The Central Bank of Nigeria (CBN) in May 2022 tightened its monetary policy known as the monetary policy rate (MPR) to contain rising inflation.
Inflation has continued to rise unabated in several advanced economies and is expected to remain elevated, at least in the medium term, as food and energy prices have reached levels not seen in four decades.
Nigeria’s inflation rate accelerated to 17.71% in May 2022 from 16.82% in April 2022, according to the National Bureau of Statistics (NBS).
The CBN joined central banks around the world in raising its benchmark interest rate by 150 basis points to 13%, the first time in six years. The apex bank kept the asymmetric corridor around the MPR at +100/-700 basis points, the cash reserve ratio (CRR) at 27.4% and the liquidity ratio (LR) at 30%.
Consequently, deposit banks took over their assets after the MPC decision, while savings rates remain constant. “Given the positive correlation of market lending rates with the MPR, borrowing costs are expected to rise, which could limit loan growth,” said Aisha Ahmad, Deputy Governor in responsible for the stability of the financial system.
“Free, CBN intervention loans for certain industries and SMEs will remain at 5% per annum until March 2023, stabilizing access to affordable financing for job-creating sectors,” said- she declared.
This, she said, should be positive for the macroeconomy, boosting output growth and positioning companies to maintain strong cash flows while minimizing default risk and preserving financial stability.
The Monetary Policy Committee (MPC) was of the view that the Central Bank’s Development Finance Initiative rates should remain at 5% until March 2023.
In his maiden speech on June 5, 2014, CBN Governor Godwin Emefiele said his vision would be to ensure that the Central Bank of Nigeria would be more people-oriented as its policies and programs would be people-oriented. support for job creation, reducing the high level of Treasury bill rates, improving access to credit for micro, small and medium-sized enterprises (MSMEs), deepening its intervention program in the agricultural sector, building a robust payment system infrastructure that will help foster inclusiveness, in addition to key macroeconomic concerns such as exchange rate stability, financial system stability and maintaining a solid external reserve.
At its last meeting in May this year, the MPC reviewed the performance of Central Bank intervention programs aimed at boosting productivity in agriculture; manufacturing industries; energy/infrastructure; Health care; exports; and micro, MSME.
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Therefore, between April and May 2022, the CBN released the sum of N57.91 billion under the Anchor Borrowers Program (ABP) for 185,972 new rice, wheat and maize farming projects. , bringing the cumulative disbursement under the program to N1.01 trillion, disbursed to more than 4.2 million smallholder farmers growing 21 commodities across the country.
The Central Bank of Africa’s largest economy has further disbursed N1.50 billion under the Accelerated Agriculture Development (AADS) program for a new youth-led project, piloted and funded by the Ondo State Government for the acquisition of oil assets. palm cultivation and the establishment of poultry farms. This brings the total disbursement under the program to N21.23 billion for 10 state-led projects and three private sector-led projects.
In addition, the CBN has released N21.73 billion to finance seven large-scale agricultural projects under the Commercial Agriculture Credit Scheme (CACS). The funds were used for the establishment of a ranch and a milk processing plant; purchase of animal feed and medicines for livestock/dairy production; construction of a 300 metric ton per day oil mill in Gusau, Zamfara State; acquisition and installation of an agrochemical plant; as well as the purchase and storage of locally grown maize for the production of animal feed.
This brings the cumulative disbursement under this program to N741.05 billion for 674 agricultural production and agricultural transformation projects.
Under the Paddy Aggregation Scheme (PAS), N6.20 billion has been disbursed by the CBN for three new projects to purchase and clean locally grown paddy rice. This brings the total funds disbursed to 42 integrated rice mills under the SAP to N106.39 billion.
To support the growth of the manufacturing sector, the banking sector regulator has disbursed N436.85 billion for 34 new projects under the N1 trillion Real Sector Support Facility (RSSF). This has been used for both greenfield (greenfield) and brownfield (expansion) projects under the COVID-19 Response for Manufacturing (CIMS) and the Real Sector Support Facility from the differentiated cash reserve requirement (RSSF-DCRR). The cumulative disbursement under the RSSF for financing 402 real sector projects across the country currently stands at N2.10 trillion, the CBN said.
