E-Financial
CBN Slashes Interest on Intervention Loans to 5 Per Cent
Central Bank of Nigeria (CBN) has cut interest rates on all intervention facilities from nine to five per cent per annum.
The regulatory forbearance would allow banks to restructure loans given to sectors severely affected by the Covid-19 pandemic and strengthen the Loan to Deposit Ratio (LDR) policy, which has resulted in a significant rise in loans provided by financial institutions.
In a circular released at the weekend, the apex bank said the move was to address the effect of the Covid-19 pandemic on the Nigerian economy.
Chibuzo Efobi, CBN Director, Financial Policy and Regulation Department, explained that in uncertain times, there was always a way to ensure that businesses survived, including granting forbearance.He said the regulatory forbearance also includes restructuring of credit facilities impacted by Covid-19.
In the circular addressed to all banks and other financial institutions, Efobi said the extension of the five per cent per annum interest rate on all CBN intervention facilities was for one year, adding that the policy took effect retrospectively from February 28, 2022.
CBN’s data showed that total gross credit to businesses rose from N19.4 trillion to N23.5 trillion in the last one year, representing over 21.1 per cent increase.
In a state of the economy and financial sector report, the apex bank said agriculture, manufacturing, power and healthcare took the lion share of the loans disbursed.
The loans to benefit from the interest rate cut include N1 trillion facility in loans to boost local manufacturing and production across critical sectors of which 53 major manufacturing projects, 21 agriculture-related projects and 13 service projects are being funded.
The list also includes the N100 billion intervention fund for pharmaceutical companies and healthcare practitioners meant to expand and strengthen the capacity of the healthcare institutions that will also benefit from the fund.
The N50 billion target credit facility for affected households and small and medium enterprises will also benefit from the forbearance policy will equally benefit from the policy shift.
The CBN also earlier approved regulatory forbearance for restructuring of credit facilities in the Other Financial Institutions (OFIs) sub-sector to further mitigate the impact of the pandemic on households, businesses and regulated institutions.
It said OFls were granted leave to consider temporary and time-limited restructuring of the tenor and loan terms for households and businesses affected by Covid-19, subject to the issued guidelines for restructuring affected credit facilities in the OFI sub-sector.
Other specific policy measures, outside loans, undertaken to stabilise the economy and businesses in the face of the pandemic include the reduction of the monetary policy rate from 13.5 to 11.5 per cent to improve the flow of credit to households and businesses.
The CBN said it will continue to monitor developments and implement appropriate measures to safeguard financial stability and support stakeholders impacted by the Covid-19 pandemic.
The CBN increased the required minimum LDR to 60 per cent in July 2019 and further reviewed it forward to 65 per cent later in the year.
The LDR policy was meant to ensure that banks lend at least 65 of their deposits to Micro Small and Medium Enterprises (MSMEs) or be sanctioned.
The apex bank noted a significant increase in the size of gross credit by Deposit Money Banks to customers, hence retaining it at 65 per cent in January 2020.
Although the policy contributed to increasing lending to the economy but did not substantially bring about a reduction in the cost of funds. This means that, despite increased access to credit, Nigerians are still paying as much interest rates to the commercial banks.
Nigeria Deposit Insurance Corporation (NDIC) has said that it has obtained Winding up Orders for 96 out of 183 microfinance and primary mortgage banks whose licenses were revoked by the Central Bank of Nigeria (CBN) in May 2023.
Bello Hassa, managing director, NDIC, stated this at a sensitisation seminar for Judges of the Federal High Court in Lagos organised by the NDIC, to enlighten the judiciary on the intricacies of the banking industry.
Hassan said, “As at date, the Corporation had obtained Winding up Orders for 96 out of 183 Micro Finance and Primary Mortgage Banks whose licenses were revoked by the CBN in May 2023, in less than one Year of revocation.”
He added that the NDIC was committed to fulfilling its mandate of protecting depositors through bank supervision, failure resolution and liquidation so as to boost confidence in the financial system.
Speaking on the role that the judiciary plays in the fulfillment of the mandate, Hassan said, “We recognise the judiciary as one of our critical stakeholders. With this, when cases are brought before them, they can receive accelerated hearing and proclamation of Justice.”
Citing some of the achievements from previous editions of the seminar, Hassan said that instances where liquidation-related litigations experienced delays were reduced.
Central Bank of Nigeria (CBN) has withdrawn its earlier circular directing financial institutions to implement the national 0.5 per cent cyber security levy after the policy was largely resisted.
The withdrawal of the circular was announced via a statement signed by Haruna Mustafa, director, Financial Policy and Regulation, Department and Chibuzo Efobi, director, Payment System Management Department.
The apex bank confirmed the suspension in a circular issued on May 17, 2024 with reference number PSMD/DIR/PUB/LAB/017/005 addressed to commercial banks, mobile money operators, and other financial institutions.
In an earlier circular issued on May 6, 2024 with reference PSMD/DIR/PUB/LAB/017/004, the bank mandated financial institutions to charge a 0.5 per cent levy on all electronic transactions.
President Bola Tinubu last week ordered the suspension of the National Cybersecurity levy.
The Association of Bureau De Change Operators of Nigeria (ABCON) has called for the Securities and Exchange Commission (SEC) guidance and collaboration in harmonising the peer-to-peer forex sector in the country.
At an official courtesy visit to the newly appointed SEC Director-General, Dr. Timi Agama, the President of Association of Bureau de Change Operators of Nigeria (ABCON), Aminu Gwadabe, who congratulated the SEC D-G on his appointment, observed that SEC regulates the sector that continues to threaten the existence of BDCs in Nigeria through online virtual transactions platforms which give access to millions of Nigerians to trade in foreign exchange without trace and accountability.
He also explained that ABCON has invested in requisite technology to ensure the continued existence of the business and the preservation of the integrity of the sub-sector, stressing that the future of BDC’s business was digital currency. The ABCON boss said that the meeting with the SEC DG and his executive board was a follow up to an earlier online virtual consultation.
Gwadabe explained that ABCON, the umbrella body for all licensed retail foreign exchange dealers, was established in 1991 to liaise with regulators, relevant stakeholders and security agencies for a transparent retail end forex market.
Gwadabe said: “As at today, there are over 34 million Nigerians dealing in digital currency and the number is rising by about nine percent with a huge market of $9 billion annually. There are thousands of multichannel virtual currency FX platforms and none is indigenous to Nigeria, adding that P2P represents individual-to-individual transaction.
“To automate the entire foreign exchange retail market, ABCON has partnered with the Commodities Exchange Board in building the platform knowing that they have sources of foreign exchange. ABCON is willing to work with SEC towards achieving full automation of the retail end of the foreign exchange market in Nigeria.
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