By Etuka Sunday
The Central Bank of Nigeria (CBN) yesterday said it would create a N50billion ($163milion) fund as part of policy measures to combat the impact of the Coronavirus pandemic on the nation’s economy.
CBN’s governor, Mr Godwin Emefiele who announced this in a Press Conference in Abuja, also announced other measures to include cutting interest rates on some banks loans to 5% per annum, down from 9%, for a year.
Emefiele said: “the CBN hereby establishes a facility through the NIRSAL Microfinance Bank for households and small- and medium-sized enterprises (SMES) that have been particularly hard hit by Covid-19, including but not limited to hoteliers, airline service providersS, health care merchants, etc.
“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.
“Interest rates on all applicable CBN intervention facilities are hereby reduced from 9 to 5 percent per annum for 1 year effective March 1, 2020,” he said.
He explained that, “because of the drop in revenues, to companies that may be directly affected Covid-9, health crisis and economic crisis, because their revenue will drop, we are saying, if your loan was supposed to be 3-year loan, where you took N10million and you are paying N100, 000 monthly as repayment for a 3-year loan, that we are going to grant the banks the dispensation where they can restructure your loan from three years to six years such that, in addition to low interest rate, what you will be making in installment repayment of your loan will have dropped from N100, 000 to N50,000 monthly, to match the reduction in revenues arising from the impact of Corona virus.”
On whether the bank was ready to alter the current interest rate regime, Emefiele said, “there are so many things the Monetary Policy Committee takes into consideration in its determination whether or not to alter MPR, I think we should just wait, MPC will be holding next week, I am sure that with array of data that will be confronting MPC by next week, they will direct as to whether or not to alter, whether or not reduce, or whether or not to raise interest rate.”
He said, in view of its role as banker to the federal government and lender of last resort, the apex bank stands ready to provide liquidity back stops as and when required.
Emefiele said, the Coronavirus pandemic was having significant adverse consequences for both the global and the Nigerian economies.
“It has already led to unprecedented disruptions in global supply chains, sharp reduction in crude oil prices, turmoil in global stock and financial markets, massive cancellations in sporting, entertainment and business events, lockdown of large swaths of movements of persons in many countries, and intercontinental travel restrictions across critical air routes in the world.
“These outcomes have had serious adverse implications for key sectors including but not limited to oil and gas, airlines, manufacturing,trade and consumer markets.
“The CBN in furtherance of its financial stability mandate is committed to providing support for affected households, businesses, Binstitutions, and other stakeholders in order to cushion the adverse economic impact of this pandemic,” he said.
On credit support for Healthcare Industry, the CBN boss said, “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.”
On Regulatory Forbearance, he said, “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,” he said.
On Strengthening of the CBN Loan Deposit Ratio Policy, he said, “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 CBN shall continue to monitor developments and will issue further updates as may be appropriate,” he said.