projects financed;
  4. Provide periodic reports to the CBN Management on the performance of the intervention;
  5. Ensure compliance with the provisions of the Guidelines;
  6. Review the Guidelines as may be necessary from time to time
  1. Participating Banks (PBs)
  1. Appraise and approve requests under the Facility based on normal business consideration and due diligence
  2. Forward such approved requests to CBN for verification and final approval;
  3. Monitor financed projects and render periodic returns as may be specified by the CBN from time to time;
  4. Ensure repayments of facilities by obligors; and
  5. Comply with the Guidelines of the Facility.
  1. Ministry of Petroleum Resources (MPR)
  1. Receive and endorse project proposals for financing under the intervention;
  2. Ensure first class independent diligence is undertaken to ascertain the economic impact and commercial viability of proposed projects;
  3. Partner the CBN and Participating Bank in monitoring the project till full repayment;
  4. Comply with the provisions of the Guidelines.
  1. Beneficiaries
  1. Adhere strictly to the terms and conditions of the Facility;
  2. Ensure prudent utilization of facility for the purpose for which it was granted;
  3. Keep up-to-date records of the enterprise’s activities under the intervention
  4. Allow access to the project and records by the CBN and PB;
  5. Repay the facility in accordance with the approved repayment schedule;
  6. Comply with the provisions of the Guidelines.

 

  1. Discontinuation of the credit facility

The PB shall return the fund to the CBN within 3 working days, including details of the credit facility, if a loan is repaid or the facility is otherwise discontinued.

  1. Infractions: Sanctions on infractions shall be applicable as determined by the CBN.
     
  2. Amendments: The Guidelines shall be subject to review from time to time as may be deemed necessary by the CBN.
  3. Enquiries and returns

All enquiries and returns should be addressed to:
The Director,
Development Finance Department,
Central Bank of Nigeria,
Corporate Headquarters Central Business District, Abuja.
Conclusion
The Nigeria government and the Central Bank of Nigeria aim to complement the effort of stakeholders in the purchasing, distribution and sales of CNG and LPG in Nigeria and set up framework for the implementation of the intervention facility. Accessing the CBN N10 Billion Intervention Fund for Manufacturers, Processors, Wholesale Distributors of CNG and LPG requires the gas business owners to have what it takes to be entitled to the fund. The fund will increase the financial capacity of the gas plants in the country. It is therefore a necessity for the financial agency that are responsible for the registering and disbursement of the fund to ensure that gas producers are well qualified to obtain the fund and regularly monitored the channel of the fund.
The framework for accessing the fund is downloadable here.
 
 
 
KiakiaGas Limited is a leading Gas business in Lagos,Nigeria with expertise in LPG retailing, New Gas Market development, Building of Gas Plants and Gas strategy advisory. If you need a partner with a global perspective and local expertise in the Nigerian and African space, kindly book for a free session with our team of experts to help you http://www.kiakiagas.com/book-session or write us an email at advisory@kiakiagas.com or Whatsapp: +2348085269328
 

 

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