The new Central Bank of Nigeria’s 100-for-100 policy on production and productivity has the bite required to meet its expected goals and turns the economy around in its targeted areas, writes Group Business Editor, SIMEON EBULU
It’s over two weeks, or more specifically 16 days today into the implementation of the new CBN 100-for-100 policy on production and productivity (100 for 100 PPP) designed to raise a fresh industrial output lifeline to produce for local consumption and for export. It is also intended to serve as a base to create massive employment opportunities arising from the addition of new production lines across various sectors of the economy.
The 100-for-100 PPP is another policy evolution from the CBN stable, among its other intervention programmes in agriculture, manufacturing, aviation, power and health, aimed at keeping companies and industries in these areas and others, active and continue to operate as going concerns, retain their workforce and contribute to the nation’s Gross Domestic Product (GDP), especially after the advent of the crushing effect of the COVID-19 pandemic that ravaged businesses across board, both locally and internationally.
The leadership of the CBN has been somewhat restive and evidently dissatisfied with the performance of the economy, especially its tendency to be import dependent, its lack, or slow adaptation to backward integration in addition to its propensity to be a gusler of forex of which Nigeria is in dire need.The CBN has been proactive and unrelenting, albeit with limited fiscal support, in churning out policies, aimed at galvanising and redirecting available resources at its disposal, to breathing life into the productive sectors of the economy through its various intervention programmes, including those targeted at Small and Medium Enterprises (SMEs) and Micro, Small and Medium Enterprises (MSMEs).
Given that a large proportion of Nigeria’s manufacturers depend on imported feedstock and machinery for production, against the CBN’s drum-beat and encouragement for backward integration, a large proportion of Nigeria’s forex and foreign reserves go into paying foreign suppliers just to keep the local manufacturing base alive and on-going.
Forex management and determination of the Naira exchange rate vis-a-vis other foreign currencies, has, therefore, remained one of CBN’s intractable challenge, nonetheless, the bank has remained on top of the game.
Policy Thrust
The 100-for-100 policy is the latest, and evidently the most pointed and targeted of the apex bank’s intervention efforts to turn the fortunes of the economy around. It aims at revolutionising and expanding Nigeria’s productivity by giving industry and manufacturers the wherewithal needed to turn their productive capacity around, through expansion and opening of new product lines.
Not only that, the policy thrust also envisages that the new production lines to be birthed by this measure, will churn out enough products to meet, not only local consumption, but equally for the export market.
On this, the CBN Governor, Godwin Emefiele said: “The purpose of this instrument is to take further steps to reverse our over-reliance on imports.”
He said working through banks, the required financial instrument will be made available to their customers in critical areas to boost production and productivity, with a view to immediately transforming and jumpstarting the productive base of the economy.
Giving insight into the thrust of the policy, the CBN chief said after these 100 projects by companies in the first 100 days from November 1 are done with, “we will take the next 100 companies/projects for another 100 days beginning February 1, 2022, and then another 100 companies for another 100 days beginning from May 1, 2022, saying it is his conviction that if the CBN targets and supports the right companies and projects, “we will see a significant, 14 measurable and verifiable increase in local production and productivity, reduction in certain imports, increase in non-oil exports, and improvements in the FX-generating capacity of the economy.”
Emefiele, who consigned the implementation of the 100-for-100 PPP to the Development Finance Department under his supervision, said he was convinced that continuous and more production, “is the best and most sustainable way to address the Naira’s value – whether in hard currency or digital eNaira.”
He said under this policy, the CBN will advertise, screen, scrutinise and financially support 100 targeted private sector companies in 100 days, beginning from November 1, 2021, and rolling over every 100 days with a new set of 100 companies, whose names will be published in national dailies for Nigerians to verify and confirm.
Eligibility
The CBN has put in place a structure and set of rules that will guide the implementation of the 100-for-100 PPP initiative. It’s simple in perspective with clear-cut targets and goals to accomplish.
Part of the criteria for selecting companies that will participate in the 100 for100 Policy on Production and Productivity, is that the engaging firms should be sufficiently capable of significantly impact on the economy in terms of job creation, earn foreign exchange through exports and must be compliant on the ease of doing business conditionalities.
CBN’s Director, Development Finance Department, Yila Philip, in a statement entitled: ‘Selection criteria for private sector companies’ participation under the 100 for 100 Policy on Production and Productivity, said: “The projects for consideration shall be new projects in existing companies requiring new machinery and other support and must have the greatest potential to achieve significant scale in their in-country production and for domestic consumption and exports.”
He pointed out that local content, job creation and human capital development, contribution to economic growth, production efficiency and scalability, were key considerations that would form part of the decision making, and underlined the fact that 80 per cent of the jobs created by such projects must be for Nigerians, while 50 per cent of raw materials for the project must be sourced in-country.
