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An increasing number of Nigerian Deposit Money Banks (DMBs) are initiating the process to cease accepting loan applications under the Central Bank (CBN) development finance intervention programs.
During the tenure of the former CBN governor, Godwin Emefiele, the apex bank engaged in quasi-fiscal activities to support the economic growth plan of former President Muhammadu Buhari. Local lenders have informed customers that the CBN has halted the acceptance of new loan applications under existing development finance intervention funds.
Development funding programs slated for discontinuation include the Nigeria-Incentive Based Risk Sharing System for Agricultural Lending (NIRSAL), aimed at supporting farmers to enhance food production. The CBN also allocated funds under initiatives like the Accelerated Agricultural Development Scheme (AADS), Anchored Borrowers Programme (ABP), Agri-Business/SME Intervention Scheme, and Real Sector Support Funds (RSSF), among others.
Banks have clarified to customers that all existing development finance intervention funds with approved interest rates will remain unchanged and are to be fully repaid in accordance with the associated terms and conditions.
The CBN has retreated from development finance interventions designed to support the real sector. Approximately 34.7% of these interventions were directed towards the agricultural sector, with the CBN disbursing single-digit loans of about N1.8 trillion to 4.6 million farmers for 679 agro projects since 2015.
CardinalStone Partners, in a report, pointed out that despite the financing, agricultural GDP growth has significantly weakened, averaging 2.4% between 2016 and 2023 compared to the pre-intervention period’s outcome of 8.9%.
The investment firm suggests that the discontinuation of these interventions is unlikely to negatively impact the sector’s growth trajectory if security and weather conditions improve.
CardinalStone projects an improvement in agricultural sector GDP growth to 1.6% in 2024 from 0.8% in 2023, citing a low base and potential favorable weather conditions, with improved security being a significant upside risk.
In a speech last year, Yemi Cardoso, Governor of the Central Bank of Nigeria (CBN), acknowledged that the apex bank had deviated from its core mandates and engaged in quasi-fiscal activities, injecting over N10 trillion into the economy through various initiatives in sectors such as agriculture, aviation, power, and youth empowerment. Cardoso announced the discontinuation of direct quasi-fiscal interventionist activities, emphasizing a shift to orthodox monetary policy tools for implementing monetary policy. #NigerianBanks #CBNIntervention #DevelopmentFinance
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