The decision by the Central Bank of Nigeria (CBN) to force deposit money banks to increase lending to the real sector of the economy, has begun to have some positive impacts. This is because, between May and October this year, Nigerian manufacturers collectively received a total of N459.69 billion from the banks.
The president of the Manufacturers Association of Nigeria (MAN), Mr Mansur Ahmed, confirmed this earlier today when he spoke to CNBC Africa. According to him, the increase in the credit facilities provided by Nigerian banks is all thanks to the CBN’s recent policy on loan to deposit ratio.
Recall that Nairametrics reported this development. The apex bank had first set the loan to deposit ratio at 60% before later increasing it 65%. The banks have until next month to comply or risk being sanction.
The policy move was expected to help reinvigorate the real sector of the Nigerian economy. It is, therefore, not very surprising to see that it is already having a positive impact on the manufacturing sector.
Note that Mr Mansur even attributed the recently recorded growth in the manufacturing sector to this CBN policy. The Nigerian manufacturing sector grew by 1.10% in Q3 2019, according to the National Bureau of Statistics, NBS.
“It’s true. The recent intervention of the CBN has indeed helped to direct more credit to the sector. Perhaps that is already reflected in the improvement in the growth rate of the manufacturing sector which has gone up to about 1.10% from something like –0.12% in the previous quarter.”
Now, inasmuch as this is quite celebratory, Mr Mansur said the important thing now is to sustain this momentum. This is very important, he said, because “the cost of capital is still a major impediment to growth.” Therefore, the CBN and DMBs should not relent in their effort to lending more to the manufacturers, particularly those operating in small scale basis.
Watch the full interview here.