A rising number of Nigerian deposit money banks (DMBs) have begun the process of ceasing loan application collection under the Central Bank of Nigeria’s (CBN) development finance intervention initiatives.
Under former CBN Governor Godwin Emefiele, the apex bank shifted to quasi-fiscal operations to promote ex-President Muhammadu Buhari’s economic growth strategy. Customers were informed by local lenders that the apex bank has ceased accepting new loan applications under current development financing intervention funds.
Banks identified development financing that would be phased down, including the Nigeria-Incentive Based Risk Sharing System for Agricultural Lending (NIRSAL), which was established to assist farmers in increasing food production.
Apex Bank also set funds aside under the Accelerated Agricultural Development Scheme (AADS), Anchored Borrowers Programme (ABP), Agri-Business/SME Intervention Scheme and Real Sector Support Funds (RSSF) among others.
Banks told customers that all existing development finance intervention funds with approved interest rates remain unchanged and are to be fully repaid in line with associated terms and conditions.
The CBN pulled back from the development finance intervention initiated to support the real sector. About 34.7% of these interventions were skewed to the agricultural sector, wherein CBN disbursed single-digit loans of about N1.8 trillion to 4.6 million farmers for 679 agro projects since 2015.
In a report, CardinalStone Partners said despite the financing, agricultural GDP growth has weakened materially, averaging 2.4% between 2016 and 2023 versus the pre-intervention period outturn of 8.9%.
“We perceive that these interventions yielded little impact due to a lack of proper accountability on the use of funds and other exogenous setbacks such as insecurity and unfavourable weather conditions”, the firm stated.
The investment firm opines that the discontinuation of the intervention will unlikely drag the sector’s growth traction should security and weather improve.
“We project agricultural sector GDP growth to improve to 1.6% in 2024 from 0.8% in 2023, aided by low base and likely favourable weather conditions, with security improvement a material upside risk”, CardinalStone said in its report for the year.
In a speech last, Yemi Cardoso, Governor of the Central Bank of Nigeria (CBN) said the apex bank had strayed from its core mandates and was engaged in quasi-fiscal activities that pumped over N10 trillion in the economy through almost different initiatives in sectors.
The sectors range from agriculture, aviation, power, youth and many others. He agreed that these distracted the Bank from achieving its objectives and took it into areas where it had limited expertise. Dangote Reacts to EFCC Visit to Headquarters
“In line with our strategy to refocus on our core mandate, the CBN will discontinue direct quasi-fiscal interventionist activities and instead utilize orthodox monetary policy tools for implementing monetary policy”, Cardoso said in the speech delivered at the Chartered Institute of Bankers in November 2023.
