In a noteworthy move, the Central Bank of Nigeria (CBN) has officially suspended the acceptance of new loan applications for its Intervention Program. The circular, titled “Suspension of Acceptance of New Applications under the Existing Central Bank of Nigeria, CBN Development Finance Intervention Programme,” was issued to bank Chief Executives.
Sa’ad Hamidu, the Acting Director of the Development Finance Department, signed the circular, signaling a strategic shift in the bank’s operational focus. This suspension marks a departure from the previous emphasis on development finance intervention funds, a core element of the central bank’s past approach.
Simultaneously, the CBN has entrusted commercial banks, previously responsible for distributing these intervention loans, with the task of recovering outstanding loans issued under these programs. This shift underscores the CBN’s commitment to streamline financial commitments and return to more traditional central banking roles.
The CBN clarified its evolving strategy, expressing a desire to step back from direct involvement in development finance interventions. Instead, it aims to concentrate on its primary responsibilities related to monetary policy. This entails transitioning into a more advisory role, providing policy guidance to support broader economic growth objectives.
The official statement reads, “Accordingly, the CBN would be moving into more limited policy advisory roles that support economic growth.”
As a result of this shift, the CBN has ceased accepting new loan applications for processing under any existing intervention programs and schemes. Existing facilities, including interest rates and terms, remain unchanged, with commercial banks taking on the responsibility of recovering outstanding balances.
This move aligns with recommendations from the International Monetary Fund (IMF), urging a halt to intervention funds due to their impact on rising inflation rates. The IMF’s advice includes fully sterilizing the impact of CBN’s financing of fiscal deficits on money supply and phasing out credit intervention programs.
Under the leadership of Governor Godwin Emefiele, the CBN has executed various development programs across sectors like agriculture, manufacturing, and MSMEs. Notable among them was the Anchor Borrower Program, disbursing around N1.01 trillion to farmers.
However, as of March 2023, the repayment ratio for the Anchor Borrowers’ Programme stood at 53.39%, amounting to N503 billion out of a potential N942 billion. Nairametrics estimates total intervention funds to be over N4.8 trillion based on collated disbursements announced by the apex bank.
The recent directive carries significant implications for the financial sector, potentially leading to increased loan provisioning for banks and posing risks to the financial stability of organizations benefiting from these intervention funds. Stringent recovery efforts could impact these organizations’ ability to meet loan obligations, with potential consequences for their operations and investor confidence.
