March 21 (THEWILL) – The Central Bank of Nigeria (CBN) has extended until February 2023, the reduction of all intervention facilities from nine to five percent per annum.
The regulatory forbearance intended to allow banks to restructure loans granted to sectors severely affected by the Covid-19 pandemic and to strengthen the loan-to-deposit ratio (LDR) policy, was initially initiated in March 2021 and was to last for a year.
In a circular issued over the weekend, the apex bank said the move was aimed at consolidating the measures taken to deal with the effects of the Covid-19 pandemic on the Nigerian economy.
The Director of the CBN’s Financial Policy and Regulation Department, Chibuzo Efobi, who signed the circular, explained that in uncertain times, there was always a way to ensure the survival of businesses, including granting abstention.
He had also said the regulatory forbearance included the restructuring of credit facilities impacted by Covid-19.
In the circular to all banks and other financial institutions, Efobi said the extension of the interest rate of 5% per annum on all CBN intervention facilities was for one year, adding that the policy took effect retroactively from February 28, 2022.
Loans benefiting from lower interest rates include a N1 trillion loan facility to boost local manufacturing and production in critical sectors, including 53 large manufacturing projects, 21 agriculture-related projects and 13 service projects are funded.
Also included is the N100 billion response fund for pharmaceutical companies and health professionals to expand and strengthen the capacity of health facilities.
Beneficiaries of the N50 billion target credit facility for affected households and small and medium enterprises will also benefit from the extended forbearance policy.
The CBN had previously approved a regulatory forbearance for the restructuring of credit facilities in the other financial institutions (OIF) sub-sector, to further mitigate the impact of the pandemic on households, businesses and regulated institutions.
CBN data showed total gross credit to businesses increased by 21.1% from 19.4 trillion naira to 23.5 trillion naira in the past year, agriculture, manufacturing , with electricity and health care occupying the lion’s share of loans disbursed.
The CBN said it will continue to monitor developments and implement appropriate measures to safeguard financial stability and support stakeholders affected by the Covid-19 pandemic.
It may be recalled that the CBN increased the minimum required LDR to 60% in July 2019 and revised it to 65% later in the year.
The LDR policy aimed to ensure that banks lend at least 65% of their deposits to micro, small and medium-sized enterprises (MSMEs) with penalties provided for defaulters.