Coronavirus: CBN unveils N50bn Fund, 5 other policy responses

CBN distributes inputs to Cocoa Farmers in Oyo State


Nigeria’s apex bank the Central Bank of Nigeria (CBN), announced on Monday six initial policy responses to combat Covid-19 scourge on economy.

At a press conference in Abuja, Governor of the CBN, Godwin Emefiele, listed the policy responses: Extension of moratorium on loans, interest rate reduction, creation of N50bn fund, credit support for healthcare sector, regulatory forbearance and a strengthening of the Loan to Deposit Rate (LDR) policy.

Emefiele -CBN-Governor

Specifically, the policy responses entail reduction of interest rate from 9 percent to 5 percent with effect from March 1, 2020; Creation of a target creative facility through the Nigeria Incentive-Based Risk Sharing system for Agricultural Lending (NIRSAL)  microfinance bank of N50 Billion; Credit support for healthcare industry and; loans to pharmaceutical companies, hospital and health care companies.

Also,  the CBN is granting  all Deposit Monetary Bank’s extension for forbearance;  Strengthening of the apex bank  loan to deposit ratio policy and;  credit support for the healthcare industry in terms of operators who want to set up or expand facilities or products.

In addition, the CBN announced the following policy measure:
CREDIT SUPPORT FOR HEALTHCARE INDUSTRY: To meet potential increase in demand for Healthcare services and products, the CBN hereby opens for its intervention facilities, loans to pharmaceutical companies intending to expand/open their drug manufacturing plants in Nigeria, as well as to Hospital and Healthcare practitioners who intend to expand/build the Health facilities to first class centres. This is in addition to growing the size of existing interventions to the Agricultural and Manufacturing sectors in Nigeria.

The CBN hereby grants all Deposit Money Banks leave to consider temporary and time-limited restructuring of the tenor and loan terms for businesses and households most affected by the outbreak of Covid-19 particularly Oil & Gas, Agriculture, and manufacturing. The CBN would work closely with DMBs to ensure that the use of this forbearance is targeted, transparent and temporary, whilst maintaining individual DMB’s financial strength and overall financial stability of the system.

In view of the success of the LDR Policy in growing credit to the economy and reducing interest rates, the CBN would further support industry funding levels to maintain DMBs’ capacity to direct credit to individuals, households, and businesses. We will also consider additional incentives to encourage extension of longer tenured credit facilities. DMBs are encouraged to continue to build capital buffers in order to improve resilience of the sector.
The apex bank added that it “stands ready to provide liquidity backstops as and when required in view of its role as Banker to the Federal Government and lender of last resort. The CBN shall continue to monitor developments and will issue further updates as may be appropriate.”

According to the CBN Governor, the policy responses were necessitated by the coronavirus pandemic which has devastated the global economy creating unprecedented disruptions in global supply chains, sharp reduction in crude oil prices, turmoil in global stock and financial markets.

“All CBN intervention facilities are hereby granted a further moratorium of one year on all principal repayments, effective March 1, 2020. This means that any intervention loan currently under moratorium are hereby granted additional period of one year. Accordingly, participating financial institutions are hereby directed to provide new amortization schedules for all beneficiaries,” Emefiele said.

(With additional report from THEWILL)

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