…gives conditions for dividend payment
Nigeria’s Securities and Exchange Commission (SEC) is proposing N10 billion minimum capital requirement for Credit Enhancement Service Providers.
The SEC noted this in the proposed rules on Credit Enhancement Service Providers and Sundry Amendment to existing rules of the Commission.
“Where a credit enhancement facility provider fails to maintain the minimum capital requirements prescribed by the Commission, it shall be prohibited from providing additional credit enhancement facilities until the required minimum capital is restored and shall submit a recapitalisation plan acceptable to the Commission,” the SEC said.
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Credit Enhancement Service Providers…
Credit Enhancement Service Providers, such as InfraCredit, offer financial guarantees and other mechanisms to improve the credit quality of debt instruments, making them more attractive to investors like pension funds and insurance companies, thereby unlocking capital for infrastructure and other projects. These entities help bridge the gap between the long-term capital needs of projects and the risk appetite of domestic investors.
No dividends payment except …
SEC also proposes that a credit enhancement facility provider shall not declare or pay dividends until all its preliminary and preoperational expenses have been written off, adequate provisions made for all losses, and it has met the minimum prudential requirements as specified under these Rules.
The SEC also noted that every credit enhancement facility provider shall establish and maintain a robust risk management framework approved by its board of directors to ensure that all risks inherent in its operations are properly identified, measured, monitored, controlled, and reported in accordance with best practices.
What’s more…
“A credit enhancement facility provider shall, at all times, comply with the IFRS or such other accounting standards as may be prescribed by the Financial Reporting Council of Nigeria in the preparation of its financial statements, and in reporting its assets and liabilities,” SEC proposes.
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Commercial banks, and insurance companies registered by the Commission to provide credit enhancement services under these Rules shall be deemed to have satisfied the capital and liquidity requirements under the Rule, upon submission of a letter of good standing from the CBN or National Insurance Commission (NAICOM) confirming compliance with applicable prudential standards and shall not be required to comply with any other prudential requirement under this Rule.
“Banks and insurance companies shall be required to submit a renewal compliance letter from the CBN and NAICOM annually, within 45 days after the end of their applicable financial year or such other period as may be prescribed by the Commission,” SEC noted.
The sundry amendment requires among other that the cash/asset ratio for core operators in the market shall be a minimum of 60 percent in liquid assets and the cash/asset mix ratio for non-core operators shall be a minimum of 30 percent in liquid assets provided that the credit enhancement facility provider shall have a cash/asset mix ratio of 85 percent on liquid assets.
