CBN Cuts Interest Rate On Intervention Loans To 5%

CBN Cuts Interest Rate On Intervention Loans To 5%

Following the ongoing global economic crises over the Coronavirus (COVID-19) the Central Bank of Nigeria (CBN) has announced the reduction of interests rate on its intervention loans from nine per cent to five per cent, as well as, an extension of the moratorium from one to two years, to buffer the Nigerian economy.

The CBN Governor, Mr Godwin Emefiele, who disclosed this at a press briefing in Abuja, yesterday, said that the measures were the bank’s first set of responses to the COVID-19 global crisis, which has adversely affected businesses in many sectors across the world.

He also announced a N50 billion additional fund for the NIRSAL Micro Finance Bank for on-lending to Small and Micro Enterprises.

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Besides, Emefiele said that CBN has come up with regulatory forbearance to enable Deposit Money Banks to restructure their customers’ loans with a view to reducing the burden on businesses and households.

He said: “The Coronavirus pandemic is having consequences for both the global and the Nigerian economies. It has already led to unprecedented disruptions in global supply chains, a sharp reduction in crude oil prices, turmoil in the global stock and financial markets, widespread cancellations in sporting, entertainment, and business events, lockdown of a large source of the movement of persons, in many countries and intercontinental travel restrictions across critical air routes across the world.

“These outcomes have had adverse effects for the key sector including oil and gas, airlines, manufacturing, trade and consumer markets.

“In furtherance of its financial systems stability mandate, the CBN is committed to providing support for affected households, businesses, regulated financial institutions, and other stakeholders in order to cushion the adverse economic consequences of this pandemic on our people.

“The CBN, operating through our Deposit Money Banks has close to N3 trillion in various forms of intervention facilities either through the Anchor Borrowers Programme, the Commercial Agriculture Credit Scheme, our Micro and Medium Enterprises programme or through our ASMIES programme.

“Since we expect that as a result of this pandemic, revenues that would accrue to businesses to run their businesses as well as paying their bank loans have become so short naturally, we expect that there would be difficulties by businesses to service their loans.

“So we make the following proposition besides others that we will be making from time to time as we proceed in this journey. All CBN intervention facilities are hereby granted a further moratorium of one year on principal repayments, effective March 1, 2020.

“This means that any intervention loan currently under moratorium is hereby granted another moratorium on one year. Accordingly, participating financial institutions are hereby directed to provide new amortization schedules for all facilities for their beneficiaries.

“Interest rates on all applicable CBN intervention facilities are hereby reduced from 9 per cent to 5 per cent per annum for one year, effective March 1, 2020.”

N50bn intervention fund

The apex bank also announced special funding for small businesses. Emefiele stated: “The CBN hereby establishes a facility through NIRSAL Micro Finance Bank to the sum of N50 billion for households and Micro, Small and Medium Enterprises that have been particularly hit by COVID-19, including but not limited to hoteliers, airlines providers, healthcare merchants and others.”

Healthcare industry support

The healthcare sector also came under the special support of the apex bank under the prevailing health circumstances. Emefiele stated: “To meet the potential increase in demand for health care services and products, CBN hereby opens for intervention facilities loans to pharmaceutical companies, intending to expand or intending to establish their own drugs manufacturing plants in Nigeria, as well as, to hospitals or healthcare practitioners who intend to expand or build healthcare facilities to first-class standards.

“This is in addition to growing the size of our interventions in the agricultural and manufacturing sectors in Nigeria.”

Regulatory Forbearance

Banks which are the disbursing agents for the several intervention funds also got further forbearance. Emefiele stated: “The CBN hereby grants all DMBs (Deposit Money Banks) leave to consider temporary and time-limited restructuring of tenure and loan terms for businesses and households most affected by this outbreak of COVID-19, particularly the oil & gas, agric, manufacturing.

“The CBN will work closely with our DMBs to ensure that the use of this forbearance, is targeted, transparent and temporary while maintaining individual DMBs’ strength and overall financial stability of the system.

“What are we saying here?    You took a loan from a bank and because there is a drop in your revenue, arising from the consequences of the COVID -19 pandemic, we are saying that the banks have been granted a dispensation where they should be able to restructure their loans for a longer tenure so that what you will re-pay to the banks as principal plus interest    is reduced substantially because of the fact that your loan would have been restructured for a longer tenure and possibly at a lower interest rate so that your business can remain alive.”

CBN Cuts Interest Rate On Intervention Loans To 5%