NATIONAL ECONOMIC RECONSTRUCTION FUND ACT

ARRANGEMENT OF SECTIONS

SECTION

1.   Establishment, aims and objectives of the National Economic Reconstruction Fund.

1. Eligibility.
2. Establishment and composition of the National Economic Reconstruction Committee, etc.
3. Establishment of a monitoring office, etc.
4. Functions and obligations of participating banks.
5. Functions of the Fund.
6. Interest rates.
7. Funding sources.
8. Audit.
9. Reports.
10. Proceedings of the Committee.
11. Interpretation.
12. Short title.

An Act to establish the National Economic Reconstruction Fund, to correct, inade-
quacies in the provision of medium to long-term financing to small and medium-
scale industrial enterprises, provide medium and long-term credit to commercial
banks for on-lending and for matters connected therewith.

[1989 No. 2.]

[9th January, 1989]

[Commencement.]

1. Establishment, aims and objectives of the National Economic Reconstruction
Fund

(1) There is hereby established a fund to be known as the National Economic recon-
struction Fund (in this Act referred to as “the Fund”).

(2) The aims and objectives of the Fund shall be to—

(a)       correct any observed inadequacies in the provision of medium to long-term
financing to small and medium-scale industrial enterprises, especially manu-
facturing and agro-allied enterprises and ancillary services;

(b)       provide medium to long-term loans to participating commercial and merchant
banks for on-lending to small and medium-scale enterprises for the promotion
and acceleration of productive activities in such enterprises;

(c)        facilitate the provision of loans with five to ten year maturity, including a
grace period of one to three years, depending on the nature of the enterprise or
project;

(d)       provide such loans either in naira or in foreign currencies or both currencies
according to the sources of funds available to the Fund and the requirements of
the eligible enterprise or project.

1. Eligibility

(1) Manufacturing and agro-related projects, mining, quarrying, industrial support
services, equipment leasing and such other enterprises or projects ancillary thereto shall
be eligible for loans under this Act it~

(a)                           the enterprise or project is wholly owned by Nigerians;

(b) the enterprise or project is small or medium-scale and its fixed assets, other
than land, including the cost or the investment project, does not exceed N to 
million; and

(c)     in the case of a manufacturing enterprise or project, at least 40% of its raw
materials and other production inputs is at present locally derived or at least
60% shall, by 30 September 1990, be so derived.

(2) In granting loans under this Act, preference shall be given to enterprises or proj-
ects located in the rural areas.

3. Establishment and composition of the National Economic Reconstruction Com-
mittee, etc.

(1) There is hereby established a committee to be known as the National Economic
Reconstruction Fund Committee (in this Act referred to as “the Committee”) which shall
comprise-

(a)        the Minister or his representative as chairman;

(b)        the Governor of the Central Bank of Nigeria or his representative;

(c)         the Fund General Manager;

(d)       one representative of commercial banks;

       (e)        one representative of merchant banks;
(f)       one representative of development banks; and
(g)              one representative of the Federal Ministry of Finance who shall be the secre-
tary to the Committee.

(2) The three representatives of the banks shall be appointed by the President, on the
recommendation of the Minister.

(3) The status of the representatives of the banks shall not be less than that of assis-
tant general manager.

(4) The Committee shall administer the Fund and perform such other functions as are
conferred upon it by this Act.

(5) The members of the Committee, other than ex-officio members, shall be paid such
allowances as may be determined, from time to time, by the Minister.

(6) The quorum of the Committee shall be four.

1. Establishment of a monitoring office, etc.

(1) For the day-to-day operations of the Fund, there shall be established a monitoring
office to be located at the Federal Ministry of Finance.

(2) The monitoring office shall be headed by a Fund General Manager who shall be
appointed by the President, on the recommendation of the Minister.

(3) The Fund General Manager shall, subject to the control of the Committee, be re-
sponsible for the management of the Fund and perform such other functions as the Com-
mittee may, from time to time, assign to him.

(4) The Committee may appoint such other employees as it may deem necessary to
assist the Fund General Manager in the performance of his functions under this Act.

(5) The Fund General Manager and the other employees of the monitoring office
shall be persons of proven professional competence and be drawn from the Central Bank
of Nigeria or other commercial and merchant banks.

(6) The Fund General Manager and other employees of the Fund shall be paid such
remuneration, allowances and other benefits as the Fund may, with the approval of the
Minister, determine.

1. Functions and obligations of participating banks
   (1) The participating banks shall-

(a)               provide the working capital required by eligible enterprises and projects under
this Act;

(b)               evaluate eligible enterprises and projects and approve loans in accordance with
the practice of the particular banks and be responsible for the disbursement,
monitoring and recovery of the loans;

(c)               collect from its customers all loan repayments and agreed interest and pay to
the Fund the amounts due to it on or before the due date;

(d)               be responsible for any commercial or market risk involved in any loan granted
pursuant to this Act.

