CBN pumps in N3.3tr credit to boost economy

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By Francis Ogwo

About N3.3 trillion has been set aside for the creative sectors of Nigeria’s economy.

This was announced by the Central Bank of Nigeria (CBN) on Monday even as it disclosed that intervention funds were given to businesses affected by the COVID-19 pandemic and approved the restructuring of loans.

According to the CBN Governor, Godwin Emefiele, the loans were granted to manufacturing (N815bn), retail and consumer loan (N615bn), agriculture, forestry and fishery (N255bn), general commerce (N221bn) and information and communications technology (N208bn) through the implementation of the Loan-to-Deposit Ratio (LDR).

While speaking at the end of the Monetary Policy Committee (MPC) meeting in Abuja on Monday, Emefiele said the LDR was adjusted to 58.5% by May.

The LDR is reviewed quarterly to improve lending to the real sector.

As at September, it was pegged at 60% after the directive of CBN to all banks to maintain the rate as a minimum LDR.

The CBN boss also said the introduction of the LDR has improved credit to key sectors, as loans from banks to the sectors has increased from N15.6trillion in June 2019 to N18.9trillion a year later.

Emefiele also confirmed the disbursement of N49.195 billion of the approved N50 billion Targeted Credit Facility (TCF) (COVID-19) loan to 92,000 beneficiaries as of June 30.

He added that the banking system remains very strong, as non-performing loans were 11.1% in May last year but dropped to 6.4% as of June this year.

“For Capital Adequacy Ratio (CAR) which measures the size of capital that a bank deploys into risk asset, as at June 2019, CAR was 15.2% but as at June 2020, it remains flat at 15%.

“Liquidity ratio, in August 2019, was 48% but as of June 2020, it had dropped to 37%.

“In spite of these large sums from N15.6trillion to about N18.9trillion, the prudential ratios are still looking so strong.

“This is a clear demonstration that the Nigerian banking sector remains very strong and resilient and able to support the economy,” Emefiele said.

He stated that the health crisis caused by the pandemic would have crumbled the banking industry and the economy and the loans would have gone bad if the CBN had not asked the banks to offer forbearance to customers.

As a result, Emefiele said 22 out of 27 banks have come to the Central Bank to restructure 35,640 of their customers’ loans of about N7.8trillion.

“This constitutes 41% of the total industry loans which is N18.9trillion,” he said.

Emefiele noted that he would be happy if the forbearance was 65% of the N18.9 trillion instead of the current N7.8trillion, which he considers small.

“We are working with the banks to give more forbearance to those customers. If we see forbearance moving to 60 or 65%, we will get more comfortable that we have been able to turn the corners by assisting businesses to get over their business challenges,” he said.

Speaking further on the COVID-19 intervention fund, the CBN Governor said over N152.9billion has been disbursed to 61 manufacturing companies from the N1trillion allocated to the sector.

Under the Agricultural Small and Equity Intervention Fund, Emefiele said the CBN has funded 11,613 crisis-ridden businesses with over N41billion.

It was agreed at the end of Monetary Policy Committee meeting that the Monetary Policy Rate should be retained at 12.5%, same as the Asymmetric Corridor of +200/-500 basis points around the MPR.

The MPC also agreed to retain the Cash Reserves Ratio (CRR) at 27.5%, as well as the Liquidity Ratio at 30%.

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