Yemisi Izuora
Nigeria’s Agriculture and manufacturing sectors would now enjoy single digit interest loans as the Central Bank of Nigeria (CBN) moves to support banks to achieve this.
Ahmed Abdullahi, CBN Director, Banking Supervision, speaking to newsmen after the CBN Bankers Committee meeting in Lagos, said the loans will only be available for job creation and expansion plans.
“The idea is to have job-creating activities in the economy and also to bring interest rates down within the economy,” he said.
“Although agriculture and manufacturing are the initial sectors that are being considered, a bank can apply if there is a job-creating sector that the bank is operating in, it may be considered. The whole idea is: bring down interest rates, create jobs.
“For CRR refund, that is part of the idea. At the moment, banks funds are held under CRR and they are not being used.
“The idea came up that we can refund the CRR to a bank that has engaged in lending for a new project or for the expansion of an existing one in the agricultural or manufacturing sector as a way of utilizing the CRR.
“Anytime a bank lends to manufacturing or agricultural business at a rate that the CBN has prescribed, it will have its CRR refunded to it, up to the amount that it has lent.”
Reacting to the development, Yemisi Edun, Executive Director, Finance at First City Monument Bank (FCMB), described the directive as a positive for the economy.
“This is very positive for the economy and also positive for banks because the banks will be able to access these funds and be able to earn on it. It will be coming as single-digit rate then it will be positive for the economy.”
On his part, Segun Agbaje, Managing Director, Guaranty Trust Bank, said that the macros are very stable and positive and so on the back of that, it has created other opportunities. One of the things we always hear as bankers is that the macros are stable but how do we now stimulate the economy. I think the MPC meeting and the bankers committee is commited to this.
There is commercial paper or bonds that would be issued; the guidelines would come out very soon. The aim is in two folds to stimulate certain sectors which would start with agriculture and manufacturing. So it would allow people to do capital expenditure (CAPEX) which is more long term. It would give people single digit interest rate loans where bonds could go as far as 10 years.
On the part of banks, the CBN has been very gracious and said on these sectors, if you have companies that are doing new capital expenditures and expansions to factories, you would be able to lend using some of your Cash Reserve Ratio (CRR) at 9percent. These are not short term loans; they are long term loans of seven year loans, two year monitorium on principal.
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 7 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.