CBN retains monetary policy rates, says Nigerian economy strong despite Coronavirus pandemic

On Monday, the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) announced that all monetary policy parameters remained unchanged.

The governor of the CBN, Godwin Emefiele, said during an online briefing at the end of the committee meeting in Abuja.

He said that the monetary policy rate (MPR), popularly known as the lending rate, remained unchanged at 12.5 per cent.

Other parameters maintained include the Cash Reserve Requirement (CRR) at 27.5 per cent, the Liquidity Ratio at 30 per cent and the Asymmetric Corridor at +200/-500 basis points across the MPR.

The CRR is the funds held with the CBN as a minimum deposit that the commercial bank will keep as reserves that it can not lend to its customers.

At its previous meeting in May, the Committee agreed to reduce the lending rate from 13.5% to 12.5% in order to promote credit expansion in vital sectors of the economy, boost jobs and revive economic activity in order to recover rapidly from the coronavirus effect.

Following the outbreak of the coronavirus pandemic, the CBN launched various stimulus packages, such as concessional rates, loan restructuring and targeted loans to agriculture , manufacturing and health sectors, to stimulate economic recovery in the country.

At the briefing on Monday, the CBN governor stated that the MPC had decided to retain all monetary policy rates in order to allow time for the various intervention programs to take effect.

Reviewing the performance of the economy on the basis of the impact of the CBN intervention programs, Mr. Emefiele said the country’s banking system remains very strong and resilient.

He attributed the strength of the banking system to the tightly regulated regime of the apex bank, which he said was committed to ensuring that all banks comply with the various prudential regulations developed to direct their operations.

The CBN governor said that the non-performing loans (NPLs) ratio of the banking industry decreased from about 11,1 per cent in May 2019 to 6,41 per cent in June 2020, while the capital adequacy ratio ( CAR) decreased from 15.6 per cent to 15 per cent in the same period. Liquidity ratio, which was 48% as at August 2019, fell to 37% by June.

Between June 2019 and June 2020, Mr. Emefiele announced gross loans and advances made by banks to various sectors of the economy as a result of CBN ‘s Loan-to-Deposit (LDR) policy increased by N3.33 billion, from N15.6 billion to N18.9 billion.

It identified some of the priority sectors granted N10.3billion by the CBN to include the manufacturing sector (N815billion); the retail and consumer lending sector (N615billion); the agriculture, forestry and fisheries sector (N255billion); the information technology and communications sector (N208billion); and others, N251billion.

“The size of the large sums granted to the different sectors of the economy by the banks is an indication that the Nigerian economy is still very strong and resilient and able to support the country’s economic development,” the CBN governor said.

At the start of COVID-19, the CBN launched a range of intervention programs worth more than N100billion to help households and small and medium-sized enterprises affected by the pandemic, and N1trillion to help the agriculture and manufacturing sectors to remain in operation.

Today, N152billion out of N152.9billion has been disbursed to 61 manufacturing companies out of N1trillion, while other health care ventures have been financed out of N26.27billion out of N100billion; 11,618 recipients of agricultural loans have been financed out of N41 billion.

Another N59.195billion disbursed to the various small and medium-sized enterprises affected by COVID-19.

On why the CBN asked the banks to offer forbearance on loans to their customers, Mr. Emefiele said it was to avoid loans from going bad as a result of the coronavirus pandemic, which adversely impacted the global economy and made it difficult for companies to fulfill their loan obligations.

Forbearance is the strategy of allowing extra time for borrowers to restructure the duration for which they have to pay or repay their loans.

The governor of the CBN said that given the effect of the COVID-19 on the global economy, he was not aware of any news of any business in Nigeria suffering a pandemic.

To date, 22 out of the 27 banks in the country have submitted requests to the CBN for permission to restructure loans issued to approximately 35,640 of their customers, involving approximately N7.8 billion, which is approximately 41% of the total portfolio of industrial loans.

Currency adjustment plan started two weeks ago to try to get the exchange rate of the Naira to align with the exchange rate of the dollar. He said Nigeria has yet to obtain a $3.4 billion loan from the IMF.