The Central Bank of Nigeria has disclosed that out of the N9 trillion disbursed as intervention funds to the various sectors of the economy, N3.7trn has been paid back by beneficiaries while over N5trn is not yet due.
The director of Development Finance Department, Central Bank of Nigeria, Mr Philip Yila Yusuf, disclosed this yesterday while briefing journalists at the maiden post-Monetary Policy briefing.
Yusuf said: “We have lent out N9.3trn; as at yesterday, N3.7trn has been repaid. Most of them are still under moratorium, especially the manufacturing sector which forms the largest part of our portfolio over 31 per cent.
“In the last two to three years, we have moved from agriculture which used to be the biggest buyer of lending to manufacturing.”
He explained that it takes a long time to order the equipment manufacturers require. “You know, you have to put buildings in place, assemble them, so it takes a long time. You begin to see the net effect of all those investments in the fourth quarter (2022).
“We are slowing down on interventions; it’s not as if we are not going to do anymore. Only interventions that are very critical. MSMEs that are statutory which take 5% of every bank’s profit after tax, it is not a lot to deploy to SMEs, and supporting the electricity sector is very critical. Interventions have stopped as of yesterday,” he said.
On repayments of other interventions, Yusuf explained that most of the portfolios are quite securitised. “Where we are at risk are really around MSMEs and then the Anchor Borrowers Programme (ABP),” he said.
He said agric is 21% of the portfolio and one of the best-performing interventions is a Commercial Agric Credit Scheme (CACS) of which CBN lent N800bn and almost N700bn has been repaid.
“But there’s also a primary production element which is the ABP. N1trn for the ABP, of which we have got close to N400bn. Some of them are small-holder farmers, and every single person who is taking that loan is going to pay; we have their BVN,” he added.
Recovering state govt loans
The CBN official also said loans to the state government are being recovered. “We have also started recovering loans from state governments. We have been doing a loan workout programme with them, and we are debiting their FAAC directly for the loans. So, if a state government has taken N1bn and is in default, over a six-month period, we are going to be debiting them N150 million every month.”
The apex bank is also working with the Economic and Financial Crimes Commission (EFCC) to track defaulters. “The governor has approved for us and EFCC to set up a desk to help us recover the loans where we are at risk. The defaulters are under the ABP and SMEs loans given during COVID-19. It is only when you pay back that we can have those funds to be able to lend back. We’ll move to a regime where we’ll want to begin to push out funds.”
Increase in interest rate reflective of MPR?
The director of Monetary Policy, Central Bank of Nigeria (CBN), Hassan Mahmud, said the latest increase in the interest rate is the best path.
“We increase it from 10% to 30% of MPR and it stands to reason that with the hike in the MPR yesterday to 15.5%, that will also change.”
He said a number of banks have actually raised the savings rates, adding that the apex bank expects to see a more critical mass of them by the effective date of the circular.
Mahmud also speaking on Ways and Means said, “We are also very mindful of this and making sure that this is highly moderated because it’s also fuelling the liquidity that we have within the system.”
On the gap between the official forex window and the parallel market, the director of Trade & Exchange Department, CBN, Dr Ozoemena Nnaji, said the main drivers of those are the difference in demand and supply and demand outstripped the supply of forex.
Nnaji explained that even in the parallel market, the demand in that market or the share of that market, in proportion to the whole demand of the economy for foreign exchange, is very small.
“But that’s the market that is loudly quoted or often quoted. The central bank is doing a lot to ramp up supply.”
The director, Banking Supervision of CBN, Mr Haruna Mustafa, said the decision to adjust the Cash Reserve Ratio (CRR) is to mop up liquidity and it has been a very potent tool.
He also said the Loan-to-Deposit Ratio (LDR) policy relaxed at 60% earlier and inspired more lending by banks which helped recovery during COVID-19. The apex bank raised it to 65% recently which he said, “But recently, we signaled the resumption of enforcement. And based on the recent numbers we’ve seen; we’ve also seen an uptick in terms of the number of banks that have met that threshold.”