BY EMEKA EJERE
Agriculture is the main stay of the Nigerian economy, with agricultural produce abounding in every state of the federation, but with limited capacity for processing and preservation, resulting in huge losses and wastages.
This gap prompted the Bank of Industry (B0I) to establish the Cottage Agro-Processing (CAP) Fund to support the establishment of cottage agro-processing plants to produce food products and raw materials for industries within and outside the Staple Crop Processing Zones (SCPZs).
Established in October, 2001, the BOI is largely a state owned Development Finance Institution (DFI) charged with the responsibility of promoting the emergence of a virile industrial sector. In other words, BOI was conceived to catalyze the transformation of the real sector.
The bank has a mandate of providing financial assistance for establishment of large, medium and small enterprises; as well as expansion, diversification and modernization of existing enterprises and rehabilitation of ailing industries
Its vision is to be a leading self-sustaining Development Finance Institution, operating under sound management and banking principles that would promote the emergence and development of a virile competitive industrial sector in Nigeria.
The mission is to transform Nigeria’s industrial sector and integrate it into the global economy by providing financial and business support services to existing and new industries to attain modern capabilities to produce goods that are competitive in both domestic and external markets.
The BOI has a number of funds that entrepreneurs of all levels can access, one of which is the CAP Fund for small and medium agro processors. The Fund ensures that anticipated risks are dimensioned and mitigated by its transaction structure. It enhances goodwill by supporting agricultural production and rural development while also creating employment.
At the launching of the N5 billion CAP Fund in September 2014, a former managing director of BOI, Mr. Rasheed Olaoluwa, had said that the bank plans to finance about 1,000 projects under this fund. “It is targeted at Small and Medium Industries at the low-technology, labour intensive end of the agro-processing spectrum.
“And inclusive growth is our primary consideration. The fund is designed to enable BoI, being Nigeria’s leading development finance institution, play its catalytic role of paving the way for other financial institutions to follow,” he said.
Olaoluwa added that the fund will provide loans to beneficiaries to establish small scale plants or mini mills to process Nigeria’s agricultural products.
“The Cottage Agro Processing (CAP) fund will provide loans to beneficiaries to establish small scale plants or mini mills to process Nigeria’ s agricultural products such as cassava , oil palm, paddy rice, groundnut, yam, maize, cocoa, sheanut ,plantain, cashew, hides and skin, meat, chicken and fish. These products are grown all over the country and have been selected to ensure an even distribution across Nigeria’s 36 states.”
According to BOI, those that can access the Fund are limited liability companies, enterprises and cooperative societies engaged in the processing of agricultural products either into finished food products or raw materials for industry or for the export market. The products include: cassava, oil palm, rice paddy, groundnut, yam, maize, sorghum, aquaculture, livestock, cocoa, sheanut, plantain, cashew, tomato and all their derivatives.
The fund is being deployed for the supply and installation of equipment for an estimated 1,000 cottage mills across the country, a minimum number of 20-30 mills per state, including the Federal Capital Territory (FCT). Projects are to be located in the areas with comparative advantages in terms of the available agricultural raw materials within each state. This is expected to create a minimum of 20,000 jobs for Nigerians – 5,000 direct and 15,000 indirect jobs.
The CAP fund provides agro-processors with access to finance and technology to convert agricultural products to economic prosperity. The fund is disbursed at a single digit interest rate (9 percent); 5 year loan tenor; 6-month moratorium; guaranteed working capital and speedy processing.
Accessing the fund
Customers must meet all conditions precedent to draw down, including deposit of 20 percent equity contribution into designated account. BOI disburses the 70 percent loan in tranches direct to approved contractors and suppliers in line with agreed milestones. Upon completion, MSME-friendly partner bank provides 10 percent working capital. The customer is responsible for running of the plant and full repayment.
The first phase of the scheme is to facilitate the processing of the top three (3) major crops in each state of the federation and the FCT. BOI Zonal Offices will market the product programme as well as focus on agricultural products and their derivatives on the basis of comparative advantages and in alignment with the SCPZ nearest to them. The Zonal Offices will also identify the producers of each of derivative items within their jurisdiction in building effective deal flow.
As part of the requirements, each applicant is to provide the following: Identification of the basic agricultural raw material(s) to be used, the location where the raw materials will be sourced from and the annual volume available in that location.
Parties to the fund
BOI: To provide the long-term loan and manage the scheme. Where it becomes absolutely necessary for BOI to provide working capital, it shall be done on case-by-case basis and the partnering commercial bank shall be carried along.
Partnering bank: To provide working capital for the customer. The partnering bank shall sign a Tripartite Agreement with BOI and the customer to sweep loan repayments to BOI’s account based on the Loan Amortisation Schedule.
Customer: To provide 20 percent equity contribution, operate and manage the project from the point of disbursement through operation of the plant and ultimate repayment of the loan.
Accredited supplier – To be responsible for the supply, installation and commissioning of the equipment. The supplier is to provide a 2-year warranty for the equipment, execute a 3-year Equipment Maintenance Agreement with the customer and provide a standard factory layout plan that will accommodate the equipment to be supplied