The Consul -General of Brazil in Nígeria , Francisco Luz has confirmed the interests in encouraging trades between Nígeria and Brazil , the Brazilian said : “ A $1.2 billion intervention facility called the Green Imperative of which its first tranche of $185 million is set to be released for on-lending to the private sector has been initiated “
According to him , the Green Imperative is a private sector loan enabled by the governments of Brazil, Saudi Arabia, Deutsche Bank and Nigeria but the government is not involved in its operations . Every decision concerning the operatives will be private .
The Consul explained that the intervention is to support the business communities in Nigeria and Brazil , and to further cement trade relations between the two countries, especially in agriculture.
The first phase which is entirely private, funded by Deutsche Bank and guaranteed by the Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC) would be released in the next few days following the signing of the demand letter and other documentation.
The facility is for on-lending to the private sector and it comes with equipment, two years of working capital, two years moratorium and an interest rate of 3.01 per cent.
This will be greatly beneficial to the private sector considering that data by the Central Bank of Nigeria (CBN) as of March 2022 on banks’ deposit and lending rates showed a 3.15 per cent points increase in the average maximum lending rate to 30.73 per cent in February 2022, as against 27.58 per cent in December 2021.
The total facility is meant to cover the 774 local governments or centres in Nigeria but the first tranche of $185m that is ready for release will cover only 111 local government areas or centres which are not disclosed yet.
Senior Special Assistant to the President on Agriculture, Office of the Vice President of Nigeria, Andrew Kwasari said the concept of the Green Imperative initiative was conceived seven years ago to transform the nation’s agriculture and on which Brazil is a partner to bring the project to fruition.
According to him, the Green Imperative is focused on finding a way to deliver funding to Nigeria and Africa that is private sector driven and executed but government enabled.
“One of the instruments to leverage on the Green Imperative is the capacity to borrow at a lower interest rate,” he said.
This aligns with the Fiscal Responsibility Act 2007 that says the government of Nigeria can borrow not exceeding three per cent per annum interest rate for developmental purposes, the presidential aide noted.
“The focus then was how do we use this instrument of government to borrow, but deny the government the power to execute a project. This means that we leverage bilateral understanding, use the instrument of government to secure the loan but the government needs to rely on the private sector to act it,” Kwasari explained.
Corroborating that the first tranche is funded by Deutsche Bank, and guaranteed by the Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC), he explained that even though the facility came under the Sovereign guarantee of Nigeria using government instrument, but noted that the loan would not feature on government’s balance sheet.
“Hence, the Debt Management Office (DMO) do not necessarily have to worry about the $1.2 billion for the project because the loan is not going to be written in the books of Nigeria but to the individual private sector that accesses the loan”, he stressed.
“Should there be a default, the financier, Deutsche Bank, will not call DMO for repayment but will go to ICIEC, which has insured this loan in the international insurance market.
He hinted at the buy-in of both the Federal Executive Council (FEC) and the National Assembly for the project that is in the advanced stage.
“Everything is done, mandate letters are signed, the first draft of the loan agreement is ready, just to dust and close the government side before it becomes a private facility”, he said
For the disbursement, the CBN has placed a monetary policy component on the facility according to Kwasari who said that since the government has hedged its own risk by using Islamic Development Bank, that to hedge the government against default that might come from the entrepreneurs, the interest rate was raised to nine per cent.
“One per cent covers Capital Risk Insurance and three per cent for commercial banks to write the loan in their books and see it as their obligation to pursue the entrepreneurs to make payment as at when due”.
“So, technically what we did is, create a lease purchase, using government instrument to benefit the private sector, hedge government from exposure that will come from nonchalant private sector people,” he said.
The CBN further places a caveat on the loan to determine capable entrepreneurs who qualify with technical expertise and experience in the agric business.
To that end, an entrepreneur must show financial capability by contributing 20 per cent to demonstrate to the commercial bank, the capacity to hold a service centre which is also known as a local government.
“I hope this administration should be able to launch phase one soon because it is 100 per cent funded, reinsured and ready for rollout,” Kwasari said, adding that the downside has been the Covid-19 pandemic and government bureaucracy.
An Ex-officio Director, Nigerian-Brazilian Chamber of Commerce and Industry (NBCCI), Uzo Ebejuo, who is excited about the development, recalled that in time past, both countries have had business activities, fora, trade workshops and breakfast sessions that yielded desired results.
He urged the business community to take advantage of the renewed endeavours by Brazil investors to do business with Nigeria.
“They (Brazil investors) came for a trade mission. The Rio Janeiro group is already inviting us to reciprocate by coming to Brazil to strengthen the business relations,” Ebejuo said.
Ebejuo asserted that the Brazilian ambassador is keen to ensure Nigerians take advantage of the opportunities being offered in agriculture, ICT, tourism and a host of other sectors.
“The renewed effort trade relations is worth-the-while as it borders on the economy, business, international trade and social relationships which have been there from time immemorial,” he added.
