Daily Insight: Dissecting the CBN’s Real Sector Support Facility (RSSF) Guidelines

CBN OMO Auction

Earlier, the CBN released the guideline for accessing the RSSF, with the objective of stimulating real sector growth. The facility – which is restricted to a maximum of N10.0bn per project, is divided into;

  1. Differentiated Cash Reserves Requirements (DCRR) Regime
  2. Corporate Bonds (CB) Funding Programme

The DCRR facility would allow Banks to access part of their CRR deposits kept with the CBN, in providing credit financing to greenfield (new) and brownfield (expansion) projects in the real sector (particularly Agriculture, Manufacturing and other growth & employment stimulating sectors) for a minimum of 7-years at maximum interest rate of 9.0% and with a 2-year moratorium. On the other hand, the CBs funding facility allows the CBN to invest, alongside the public, in CBs issued by large/triple-A rated corporates for a minimum tenor of 7-years subject to the intensified transparency requirements for Triple A-rated entities.

Notably, the applicable interest rates for CBN to buy CBs appears unclear, however, our enquiry with an official of the CBN confirmed to us that the 9.0% interest rate is applicable. Also, given the fact that investment risks of each project still lie with the Banks, we suspect that Banks may be reluctant to tap into the DCRR regime due to their weak appetite for risks. Overall, a successful implementation of the programme will be positive for the faster recovery in the broader economy.

United Capital Research