CBN Hits Pause on Intervention Loans, Shifting Focus
In a notable move, the Central Bank of Nigeria (CBN) has pressed the pause button on accepting new loan applications under its Development Finance Intervention Programme.
A circular titled “Suspension of Acceptance of New Applications under the Existing Central Bank of Nigeria, CBN Development Finance Intervention Programme” was issued to bank Chief Executives, marking a strategic shift in the bank’s operational strategy.
The circular, signed by Sa’ad Hamidu, the Acting Director of the Development Finance Department, outlines the suspension and signals a significant departure from the previous central bank’s emphasis on development finance intervention funds.
Simultaneously, the CBN has tasked commercial banks, previously responsible for distributing these intervention loans, with the duty of recovering outstanding loans issued under these programmes.
This move underscores the CBN’s commitment to streamlining financial commitments and returning focus to more traditional central banking roles.
The CBN clarified its evolving strategy, expressing its intention to step back from direct involvement in development finance interventions.
Instead, the central bank aims to concentrate on its primary responsibilities related to monetary policy, transitioning into a more advisory capacity where it can offer policy guidance supporting broader economic growth objectives.
The decision aligns with recommendations from the International Monetary Fund (IMF), urging a halt to intervention funds due to their impact on rising inflation rates.
The IMF’s key recommendations include sterilizing the impact of CBN’s financing of fiscal deficits on money supply and phasing out credit intervention programs that expanded rapidly during the pandemic.
The CBN, under Governor Godwin Emefiele’s leadership, had implemented various development programs across sectors such as agriculture, manufacturing, MSMEs, and energy.
The recent circular signals a significant shift in policy, potentially affecting financial stability, loan provisioning for banks, and the ability of organizations benefiting from intervention funds to meet their loan obligations.
Source: Nairametrics