He said the criteria for participation under the 100 for 100 PPP shall be premised on the immediate contribution to growth, job creation and social impact, saying tbe CBN would take cognisance of the following evidence -based, transparent and measurable criteria in picking companies and projects to be funded.
The CBN Intervention under the 100 for 100 PPP Instrument, he said, shall provide: Naira Intervention Funding under the CBN Intervention Processes, with complete FX funding for new machinery.
He stated that the instrument is for only new projects and will not cover any refinance of facilities and will be subject to independent evaluation by international Audit firms, as well as that intervention under this project, will be made public and published in national dailies.
The CBN said it will work with fiscal authorities to facilitate power sector, port and export reforms as well as ease of doing business to improve competitiveness in Nigeria to complement and propel this initiative. It clarified what it termed a highly satisfactory project as one that meets stipulated requirements by 81 to 100 per cent; a satisfactory project, it estimates, should meet stipulated requirements by 61 to 80 per cent, while a less satisfactory project should meet stipulated requirements by 51 to 60 per cent, and an unsatisfactory project is one in the zero to 50 per cent margin.
The guideline also said the CBN intervention under the 100 for 100 PPP instrument shall provide naira intervention funding under CBN intervention with complete forex funding for new machinery.
It said companies with satisfactory performance should apply through their banks to the CBN Department of Development Finance, Office of the Governor, with appropriate documentation.
CBN unveils 100 for 100 N5b financing
Matching words with action, the CBN has launched the 100 for 100 PPP targeted at private corporate entities, and called on companies that have projects to fund to apply for as much as N5 billion under the scheme.
The CBN said once it can determine that the private company can have a substantial impact on the economy through “Key Performance Indicators (KPIs)”, the company would be selected, saying it would screen and finance eligible private sector companies in 100 days, and roll over every 100 days.
CBN said the 100 for 100 PPP is a financial instrument designed to create the flow of finance and investments to enterprises with the potential to catalyse sustainable economic growth trajectory, accelerate structural transformation, promote diversification and improve productivity.
The bank said it is prepared to select 100 private sector companies with projects that have the potential to significantly increase domestic production and productivity, reduce imports, increase non-oil exports, and overall improvements in the foreign exchange generating capacity of the Nigerian economy.
The initiative, which would be bank-led, will be rolled over every 100 days with a new set of companies selected for financing under the initiative, saying the funding shall be from the CBN’s Real Sector Support Facility-Differentiated Cash Reserve Requirement (RSSF-DCRR) window or any other funding window so determined.
The CBN said the loan amount shall be a maximum of N5 billion per obligor, adding that any amount above N5 billion shall require the special nod of CBN’s Management. The monthly interests on the facility shall be amortised and transferred quarterly with principal repayments to the CBN.
The interest rate under the intervention, it explained, shall not be more than five per cent p.a. (all-inclusive) up to February 28, 2022, thereafter, interest on the facility shall revert to nine per cent p.a. (all-inclusive) effective from March 1, 2022.
Monitoring
The CBN said it will set up comprehensive, regular monitoring of specific benchmarks and key performance indicators (KPIs) for selected companies, so as to establish Rate of Growth in production output, determine increase in capacity utilisation, increase in export volume, as well as increase in export value.
The procedure, the bank said will aid it in ascertaining decrease in industrial raw material import volume, decrease in industrial raw material import value and also be able to evaluate increase in the number of jobs generated.
Mode of application
The CBN has directed interested private-sector enterprises to submit applications to their PFIs together with the necessary documentation, which must include Financial statements, Certified true copies of company registration documents evidencing the incorporation of the Company with the Corporate Affairs Commission (CAC), three years of audited financials, including the most recent management account of the company, evidence of the company’s, promoters’, and directors’ creditworthiness and at least two credit reports of the company and the directors.
The CBN also requires the inclusion of the business plan of the underlying project for which the facility is to be applied, detailed status report on project’s capacity utilisation, production output, productivity/efficiency level, employment level, export capacity, and value creation,
in addition to increased capacity utilisation, production output, productivity/efficiency level, employment level, export capability, and value creation after funding, should be projected to represent the project’s post-financing economic benefits. It directed applicants to notify the CBN of submitted applications via a dedicated online portal (https://100for100ppp.ng)
Loan approval
The CBN said once the lending bank gets any applications, due diligence on them based on business and credit would be conducted, after which the lending bank would forward the applications of their eligible private sector companies to the CBN for approval by the appropriate PFI’s Credit Committee.
The CBN said would screen and finance eligible private sector companies in 100 days, and rollover every 100 days, saying it shall release the approved sum to the PFI for onward disbursement to the selected private sector companies and successful beneficiaries would be published in national dailies for Nigerians to verify and confirm with details of facility granted, operating sector, manufacturing activities financed and the identity of the PFI.
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