The Central Bank of Nigeria (CBN) has extended to February 2023, the cut on all intervention facilities from nine to five percent per annum.
The regulatory forbearance meant to allow banks to restructure loans given to sectors severely affected by the Covid-19 pandemic and strengthen the Loan to Deposit Ratio (LDR) policy, was initially initiated in March 2021 and was meant to last for a year.
In a circular released at the weekend, the apex bank said the move was to consolidate the measures taken to address the effects of the Covid-19 pandemic on the Nigerian economy.
The CBN Director, Financial Policy and Regulation Department, Chibuzo Efobi, who signed the circular had explained that in uncertain times, there was always a way to ensure that businesses survived, including granting forbearance.
He had also said that the regulatory forbearance includes restructuring of credit facilities impacted by Covid-19.
In the circular addressed to all banks and other financial institutions, Efobi said the extension of the five percent per annum interest rate on all CBN intervention facilities was for one year, adding that the policy took effect retrospectively from February 28, 2022.
The loans to benefit from the interest rate cut include a N1 trillion facility in loans to boost local manufacturing and production across critical sectors of which 53 major manufacturing projects, 21 agriculture-related projects and 13 service projects are being funded.
Also included is the N100 billion intervention fund for pharmaceutical companies and healthcare practitioners meant to expand and strengthen the capacity of the healthcare institutions.
Beneficiaries of the N50 billion target credit facility for affected households and small and medium enterprises will also enjoy the forbearance policy extension.
The CBN had earlier approved regulatory forbearance for restructuring of credit facilities in the Other Financial Institutions (OFIs) sub-sector, to further mitigate the impact of the pandemic on households, businesses and regulated institutions.
Data from CBN showed that total gross credit to businesses rose 21.1 percent from N19.4 trillion to N23.5 trillion in the last one year, with agriculture, manufacturing, power and healthcare taking the lion share of the loans disbursed.
The CBN said it will continue to monitor developments and implement appropriate measures to safeguard financial stability and support stakeholders impacted by the Covid-19 pandemic.
It could be recalled that the CBN increased the required minimum LDR to 60 percent in July 2019 and further reviewed it forward to 65 percent later in the year.
The LDR policy was meant to ensure that banks lend at least 65 percent of their deposits to Micro Small and Medium Enterprises (MSMEs) with sanctions spelt out for defaulters.
