Aims to drive support for FG’s economic diversification plans
The Central Bank of Nigeria (CBN) has set a maximum of N5 billion long-term loan facilities per obligor for the acquisition of plants and machinery, as well as working capital, to support private sector companies, the apex bank said as it released guidelines for its “Policy on Production and Productivity” initiative, through the “100 projects for every 100 days” project.
The CBN guidelines explained that the production for productivity initiative was designed to support the Federal Government‘s drive towards boosting productivity and economic diversification. The bank also added that on the approved amount per obligor, any amount above N5 billion per obligor would require special approval of its management.
The CBN in November unveiled its new 100 for 100 PPP (Policy on Production and Productivity) which it said is aimed at supporting 100 companies that have the greatest potential to achieve significant scale in their local production for domestic consumption and exports. The programme is a financing scheme designed to provide targeted funding (in Naira) under existing CBN’s intervention programmes to 100 high-impact companies and projects every 100 days as well as foreign exchange funding for new machinery.
The policy objective includes reducing reliance on imports and driving sustainable employment-led economic growth through increased domestic production and productivity. However, the selection criteria for the programme limits the instrument to only new projects and would not cover any refinance of existing facilities.
The Central Bank further noted that, “the initiative will create the flow of finance and investments to enterprises with the potential to kick start sustainable economic growth trajectory, accelerate structural transformation, promote diversification, and improve productivity. It is a support to private sector companies with the aim of reducing certain imports, increasing non-oil exports and to improve the FX-generating capacity of the economy.”
Per the initiative, the apex bank noted that participating companies and eligible projects must source over 50 percent of raw materials and at least 80 percent of jobs locally, of which some experts have said the efforts by the CBN to enhance the productive capacity of the economy would reverse the negative trend of high unemployment rate, boost output, and reduce import bills.
“The specific objectives include: catalyse import substitution of targeted commodities; increase local production and productivity; increase non-oil exports; and improve foreign exchange earning capacity of the economy,” it stated.
The financial sector regulator also explained that comprehensive, regular monitoring of specific benchmarks and Key Performance Indicators (KPIs) under the initiative would be undertaken regularly; and they shall include an increase in production output of financed companies; percentage increase in capacity utilisation and percentage increase in export volume and value.
It also said the initiative would include a decrease in import volume and value of industrial raw materials and increase in the number of jobs created, while adding that focal activities shall be existing businesses and brownfield projects with a potential to transform and jumpstart the productive base of the economy.
“These include manufacturing, agriculture and agro-processing; extractive industries, petrochemicals and renewable energy; healthcare and pharmaceuticals, logistics services and trade-related infrastructure; and any other activities as may be prescribed,” the CBN stated.