The Central Bank of Nigeria (CBN) has directed deposit money banks to henceforth provide credits at nine percent fixed interest rate in projects funding in agriculture and manufacturing sectors of the nation’s economy.
The apex bank’s Director of Banking Supervision, Abdullahi Ahmad, who made this disclosure on Thursday at the end of the Bankers’ Committee meeting in Lagos, said the directive was informed by the bright outlook for the nation’s economy this year, amongst other considerations.
He pointed out that the CBN had been supportive to banks which required that the DMBs should be able to lend to companies that are doing new capital expenditures, using some of their Cash Reserve Ratio (CRR) at nine per cent for long term loans of seven year loans and two year moratorium on principal.
He explained: “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.
“We have seen stability in the exchange rate being sustained, Gross Domestic Product (GDP) growth higher than 2017 and although there are capital reversals in our capital market, it is a little bit bearish but the fact is that capital outflow in the Nigerian economy is far less compared to many emerging economies is a sign there is high confidence in the Nigeria economy”, Ahmed added
He hinged some of the reasons for the latest monetary thrust on the need to stimulate job-creating activities in the economy and also to bring interest rate down, adding that although agriculture and manufacturing are the initial sectors being considered now but that later on or now, a bank can apply if there is a job-creating sector that a bank is operating in, it may be considered.
Ahmad clarified further: “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 at the rate the CBN has prescribed, it would have its CRR refunded up to the amount it has lend. The guidelines are coming up any moment from now and once they do it take off,” he added.
Commenting after the meeting, the Executive Director, Finance at First City Monument Bank (FCMB), Mrs. Yemisi Edun, said the CRR that was taken from banks would be positively deployed to grow the real sector as well as the agriculture sector in the economy.
She said: “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.
“For now, it would be channeled to agricultural sector and manufacturing but it for growth expansions enhance creation of jobs. the focus it ensure the economy grow now that we have achieved stability we need to now see a positive trend of growth and that is what we are committed to do at this time”, Edun stressed.