(2) Each participating bank shall disburse funds to approved enterprises or projects
not later than three working days of release of the funds by the Fund to the participating
bank.

(3) Loan agreements showing disbursement and repayment schedules shall be depos-
ited by each participating bank with the monitoring office.

(4) For loans disbursed in foreign currency, repayment by the participating banks
shall be the naira equivalent of the amount of repayment due, at the prevailing exchange

rate on the date of repayment in the inter-bank dealing of the Autonomous Foreign Ex-
change Market.

6. Functions of the Fund

(1) The Fund shall provide medium to long-term finance to participating banks for
on-lending to eligible enterprises or projects.

(2) The Fund shall be responsible for the disbursement to, and recovery from, par-
ticipating banks of all loans made to them for on-lending to enterprises and projects ap-
proved pursuant to this Act.

(3) Unless a participating bank has pre-paid all the amounts due on the loan before
the scheduled repayment date, the Fund shall inform the Central Bank of Nigeria of any
amount outstanding at that date and it shall be the duty of the Central Bank of Nigeria to
debit the account of the participating bank concerned at the Central Bank of Nigeria with
the amount outstanding on the particular loan and credit that amount to the account of the
Fund.

(4) In order to meet foreign obligations promptly, the Fund General Manager shall
procure the foreign currency required to service the Fund’s foreign currency loans and
hold such component of foreign exchange acquired in income-bearing securities or de-
posits, and repay its loans as per scheduled repayment dates from the component so held.

(5) The Fund shall be self-financing, service its loans and meet administrative ex-
penses from its own resources, and shall not receive any government subvention except
as provided under section 8 of this Act.

1. Interest rates

(l) The naira loans made by the Fund shall be at interest rates slightly lower than the
prevailing commercial rates in Nigeria.

(2) The naira interest rate for each loan shall be fixed for the duration of the loan.

(3) The Fund shall charge the participating banks not more than one percentage point
above its borrowing rate.

(4) Participating banks shall be allowed a maximum spread of four percentage points
above the rate charged by the Fund.

(5) Interest rates chargeable by the Fund on foreign currency loans shall differ from
currency to currency but shall be limited to a spread of one percentage point above the
Fund’s borrowing rate in each currency.

(6) The interest rate chargeable on foreign currency loans shall reflect the agreed
terms on which the loans were made available to the Fund.

(7) Any profit made by the Fund shall be applied towards increasing the reserves of
the Fund.

1. Funding sources

Without prejudice to future capital increase, the Fund shall commence operation with
an initial funding in the following amounts or any part thereof, that is-

(a)        Federal Government of Nigeria, #200 million;

(b)        Central Bank of Nigeria, N 100 million;

(c)        counterpart funding from the World Bank, the African Development Bank,
Export Credit Agencies, Governments, Banks and other organisations or any
such fundings as may be acceptable to the Committee.

9. Audit

(1) The Fund shall be audited, not later than three months after the end of each year,
by an auditor appointed by the Committee from the list of qualified auditors submitted by
the Auditor-General for the Federation.

(2) The audited accounts, the auditor’s report and the comments of the Committee
thereon, shall be submitted to the Federal Government not later than three months after
the receipt of the audited account.

10. Reports

(1) The Fund General Manager shall submit monthly reports on the operation of the
Fund to the Committee.

(2) The Committee shall submit reports on the activities of the Fund every quarter
and every 31 December of each year to the Federal Government.

11. Proceedings of the Committee

(1) The Committee shall have power to regulate its own proceedings and may make
standing orders not inconsistent with this Act for that purpose, and subject to such stand-
ing orders, may function notwithstanding any vacancy in its membership or the absence
ofa member.

(2) The Committee shall meet for the performance of its functions under this Act
whenever the chairman convenes a meeting of the Fund.

(3) Where, upon any special occasion, the Committee desires to obtain the advice of
any person on any particular matter, the Committee may co-opt that person to be a mem-
ber for as many meetings as may be necessary and that person shall, while so eo-opted,
have all the privileges of a member except that he shall not be entitled to vote or count
towards a quorum.

12. Interpretation

In this Act, unless the context otherwise requires-

“Committee” means the National Economic Reconstruction Committee appointed
pursuant to section 3 of this Act;

“Fund” means the National Economic Reconstruction Fund established under sec-
tion 1 of this Act;

“Minister” means the Minister charged with responsibility for matters relating to fi-
nance;

“participating banks” means the commercial and merchant banks involved In
granting loans to eligible enterprises and projects under this Act.

13. Short title

This Act may be cited as the National Economic Reconstruction Fund Act.

       SUBSIDIARY LEGISLATION

No Subsidiary Legislation