Nigeria’s major bank has disbursed N55.34 billion, under the 100 percent policy on production and productivity (100 percent PPP), for 44 projects, including 24 in manufacturing, 17 in agriculture, 2 in health care and 1 in the service sector.
In the health sector, the CBN disbursed N17.70 billion for four healthcare projects under the Health Sector Response Facility (HSIF), bringing cumulative disbursements to 130, 49 billion naira for 126 projects, comprising 58 hospitals, 31 pharmaceuticals and 37 other health services. .
The CBN has released N21.00 billion under the Export Facilitation Initiative (EFI), for three projects for domestic production and value addition of cocoa and sesame seeds. This intervention aims to further expand the non-oil export basket of the economy in order to improve the country’s foreign exchange earnings.
To support micro, small and medium enterprises, the Central Bank has disbursed N1.50 billion for 2,718 new projects through the Agribusiness Small and Medium Enterprises Investment Scheme (AgSMEIS) for activities in fish farming , rice processing, wheat farming, poultry farming, animal husbandry, ICT and sewing among others. This brings the cumulative disbursements under AgSMEIS to N136.13 billion.
Under the Micro, Small and Medium Enterprises Development Fund (MSMEDF), the CBN has disbursed N2.79 billion to support young people engaged at various nodes of the agricultural value chain, bringing the total disbursement under of this intervention to N98.88 billion for 749 MSMEs. projects across the country.
In the area of Energy/Infrastructure, the Central Bank has released N15.71 billion for power sector players, including Generation Companies (GenCos) and Gas Companies (GasCos), in under the Nigeria Bulk Electricity Trading Plc – Payment Assurance Facility (NBETPAF), bringing the cumulative disbursement under the facility to N1.30 trillion.
The sum of N22.67 billion was also paid to distribution companies (DisCos) for their operational expenditure (OpEx) and capital expenditure (CapEx), under the Electricity Market Stabilization Facility of Nigeria – Phase 2 (NEMSF-2). The cumulative disbursement under NEMSF-2 currently stands at N251.93 billion.
In addition, under the National Mass Metering Program (NMMP), the Bank disbursed N0.19 billion to DisCos for the purchase of electricity meters, bringing the cumulative disbursement for the purchase and installation of 865,956 meters across the country at N47.82 billion. Energy/Infrastructure interventions are designed to enhance investments and develop enabling infrastructure in the Nigerian electricity supply sector.
A review of the banking sector shows that the banking sector has continued to remain resilient, with all ratios indicating the sector is sound, according to MPC member Sanusi Aliyu Rafindadi.
The industry’s capital adequacy ratio (CAR) was 14.6% in April 2022, which was above the regulatory minimum of 10%. The non-performing loan (NPL) ratio was 5.3%, slightly above the regulatory maximum of 5%. The industry’s total credit to the economy also increased by N4.65 trillion or 21.66% between April 2021 and April 2022.
The industry’s gross credit, which stood at N26.1 trillion in April 2022, has grown steadily since 2019, largely due to the Bank’s loan-to-deposit ratio (LDR) policy. Interest rate range analysis reveals that 70.93% of customers paid interest rates below 15% in March 2022, suggesting that interest rates are declining as credit to the sector real economy continues to rise.
Osita Nwanisobi, Director of Corporate Communications Department, CBN, noted last year that the Emefiele-led CBN introduced no less than 37 intervention programs to boost the country’s economy.
Prior to joining CBN, Emefiele spent over 26 years in commercial banking, culminating in his tenure as Group Managing Director and Chief Executive Officer of Zenith Bank PLC, one of Nigeria’s largest banks with over 7 000 employees, approximately $3.2 billion in equity. , and subsidiaries in Ghana, Sierra Leone, Gambia, South Africa, China and the United Kingdom.