Borrowers who divert funds provided under the Agricultural Credit Guarantee Scheme may face a five-year prison sentence, according to the Central Bank of Nigeria.
This was contained in the CBN’s report titled ‘Guidelines for the Agricultural Credit Guarantee Scheme’, which was released on Thursday.
The apex bank emphasized that it is illegal to obtain a loan and then fail to use it for the purpose for which it was obtained.
“Banks should remind prospective borrowers under the scheme that it is an offence for which one may be imprisoned for five years to apply the loan for purposes other than those for which they are given,” it said.
It stated that the ACGSF board would determine the fund’s maximum liability in respect of any guarantee provided under the scheme on a case-by-case basis.
According to the CBN, the single obligor limit for non-tangible collateral is N100,000, while the obligor limit for secured loans is N50m for individuals, groups/cooperatives, or corporate societies.
It said the liability of the fund would be 75 per cent of the amount in default, net of any amount realised by the bank from the security it got from the borrower, subject, in the case of a loan to an individual, a co-operative society or a corporate body, to a maximum of N50m.
The CBN stated that the revised regulatory and supervisory guidelines for microfinance banks must be strictly followed, as “it stipulates that the maximum principal amount for a micro loan shall not exceed N500,000 or one percent of the shareholders’ fund unaffected by losses, or as may be reviewed from time to time by the CBN.”