Non-interest window: CBN’s allure for substantial economic growth

The recent announcement by the Central Bank of Nigeria (CBN) that it would soon release a framework for the integration of non-interest window in all its intervention programmes, particularly the Anchor Borrowers’ Programme (ABP) and the Targeted Credit Facility (TCF) to support households and micro, small and medium enterprises (MSMEs) affected by the COVID-19 outbreak has brightened prospects for increased output of agricultural and other products, writes TONY CHUKWUNYEM

Mixed reactions may have greeted the move in some quarters, but the Central Bank of Nigeria (CBN)’s decision, over a decade ago, to roll out a framework for non-interest banking, has clearly turned out to be one of the most significant steps taken by the apex bank since the early 1990s. While non-interest banking was not introduced for only adherents of Islam, financial experts have long argued that given the country’s huge Muslim population, it would play a key role in boosting financial inclusion. For instance, at a forum in 2009, a former Chief Executive Officer, Enhancing Financial Innovation & Access (EFInA), a financial sector development organisation that promotes financial inclusion in Nigeria, Modupe Ladipo, said that a survey carried out by the group in 2008, showed that 92 per cent and 86 per cent of the adult population in the North West and North East geopolitical zones of the country respectively was unbanked. Ladipo added that the survey’s findings also indicated that non-interest finance was a potential innovative approach to increase access to finance for the unbanked.

Similarly, in his remarks at the forum, the CBN governor at the time, Lamido Sanusi, said the introduction of non-interest banking would support financial sector deepening; enhance product offerings and increase enhanced investment in the economy. He reiterated that establishing non-interest banking was one of the FSS 20 2020 initiatives to establish Nigeria as a hub for financial services in Africa. In fact, also speaking at the event, the then Managing Director of Jaiz Bank Plc, the first and only full-fledged non-interest bank in the country at the time, Mohammed Bintube, put the estimated Islamic banking market size in Nigeria as at December 2008 at N4.35 trillion.


But since then, the number of participants in the sector had risen to seven in 2019, reflecting strong economic growth in core markets and regulatory advancements provided by CBN, other financial system regulators such as the Nigeria Deposit Insurance Corporation (NDIC), the Securities and Exchange Commission (SEC), the Nigerian Stock Exchange (NSE), as well as the National Pension Commission (PenCom).

Integration with intervention programmes

Thus, some analysts may have viewed the announcement by CBN last Thursday that it had plans to release a framework for the integration of non-interest window in all its intervention programmes, particularly the Anchor Borrowers’ Programme (ABP) and the Targeted Credit Facility (TCF) to support households and micro, small and medium enterprises (MSMEs) affected by COVID-19 as something that was long overdue. According to the Director, Corporate Communications, CBN, Isaac Okorafor, the creation of a non-interest window followed appeals by concerned stakeholders for farmers across the country to also be considered for funding under the non-interest window. Also speaking on CBN’s N50 billion COVID-19 Targeted Credit Facility, Okorafor noted that the bank was determined to push the economy to ensure Nigeria does not experience consecutive quarters of negative growth. He disclosed that the CBN Governor, Mr. Godwin Emefiele, had directed the Development Finance Department of the bank as well as the NIRSAL Micro-Finance Bank (NMFB) to fast-track the approval process of loans, which he stressed were to help restore businesses and livelihoods. Significantly, the apex bank made the announcements at a stakeholder meeting it organised to review the successes recorded under the ABP and the strategies for the 2020 agricultural wet season.

It was also during the meeting, which had the Director, Development Finance Department, (CBN), Yila Yusuf, in attendance, that the regulator unveiled plans to fund the value chains of nine commodities to the tune of N432 billion in the 2020 wet season. Okorafor said the bank, in the 2020 agricultural wet season, was committed to aggressively fund its agricultural programmes and spur farmers along select crop value chains to prevent the country from sliding into a recession, as is currently being experienced in some major economies of the world. In his remarks, Yusuf explained that the target for the 2020 agricultural wet season was to advance about N432 billion, through the participating banks, in the value chains of nine commodities.

