Banks to support exports with N25bn annual equity contribution
Banks have agreed to dedicate five percent of their annual profit-less tax balances as equity capital for export driven businesses as well as those which commit to helping government’s import substitution drive.
This was one of the high points of the first bankers committee in the year, which held in Abuja on Thursday.
Briefing on the outcome of the meeting, Ahmad Abdullahi, new director, Banking Supervision at the Central Bank of Nigeria (CBN) said the five percent contribution would amount to about N25billion annually, looking at the industry’s profits in the last three years.
Implementation will start from 2017 using 2016 financials of banks and the pool of funds will be domiciled at the CBN, Abdullahi noted.
According to him, the funding support will not be disbursed as ‘loans’, but will allow each bank take up an equity holding in the scheme based on its annual contribution from annual profit.
“The consortium of banks which contribute in the businesses will then take part ownership of such businesses,” he said.
The Director also explained that the members of the bankers’ committee will control scheme, but there will be a project review committee that will review submissions by entrepreneurs that require funding and now make recommendation to a board of trustees of the bankers committee.
“There was a new initiative of the bankers committee in funding agribusiness as well as Small and Medium Enterprises (SMEs). The committee felt that they should support the effort of the federal government in diversifying the economy by coming up with an initiative that will help export drive in the economy as well as import substitution.
“The committee has decided that it is going to be contributing five percent of each bank’s Profit After Tax to a pool of funds that will be kept in the Central Bank of Nigeria and it will be used to finance eligible, bankable projects that are meant for export drive or import substitution.
“Based on the banks’ P&L in the last three years, we estimate that up to N25billion would be contributed by the banks annually,” the director stated.
He assured that the initiative will not duplicate efforts of the Development Finance Institutions (DFIs), insisting rather, “the more, the merrier.”
He said the the scheme would provide long term funding for businesses since the plan is a maximum 10 years the exit period for any business that is benefitting from this.
Chidi Umeano, head of the Shared services office of the CBN also briefing on the outcome of the meeting announced that the four-year
old cashless policy will now be re-introduced and rolled out in the remaining 30 states within the year, beginning in May.
The cashless policy, which was introduced in 2012, has been implemented in six states- Lagos, Abia, Kano, Anambra, Rivers, Ogun, including the Federal Capital Territory.
It was suspended in 2014 but Umeano says it is now time to reintroduce the scheme based on availability of massive payment infrastructure and a lot of awareness which can now support nationwide implementation.
“We have a very interesting statistics to show that there has been a lot of shift from the cash to other electronic forms of payment.
“We have figures to show that a lot of those activities in certain channels have up to trillions of naira on yearly basis. So we think it is now time to review and restart the cashless policy”
He said that the scheme will, however be reintroduced gradually. By May 1, they will take on the first 10 states, August 1, the second ten states and by October 1, take on the remaining ten states to complete a nationwide rollout.
He said the policy would ensure that the vulnerable are well protected, arguing that the nationwide cashless will help in financial inclusion, sustainability goals of the country, increased security in transactions.
He said while CBN intensifies its sensitisation in this regard, the bankers committee also agreed to ramp up their deployment of electronic channels to make the scheme succeed.
Segun Agbaje, Chief Executive Officer of the Guaranty Trust Bank said the CBN and the entire banking industry is quite concerned about Ponzi schemes and they want to ensure that the people do not get lured into get rich quick schemes and get hurt.
“Most Central Banks of the world including the CBN are beginning to look at these schemes and understand it better before coming up with regulation either to support or prevent it.
He however said they are at very early stages in the country, urging the CBN to look more closely at it and come up with policy statements and direction on how to deal with block chain type technology.
There was also the concern that the members of the bankers committee expressed regarding the state of Ponzi schemes that are operating in the country.
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