Analysts Extol CBN on Credit Facilities Extension Granted
Godwin Emefiele -Governor, Central Bank of Nigeria

Analysts Extol CBN on Credit Facilities Extension Granted

Amidst rising non-performing loan in the banking sector, analysts have expressed support for decision of the Nigerian central bank to extend repayment of credit facilities deployed in the pandemic year.

Recalled that at the onset of the global pandemic shock, fiscal and monetary policies waded in to dampen the impact of the coronavirus on the economy.

Policymakers had feared harder economic challenges and the resultant effect on business activities could damage further the nation’s productive capabilities.

In its macroeconomic note, Greenwich Merchant Bank said the Central Bank of Nigeria (CBN) forbearance for credit restructuring is critical for steering the economy into full recovery.

It noted the CBN established ₦50 billion targeted credit facility for households and small-and medium-sized enterprises (SMEs).

To stimulate recovery, the apex bank lower the interest rate on all intervention facilities from 9.0% to 5.0%, amongst others, to cushion the fallout of the global pandemic.

Credits were granted to support individuals and businesses to alleviate coronavirus-induced suffering with one year in focus.

Greenwich Merchant Bank said the moratorium and reduced interest rate were planned to last for a year, which means they expired by March 1, 2021.

But having noted the economy is yet to come out of the woods, the CBN then announced it would grant a one-year moratorium on principal repayments.

“In a bid to strengthen the economic recovery, the CBN this week announced an extension of its regulatory forbearance for the restructuring of other financial institutions (OFI) credit Facilities”.

Effectively, Greenwich said the discounted interest rate for the CBN intervention facilities will be stretched until February 28, 2022.

In the same way, the moratorium on the Apex bank’s facilities will be rolled-over on a case-by-case basis.

Analysts believe the move to extend the regulatory forbearance came as banks assets quality dropped.

In December, 202o Nigerian banks’ non-performing loans (NPLs) ratio rose above the prudential threshold of 5.0% to 6.0% a.

This translates to 10 basis points above 5.9% recorded at end-November 2020.

“We recall that out of ₦18.9 trillion total banking sector credit, more than a dozen commercial banks applied to restructure over 32,000 loans worth ₦7.8 trillion”, Greenwich revealed.

It added that so far, the CBN has announced a total disbursement of ₦2.0 trillion across its intervention programs.

CBN had disbursed about ₦192.6 billion to 426,016 beneficiaries (household and small businesses) under its COVID-19 Targeted Credit Facility (TCF)

The Apex bank further disclosed the breakdown of its intervention which totals ₦107 billion for the Agribusiness Small and Medium Enterprises Investment Scheme (AGSMEIS), and ₦73.0 billion under the Health Care Support Intervention Facility, among other things.

Analysts Extol CBN

More importantly, analysts said the CBN’s policy actions aided growth, as the economy exited its short-lived recession in the final quarter of 2020, on the back of a pick-up in the non-oil sector.

“Noteworthy was the growth in the Agriculture sector which enjoyed support through the Anchors’ Borrowers Programme, and other supportive measures”, Greenwich said.

The banking group added that with the economy poised to grow further in Q1:2021, the CBN continues to maintain its pro-growth stance to ensure that stability is achieved, and that support is not withdrawn too quickly.

In view of this, the MPC at its January meeting also maintained the status-quo, noting that its current priority is to quicken the pace of recovery through sustained and targeted spending by the fiscal authorities, backed by the Bank’s intervention.

Thus, the MPC urged the CBN to increase its efforts towards deploying credit to the real sector.

“It is our view that the efforts of the CBN will be critical for steering the economy to full recovery, even as oil prices rebound.

“We note that country is about to commence mass vaccination, following the receipt of around four (4) million vials of the AstraZeneca vaccine and the ongoing registration of the populace for inoculation.

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“Though this remains positive, we expect the economy would remain under marked stress, as lingering security challenges, FX difficulties, ballooning public debt, elevated inflationary pressures, and shrinking job numbers appear as downside risks to the outlook”, Greenwich explained.

Analysts Extol CBN on Credit Facilities Extension Granted