Banks Stop Loan Applications under CBN Intervention Programs
UPDATE: A growing number of Nigerian deposit money banks (DMBs) have started the process to end collecting loan applications under the Central Bank (CBN) development finance intervention programs.
Under the former CBN boss, Godwin Emefiele, the apex bank had switched to quasi-fiscal activities to support ex-president Muhammadu Buhari’s economic growth plan. Local lenders told customers that the apex bank had discontinued the process of new loan applications under existing development finance intervention funds.
Banks listed development funding that will go into extinction to include the Nigeria-Incentive Based Risk Sharing System for Agricultural Lending (NIRSAL) created to support farmers to boost food production.
Apex Bank also set funds aside under the Accelerated Agricultural Development Scheme (AADS), Anchored Borrowers Programme (ABP), Agri-Business/SME Intervention Scheme and Real Sector Support Funds (RSSF) among others.
Banks told customers that all existing development finance intervention funds with approved interest rates remain unchanged and are to be fully repaid in line with associated terms and conditions.
The CBN pulled back from the development finance intervention initiated to support the real sector. About 34.7% of these interventions were skewed to the agricultural sector, wherein CBN disbursed single-digit loans of about N1.8 trillion to 4.6 million farmers for 679 agro projects since 2015.
In a report, CardinalStone Partners said despite the financing, agricultural GDP growth has weakened materially, averaging 2.4% between 2016 and 2023 versus the pre-intervention period outturn of 8.9%.
“We perceive that these interventions yielded little impact due to a lack of proper accountability on the use of funds and other exogenous setbacks such as insecurity and unfavourable weather conditions”, the firm stated.
The investment firm opines that the discontinuation of the intervention will unlikely drag the sector’s growth traction should security and weather improve.
“We project agricultural sector GDP growth to improve to 1.6% in 2024 from 0.8% in 2023, aided by low base and likely favourable weather conditions, with security improvement a material upside risk”, CardinalStone said in its report for the year.
In a speech last, Yemi Cardoso, Governor of the Central Bank of Nigeria (CBN) said the apex bank had strayed from its core mandates and was engaged in quasi-fiscal activities that pumped over N10 trillion in the economy through almost different initiatives in sectors.
The sectors range from agriculture, aviation, power, youth and many others. He agreed that these distracted the Bank from achieving its objectives and took it into areas where it had limited expertise. Dangote Reacts to EFCC Visit to Headquarters
“In line with our strategy to refocus on our core mandate, the CBN will discontinue direct quasi-fiscal interventionist activities and instead utilize orthodox monetary policy tools for implementing monetary policy”, Cardoso said in the speech delivered at the Chartered Institute of Bankers in November 2023. #Banks Stop Loan Applications under CBN Intervention Programs
