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Infrastructure Finance

Section 3.2.12(h) of the CBN Monetary Policy Circular No. 38 for the 2010/2011 fiscal years noted that �infrastructural development remains grossly inadequate relative to the nation�s requirements due to lack of funds�. To address this challenge, the Central Bank of Nigeria established the Infrastructure Finance Office on March 01, 2010. The mandate of the Office is to, among others, evolve a sustainable financing framework to stimulate long-term financing for infrastructure development in the country. The Bank has undertaken some steps to improve the sector as follows:

a. The N300 billion Power and Aviation Intervention Fund (PAIF)

The Bank provided N300 billion facility for investment in debentures to be issued by the Bank of Industry (BOI) in accordance with Section 31 of the CBN Act 2007, for investment in power and aviation projects. The funds are to be channeled through the BOI for on-lending to the Deposit Money Banks at a maximum interest rate of 1.0 per cent for disbursement at concessionary interest rate of not more than 7.0 per cent and a tenor of 10 � 15 years. The African Finance Corporation (AFC) will serve as technical adviser to the fund.

b. Review of the Prudential Guidelines to recognize the peculiarities of long term financing.

As part of measures by the CBN to further encourage banks to lend to the real sector of the economy, particularly SMEs, infrastructure and agriculture, the Board of Directors of the Bank has approved the amendment of the prudential guidelines on loan loss provisioning, and rules and regulations on margin lending. The objective is to take cognizance of the current dynamics in the industry and provide guidance on the recognition and measurement of loans, establishment of loan loss allowances, credit risk disclosure and related matters. The reviewed Prudential Guidelines recognizes the use of a time-based approach for specialized loans. The time based approach establishes longer time lines for measuring asset quality, based on the gestation periods for projects in the target sectors.

c. Review of the Universal Banking Model

The Bank is in constant consultation with other stakeholders to review the universal banking model in favour of monoline and specialized banking so as to encourage innovation and specialization among banks. The new initiative is expected to encourage the establishment of specialized financial institutions to grant loan terms funds generally required for infrastructure development.

Click here for the PAIF Guideline (Revised)

Click here to see frequently asked questions on Development Finance

Facts : 1/1/1900
London Club of Creditors:These are mainly uninsured and unguaranteed debts extended by commercial banks to nationals of debtor nations. Members of the club are commercial banks mainly in industrialized countries. The first London club meeting was held in 1976 to discuss re-payment and conclude re-structuring agreements.
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