COVID-19: 8 banks’ Real Sector Support Facility drops by 21.2% in 2020
By Kayode Tokede
With the COVID-19 pandemic, eight banks have reported 21.2 per cent dropped in Real Sector Support Facility (RSSF) to N143.68billion in 2020 from N182.26billion reported in 2019.
RSSF represents the outstanding balance on the on-lending facility granted to the Bank by Central Bank of Nigeria in respect of N300billion real sector funding.
It was established by CBN in 2018 with a facility tenor for a range of 7 to 10 years inclusive of 24 months moratorium at a 3 per cent interest rate to the Bank.
The objective of RSSF was to stimulate real sector growth and the facility was restricted to a maximum of N10.0bn per project.
Of the eight banks, our correspondent gathered that Zenith Bank Plc, followed by Guaranty Trust Bank Plc (GTBank) top the chart in the year under review.
Our correspondent also gathered that banks in 2020 reduced exposure to RSSF as domestic and foreign economy challenges bite on real sector.
The breakdown revealed that Zenith Bank in 2020 reported N41.9billion lending to RSSF, 4.1 per cent increase over N43.7billion in 2019, while GTBank reported RSSF N22.6billion RSSF lending, 11 per cent decline from N25.3billion reported in 2019.
Zenith Bank in its 2020 audited results explained that, “The Central Bank of Nigeria, as part of the efforts to unlock the potential of the real sector to engender output growth, productivity and job creation has established a N300 billion RSSF.
“The facility is disbursed to large enterprises and startups with financing needs of N500 million up to a maximum of N10 billion.
“The activities targeted by the Facility are manufacturing, agricultural value chain and selected service subsectors. The funds are received from the CBN at two per cent, and disbursed at nine per cent to the beneficiary.”
GTBank also said, “The amount of N22,575,144,000 (December 2019: N25,313,433,000) represents the outstanding balance on the RSSF.
“The Facility is given by the CBN to support large enterprises for startups and expansion financing needs. The real sector activities targeted by the facility are manufacturing, agricultural value chain and selected service sub-sectors.
“The Facility is administered at an all-in Interest rate/charge of 9% per annum payable on quarterly basis.”
Access Bank and United Bank for Africa Plc disbursed N16.5billion and N16.28billion in 20220 as against N18.41billion and N29.1billion in 2019, respectively.
Access bank in its audited result and accounts for full year ended December 31, 2020 said, “The amount of N16,508,760,313 represents the outstanding balance on the on-lending facility granted to the Bank by CBN in respect of the RSSF.
established by CBN. The facility tenor is for a range of 7 to 10 years inclusive of 24 months moratorium at a 3 per cent interest rate to the Bank.
“An additional facility of N2billion was disbursed under the scheme for a period of 7 years inclusive of 1 year moratorium at a 3 per cent interest rate to the Bank. From this creditor, the bank has nil undrawn balance as at 31 December 2020.”
While Union Bank of Nigeria reported 10 per cent drop in its RSSF loans disbursement to N17.57billion in 2020 from N19.5billion in 2019, Stanbic IBTC reported 0.2 per cent growth in its RSSF disbursement in 2020 from N11.7billion in 2019 to N11.72billion in 2020.
In addition, Sterling Bank’s loans disbursement to RSSF dropped to N5.4billion in 2020, 26.3per cent below N7.35billion in 2019, as FCMB Group reported N11.7billion RSSF loans disbursement in 2020, 57 per cent below N27.21billion reported in 2019.
According to FCMB, “The CBN, as part of the efforts to unlock the potential of the real sector to engender output growth, productivity and job creation has established a N300 billion RSSF.
“The facility is disbursed to large enterprises and startups with financing needs of N500 million up to a maximum of N10 billion. The activities targeted by the Facility are manufacturing, agricultural value chain and selected service sub-sectors.
“The funds are received from the CBN at 3%, and disbursed at 9 per cent to the beneficiary. The facility is secured by Nigerian Government Securities. The value of Government securities pledged as collateral is N20.32billion for 30 September 2020 (31 December 2019: N20.32billion).”
According to analysts, “The RSSF is a development that would greatly improve access to funds for investment in the real sector of the economy, as well as enhance the financial stability of borrower companies thus creating a more stable environment for foreign direct investment in the Nigerian real sector.
“It is useful to note that the Companies Income Tax Act, Cap C21, Laws of the Federation of Nigeria, 2004 prescribes that foreign loans with minimum repayment period of 7 years and a moratorium period of not less than 2 years are 100% exempted from withholding Tax.
“Thus, a foreign lender wishing to give additional loans to a RSSF Borrower on similar terms will benefit from complete repatriation of Interest income on such matching loans, without any deduction of withholding tax, and the requirements to gross up by the Borrower, thus improving the cash flow to the business.”
