CBN Unfolds Single-digit Loan Scheme for Agric, Real Sector

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    · Bank CEOs upbeat over economic stabilisation policy

    · Nigeria earned N77.74bn from external reserves in 2017

    Obinna Chima and Nume Ekeghe

    The Central Bank of Nigeria (CBN) and the Bankers’ Committee thursday agreed to offer single-digit interest rate loans to operators in the manufacturing and agricultural sectors of the economy from commercial banks’ cash reserve requirement (CRR) with the apex bank.

    Data obtained from the CBN website put the total banking industry reserves with the central bank as at June 2018 at N4.115 trillion.

    The central bank explained that instead of out rightly lowering interest rate, it opted for a system whereby the single-digit interest funds would be implemented to long-term credit at nine per cent and a minimum tenor of seven years.

    This was revealed at the end of a Bankers’ Committee meeting that took place in Lagos.

    CBN Governor, Mr. Godwin Emefiele, had at the last Monetary Policy Committee (MPC) meeting in Abuja last month, said the central bank was working on the modalities for the scheme.

    But addressing journalists yesterday, the Director of Banking Supervision, Mr. Ahmad Abdullahi, said the idea is to enhance job creation.

    He said, “Although agric and manufacturing are the initial sectors that are being considered, a bank can apply if there is a job creating sector that bank is operating in, it may be considered.

    “The idea is that 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 sector operator, at the rate the CBN has prescribed, it would have its CRR refunded up to the amount it has lent. The guidelines are coming up any moment from now.

    “It is in two folds, there would be commercial papers (CPs) and corporate bonds. On the other hand, there would be direct lending by the banks to SMEs that are in those sectors.”

    Continuing, the CBN director said, “Market expectation was that because of the 17 months of inflation coming down, there would be a reduction in monetary policy rate (MPR). The concern MPC has regarding capital reversals and exchange rate stability that was why we see the MPC holding interest rate.”

    He also expressed satisfaction with the performance of the economy.

    According to him, “The outlook for the economy in 2018 is much better than 2017. 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, but the fact is that capital outflow in the Nigerian economy is far less compared to many emerging economies, which is a sign that there is high confidence in the Nigeria economy.”

    Also, the Chief Executive Officer of Guaranty Trust Bank Plc, Mr. Segun Agbaje, said the initiative was expected to create jobs and enhance economic growth.

    Agbaje said, “The CBN has been very gracious and said on these sectors, if you have companies that are doing new capital expenditures and expansions, you (the banks) would be able to lend using some of your CRR at nine per cent.

    “These are not short-term loans; they are long term loans of seven-year loans and two year moratorium on principal.”

    He applauded the initiative saying, “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.”

    He added, “So, it would allow people to do capital expenditure, which is more long-term. It would give people single-digit interest rate loans, where bonds could go as far as 10 years.”

    Also, the Executive Director, Finance, First City Monument Bank, Mrs. Yemisi Edun, said, “The CRR that is taken from banks would be positively deployed to grow the real sector as well as the agriculture sector.

    Edun added, “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.”

    “The focus is to ensure that the economy grows. Now that we have achieved stability, we need to see a positive trend of growth and that is what we are committed to do at this time.”

    Nigeria Earned N77.74bn from External Reserves Management

    In a related development, the CBN has revealed that the aggregate earnings from the management of Nigeria’s external reserves in 2017 was N77.74 billion.

    The central bank disclosed this in its 2017 draft annual report obtained from its website.

    The above-mentioned amount, represented an increase by 44.2 per cent, compared with the N43.40 billion recorded in 2016.

    This also was an increase of N36.18 billion or 87.1 per cent over the budgeted amount of N41.55 billion in the year under review.

    The report attributed the increase largely, to the external reserves accretion.

    “This was in to the increase in income on current and repo account balances, as a result of sweeping arrangement between the JP Morgan and the Federal Reserve Bank.

    “The bank maintained all the previous performance measures of its bonds. Thus, the World Bank US Treasury Bonds portfolio was measured against the Bank of America Merrill Lynch 1-3 years US Treasury Index, while the Global Government Bonds Short-Duration (US$ Hedged) portfolio was measured against the Bank of America Merrill Lynch Global Government Bond G7 1-3-year Index, ex-Italy 100 per cent hedged into US$,” the report stated.

    However, it revealed that aggregate foreign exchange inflow into the economy rose by 45 per cent to US$91 billion in 2017, compared with US$62.75 billion recorded in 2016.

    But the report pointed out that a disaggregation showed that inflows, through the CBN and autonomous sources, were US$42.17 billion and US$48.33 billion, constituting 46.3 and 53.7 per cent, respectively, of the total.

    A further analysis showed that foreign exchange inflow, through the CBN, rose to US$42.17 billion, compared with US$21.07 billion in 2016.

    “A breakdown of foreign exchange inflow, through the CBN, showed that earnings from crude oil export increased by 1.9 per cent to $10.37 billion, above the level in 2016.

    “The development was attributed to price and output of crude, both of which rose relative to the preceding period.

    “Similarly, the non-oil component of the inflow, through the bank, rose by 192.2 per cent to US$31.80 billion in 2017, above the level in the preceding year,” it added.