He also disclosed that over 1.1 million farmers, cultivating over one million hectares of farmland, were expected to benefit from the loans that will help to produce a collective output of 8.3 million metric tons. According to Yusuf, the focus for the 2020 wet season is to ensure the provision of improved seeds to incentivise the farmers to return to their farms. He also stressed that CBN adopted the value chain approach across all the commodities to ensure that every player along the entire value chain, from the farmers through to the processors, was financed.

He stated that the CBN’s funding of the ABP for the 2020 season was the highest since the inception of the programme in 2015, adding that this was quite significant considering the successes recorded in the 2019 season that contributed to averting a food shortage in the country, despite supply chain disruptions occasioned by the COVID-19 lockdown, during which some major producing countries of staples, such as rice, closed their silos and halted the export of those produce from their shores. Other stakeholders present at the meeting, such as the presidents of the Rice Farmers Association of Nigeria (RIFAN), Alhaji Aminu Goronyo; National Cotton Association of Nigeria (NACOTAN), Mr. Anibe Achimugu, Maize Association of Nigeria (MAN), Alhaji Bello Abubakar, and the Maize Growers, Processors, and Marketers Association of Nigeria (MAGPMAN), Dr. Edwin Uche, all attested to the success of the ABP, which they noted had enhanced the value chains of their respective commodities.

Africa’s biggest rice producer

Although, CBN set up several intervention programmes between 2014 and 2019, such as the Agricultural Credit Guarantee Scheme (ACGS), Commercial Agriculture Credit Scheme (CACS), the N220 billion Micro, Small and Medium Enterprise Development Fund (MSMEDF), Small and Medium Enterprises Credit Guarantee Scheme (SMECGS) and the Power and Airline Intervention Fund (PAIF), among others, it is the ABP, which it established in 2015 that is the flagship of banking watchdog’s intervention schemes. For instance, while prior to the establishment of the scheme, Nigeria used to be the biggest importer of rice from countries such as Thailand and India, it now leads the continent in the production of the commodity.

This was confirmed by the Chief Executive Officer of the Nigeria Export Promotion Council (NEPC), Mr. Segun Awolowo, when he revealed at a recent event that Nigeria’s import of foreign rice had declined by 3.7 million metric tonnes. He stated that with Nigeria’s rice production put at 4.9MMT, dependence of the country on foreign rice had declined from 4.5MMT to 800,000MT, adding that the country was among the top 16 rice producers in the world with production valued at N684 billion. He said with the country’s latest production record, which surpassed other African countries, Nigeria’s annual rice import would have reduced from 4.5MMT to 800,000MT. Awolowo said: “We gathered that Nigeria attained about 4.9MMT in rice production in 2019, which makes it the largest producer in Africa, surpassing Egypt, which produced 4.3 million metric tonnes annually. With Nigeria’s latest production record, annual import would have drastically reduced from 4.5MMT to 800,000MT.” Perhaps, more significantly, besides making Nigeria Africa’s largest rice producer, the ABP has generated massive employment opportunities. For instance, CBN revealed that between 2015 and June 2019, the programme had empowered 1.1million farmers.

Last line

Although non-interest finance is not targeted at only Muslims, the consensus in industry circles, at the weekend, was that CBN’s plan to integrate non-interest window in all its intervention programmes, especially the ABP and the Targeted Credit Facility (TCF) to support households and Micro, small and medium enterprises (MSMEs) affected by COVID-19 would be more widely embraced in North West and North East geopolitical zones, where the bulk of the country’s rice is produced, since most of the farmers in those regions, are adherents of the Islamic faith. With more farmers and other entrepreneurs in the regions and all over the country likely to embrace the CBN’s non-interest intervention projects, Nigeria seems poised to record higher outputs in agriculture as well as other sectors in the coming years.




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