New Telegraph

MPC retains MPR at 12.5%, holds other parameters constant

  • CBN disburses N49.15bn COVID-19 loan

 

  • Emefiele: Nigerian banks strong, resilient

 

In its wisdom of ensuring quick recovery of the economy from COVID- 19 crisis, the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) has resolved to retain the Monetary Policy Rate (MPR) at 12.5 per cent, a figure approved in May.

 

Besides, it held all other policy parameters – asymmetric corridor of +200/- 500 basis points around the MPR; CRR at 27.5 per cent; and liquidity ratio at 30 per cent.

 

CBN Governor, Mr. Godwin Emefiele, gave the updates yesterday in Abuja at after the MPC meeting.

 

“As a result, the Committee noted that the earlier downward adjustment of the MPR by 100 basis points to 12.5 per cent to signal the loosening monetary policy stance is yielding positive impact as credit growth increased significantly in the economy.

 

“The Committee also noted the positive impact of the various fiscal and monetary interventions on households, SMEs and manufacturing sectors.

 

“The MPC also noted that increasing MPR at this stage will thus be counterintuitive and will result in upward pressure on market rates and cost of production,” he said.

 

Emefiele disclosed that the committee decided by a vote of eight members to hold and two members voted to reduce MPR while all members voted to retain all other policy parameters.

 

The CBN Governor also confirmed disbursing N49.195 billion of the approved N50 billion Targeted Credit Facility (TCF) COVID- 19 loan to 92,000 beneficiaries as of June 30, 2020.

 

He hinted that the facility being disbursed by NIRSAL Microfinance Bank may be expanded by the bank. “In February, we made N50 billion to support household and MSMEs that were impacted by COVID-19. For the health and pharmaceutical companies, we put on the table N100 billion.

 

For the manufacturing sector to remain in business, we put on the table N1 trillion intervention facility.

 

“But I can say that as at today, over N152.9 billion has been disbursed to 61 manufacturing companies out of the N1 trillion.

 

Twenty healthcare projects have been funded to the tune of N26.27 billion out of the N100 billion. Under our Agricultural Small and Equity Fund Intervention, it has funded 11,613 with over N41 billion, and these are the micro and small businesses that badly need access to credit in our economy.

 

“Out of N50 billion for household as small enterprises affected by COVID-19, we have so far disbursed to over 92,000 people the sum of N49.15 billion.

 

The MPC endorsed today (Monday) that we might need to increase the household and SME facilities to accommodate more of these SMEs to help them easily recover from the crisis,” he said.

 

Speaking on the state of Nigerian banks, Emefiele dismissed anxiety being expressed in some quarters, saying that the banks were strong and resilient.

 

 

The Governor said: “The Nigerian banking system remains very strong and resilient. Unlike in other climes, the Nigerian banking system appears to be one of the well-regulated industries in the world today.

 

“As at May 2019, NPLs in the industry was 11.1 per cent. As at June 2020, NPL had dropped to 6.4 per cent. Capital Adequacy Ratio, which measures the size of capital that bank deploys into risk asset, as at June 2019, was 15.2 per cent, but as at June 2020, it remained flat at 15 per cent.

 

On liquidity ratio, by August 2019, it was 48 per cent, but as at June 2020, it had dropped to 37 per cent.

 

“It dropped understandably because from July 2019 to June 2020, credit advanced into the economy as the CBN Loans to Deposit Ratio increased by N3.3 trillion from N15.6 trillion in June 2019 to N18.9 trillion as at June 2020. And these loans were granted to some of the productive sector.

 

“For instance, manufacturing sector received N815  billion, retail, consumer loan sectors received N615 billion, agric, forestry and fishery sector N255 billion, general commerce N221 billion, information technology communications N208 billion, among a few out of the N3.3 trillion that had been granted. “So what we are saying is that in spite of these large sums granted, from N15.6 trillion to about N18.9 trillion, that the prudential ratios still looking so strong is a clear demonstration that the Nigerian banking sector remains very strong and resilient and able to support Economic Development of Nigeria.”

 

Justifying the loan forbearance given to bank customers, the CBN governor said the decision was taken to save what would have been a doomsday.

 

“The health crisis occasioned by the pandemic itself would have resulted in a doomsday for the banking industry and the economy. If the CBN did not ask the banks to offer this forbearance to their customers, the loan would go bad immediately based on our prudential.

 

When those loans go bad by our prudential ratio, it means the customers can’t pay, they get classified and the banking system begins to wobble.

 

“On the strength of this forbearance, 22 banks out of 27 have come to the central bank to restructure 35,640 loans of their customers for about N7.8 trillion, which constitutes 41 per cent of the total industry loans, which is N18.9 trillion that we even consider is even low.

 

“We are working with the banks to give more forbearance to those customers. If we see forbearance moving to 60 or 65 per cent, we get more comfortable that we have been able to turn the corners by assisting businesses to get over their business and come again back to life. Loan forbearance has helped us prevent a doomsday scenario for the economy,” Emefiele stated.

 

He said the committee commended the Federal Government for the approval to establish a CBNled infrastructure development company, which will leverage local and international funds for rebuilding of critical infrastructure across the country.

 

“This entity, which will be wholly focused on Nigeria and Nigerians alone, will be co-owned by the CBN, the Africa Finance Corporation (AFC) and the Nigeria Sovereign Investment Authority (NSIA), but exclusively managed by an Independent Infrastructure Fund Manager (IIFM) that will mobilise local and foreign capital to support the Federal Government in building the transport infrastructure required to move agriculture and other products to processors, raw materials to factories, and finished goods to markets.

 

“The sum of N15 trillion is projected over five years for the initial run.

 

The committee noted with satisfaction the CBN’s immediate work on the updates and timelines for the establishment of this much-needed entity,” the CBN governor said.

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