Nigeria
has taken a bold step to spur manufacturing and agricultural sectors of
the economy as commercial bank have been directed to give single-digit
interest
rate loans to investors in the sectors.
has taken a bold step to spur manufacturing and agricultural sectors of
the economy as commercial bank have been directed to give single-digit
interest
rate loans to investors in the sectors.
The
Central Bank of Nigeria (CBN) and the Bankers’ Committee agreed to
offer single-digit interest rate loans to operators in the sectors from
commercial banks’
cash reserve requirement (CRR) with the apex bank.
Central Bank of Nigeria (CBN) and the Bankers’ Committee agreed to
offer single-digit interest rate loans to operators in the sectors from
commercial banks’
cash reserve requirement (CRR) with the apex bank.
Data
obtained from the CBN website put the total banking industry reserves
with the central bank as at June 2018 at $13.4 billion.
obtained from the CBN website put the total banking industry reserves
with the central bank as at June 2018 at $13.4 billion.
The
central bank explained that instead of out rightly lowering interest
rate, it opted for a system whereby the single-digit interest funds
would be implemented
to long-term credit at nine per cent and a minimum tenor of seven
years.
central bank explained that instead of out rightly lowering interest
rate, it opted for a system whereby the single-digit interest funds
would be implemented
to long-term credit at nine per cent and a minimum tenor of seven
years.
This was revealed at the end of a Bankers’ Committee meeting that took place in Lagos on August 16, 2018.
CBN
Governor, Mr. Godwin Emefiele, had at the last Monetary Policy
Committee (MPC) meeting in Abuja last month, said the central bank was
working on the modalities
for the scheme.
Governor, Mr. Godwin Emefiele, had at the last Monetary Policy
Committee (MPC) meeting in Abuja last month, said the central bank was
working on the modalities
for the scheme.
The
Director of Banking Supervision, Mr. Ahmad Abdullahi, said the idea is to enhance job creation.
Director of Banking Supervision, Mr. Ahmad Abdullahi, said the idea is to enhance job creation.
“Although
agriculture and manufacturing are the initial sectors that are being
considered, a bank can apply if there is a job creating sector that bank
is operating
in, it may be considered.
agriculture and manufacturing are the initial sectors that are being
considered, a bank can apply if there is a job creating sector that bank
is operating
in, it may be considered.
“The
idea is that we can refund the CRR of a bank that has engaged in
lending in a new project or an existing one in the agriculture or
manufacturing sector
as a way of utilising the CRR.
idea is that we can refund the CRR of a bank that has engaged in
lending in a new project or an existing one in the agriculture or
manufacturing sector
as a way of utilising the CRR.
“So
anytime a bank lends to manufacturing or agric sector operator, at the
rate the CBN has prescribed, it would have its CRR refunded up to the
amount it has
lent. The guidelines are coming up any moment from now.
anytime a bank lends to manufacturing or agric sector operator, at the
rate the CBN has prescribed, it would have its CRR refunded up to the
amount it has
lent. The guidelines are coming up any moment from now.
“It
is in two folds, there would be commercial papers (CPs) and corporate
bonds. On the other hand, there would be direct lending by the banks to
SMEs that are
in those sectors.”
is in two folds, there would be commercial papers (CPs) and corporate
bonds. On the other hand, there would be direct lending by the banks to
SMEs that are
in those sectors.”
“Market
expectation was that because of the 17 months of inflation coming down,
there would be a reduction in monetary policy rate (MPR). The concern
MPC has
regarding capital reversals and exchange rate stability that was why we
see the MPC holding interest rate.”
expectation was that because of the 17 months of inflation coming down,
there would be a reduction in monetary policy rate (MPR). The concern
MPC has
regarding capital reversals and exchange rate stability that was why we
see the MPC holding interest rate.”
He also expressed satisfaction with the performance of the economy.
“The outlook for the economy in 2018 is much better than 2017. We have seen stability in the exchange rate being
sustained, gross domestic product (GDP) growth higher than 2017.
sustained, gross domestic product (GDP) growth higher than 2017.
“And
although there are capital reversals in our capital market, but the
fact is that capital outflow in the Nigerian economy is far less
compared to many emerging
economies, which is a sign that there is high confidence in the Nigeria
economy.”
although there are capital reversals in our capital market, but the
fact is that capital outflow in the Nigerian economy is far less
compared to many emerging
economies, which is a sign that there is high confidence in the Nigeria
economy.”
Also,
the Chief Executive Officer of Guaranty Trust Bank Plc, Mr. Segun
Agbaje, said the initiative was expected to create jobs and enhance
economic growth.
the Chief Executive Officer of Guaranty Trust Bank Plc, Mr. Segun
Agbaje, said the initiative was expected to create jobs and enhance
economic growth.
Agbaje
said, “The CBN has been very gracious and said on these sectors, if you
have companies that are doing new capital expenditures and expansions,
you (the
banks) would be able to lend using some of your CRR at nine per cent.
said, “The CBN has been very gracious and said on these sectors, if you
have companies that are doing new capital expenditures and expansions,
you (the
banks) would be able to lend using some of your CRR at nine per cent.
“These are not short-term loans; they are long term loans of seven-year loans and two year moratorium on principal.”
He
applauded the initiative saying, “It would probably be the first time
in the history of this country where manufacturers would be able to take
fixed interest
rate loans for seven years, which means they would be able to plan.
applauded the initiative saying, “It would probably be the first time
in the history of this country where manufacturers would be able to take
fixed interest
rate loans for seven years, which means they would be able to plan.
“The
volatility that they fear for all kinds of risks would be taken out and
I think these are very laudable steps in improving and growing the
economy.”
volatility that they fear for all kinds of risks would be taken out and
I think these are very laudable steps in improving and growing the
economy.”
He
added, “So, it would allow people to do capital expenditure, which is
more long-term. It would give people single-digit interest rate loans,
where bonds could
go as far as 10 years.”
added, “So, it would allow people to do capital expenditure, which is
more long-term. It would give people single-digit interest rate loans,
where bonds could
go as far as 10 years.”
Also,
the Executive Director, Finance, First City Monument Bank, Mrs. Yemisi
Edun, said, “The CRR that is taken from banks would be positively
deployed to grow
the real sector as well as the agriculture sector.
the Executive Director, Finance, First City Monument Bank, Mrs. Yemisi
Edun, said, “The CRR that is taken from banks would be positively
deployed to grow
the real sector as well as the agriculture sector.
Edun
added, “This is very positive for the economy and also positive for
banks because we would be able to access these funds and earn on it. And
because it
would be coming at single digit rate, it would be positive for the
economy.”
added, “This is very positive for the economy and also positive for
banks because we would be able to access these funds and earn on it. And
because it
would be coming at single digit rate, it would be positive for the
economy.”
