COVID-19: CBN To Create 50 Billion Naira Credit Facility To Boost Economy

by on March 17, 2020

The Central Bank of Nigeria (CBN) in furtherance to it’s financial system stability mandate, announced a provision of 50-billion-naira credit facility to cushion the adverse effect of covid-19 on the economy.

Governor of CBN, Mr Godwin Emefiele, made this announcement on Monday, during a press briefing, while presenting the bank’s policy measures to tackle the adverse effect of COVID-19 on the economy.

The Bank announced amongst others, the creation of a N50 billion targeted credit facility through the NIRSAL Microfinance Bank for households and Small-and Medium-sized enterprises (SMEs) that have been particularly affected by Covid-19, including but not limited to hoteliers, airline service providers and health care merchants.

The governor explained that the CBN, through the Deposit Money Banks has provided a total of N3 trillion to the Small and Medium Sized Enterprises sector of the economy, stating that these loans are given through the Commercial Credit Guarantee Scheme and the Anchor Borrowers Programme, amongst others.

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The Apex Bank also established an extension of one-year moratorium on principal repayment on all central bank intervention facilities, and enjoined that all participating financial institution provide new amortization schedules for all facilities beneficiaries.

The bank further established that it has granted all deposit money banks leave to consider temporary and time-limited restructuring of the tenor and loan terms for businesses and households mostly affected by outbreak of the COVID-19 disease in the areas of oil and 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,” 

The governor added that the bank agreed to reduce the interest rates on all of its facilities from nine per cent to five per cent for one year, effective also from March 1, 2020.

The governor further added that to meet the potential increase in demand for health care services and products, the bank assures credit support for health care industries in the form of loans to hospitals, health care practitioners and pharmaceutical companies.

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According to him, these credit facilities would be given to pharmaceutical companies planning to expand or open drug manufacturing plants in Nigeria. They would also be extended to hospitals and healthcare practitioners who plan to build health facilities or expand existing facilities to first class centres.

The governor also hinted on the resolve of the CBN to strengthen its LDR policy in view of the success already recorded in growing credit to the economy and reducing interest rates.

He said the CBN would further support industry funding levels to maintain DMBs’ capacity to direct credit to individuals, households, and businesses.

To actualize this, the CBN Governor said the bank would consider additional incentives to encourage the extension of longer credit facilities, he encouraged DBMs to continue building capitals buffers in order to improve resilience of the sector.

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While promising to further issue updates on its response to economic impact of coronavirus on the economy, the central bank chief said “ the bank stands ready to provide liquidity backstops as and required in view of its role as banker to the federal government and lender of last resort” he added. 

Author: Gardia Mercy

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