The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) is set to convene next week for its periodic meeting.
The notice of the meeting, which was released by the apex bank on its website, stated that the 275th meeting of the MPC is scheduled to hold on next Monday, September 21 and Tuesday, September 22, 2020, at CBN Headquarters, Abuja.
The MPC meeting: Basically, the MPC is the CBN’s highest monetary policy decision-making body. It comprises the governor of the Bank who is the chairman, the four deputy governors of the Bank, two members of the board of directors of the Bank, three members appointed by the president, and two members appointed by the governor.
The MPC sets monetary policies for banks in the country through decisions on the Monetary Policy Rate (MPR), Cash Reserve Ratio (CRR) and Liquidity ratio. These variables determine the quantum of funds that the banks have at their disposal to lend.
The MPR is the rate at which the CBN lends to banks. This, in turn, determines the interest rate that banks charge members of the public.
Decisions at the last meeting
The Central Bank’s MPC meeting was last held in August 2020, where all key rates were left unchanged. Basically, the MPR was kept at 12.5%, while other parameters such as Cash Reserve Ratio (CRR) at 27.5%, Liquidity ratio at 30%, and asymmetric corridor remained unchanged.
Emefiele explained that eight members of the committee voted in favour of holding the MPR, while two members wanted it reduced.
According to the MPC, the decision to hold all rates constant was largely driven by the effect of the outbreak of COVID-19 that has largely disrupted the global economy.
AfDB assures firms of supporting their expansion plans
AfDB is dedicated to prepare homegrown institutional investment funds.
Africa Development Bank (AfDB) has reassured firms of its dedication to their expansion plans and fortification of their capital base through its homegrown institutional investment funds.
While announcing the bank’s endorsement of a $10 million unsecured facility given to InfraCredit, a Nigerian firm, Stefan Nalletamby, AfDB’s Director of Financial Sector Development, explained that the financial institution is dedicated to prepare homegrown institutional investment funds and invigorate non-sovereign local debt capital market advancement in Nigeria.
He said, “The Bank’s help will fortify the capital base of InfraCredit, supporting the expansion of the Company’s core business of guaranteeing of bonds securities issued to fund infrastructural projects.
“This at last assists with expanding private sector financing for critical infrastructure such as; energy, agribusiness, water, health and education, through local capital markets.”
Explore the Nairametrics Research Website for Economic and Financial Data
Chief Executive Officer of InfraCredit, Chinua Azubike, said, ‘’Despite the impact of COVID-19, and changes to macro-economic assumptions, we are pleased to have reached yet another milestone in our pursuit to strengthen our robust balance sheet and guarantee issuing capacity.
“Notwithstanding challenging market conditions, we have continued to demonstrate our strong fundamentals, solid underlying portfolio performance, proven track record and profitability.”
With the admission of AfDB to its capital structure, he explained that his company is confident of its continuing ability to deepen market penetration and support access to long term domestic credit for the growing pipeline of infrastructure projects that will create jobs and support local economic growth.
CBN to increase loans to agricultural sector to 10% of total bank credit
The CBN continues with its support for the agricultural sector.
The Central Bank of Nigeria (CBN) has revealed that the country needs to increase its level of bank credit to the agricultural sector by over 50% within the next 4 years to boost food production.
The implementation of this is expected to drive the allocation to the sector to 10% of the entire credit in the banking sector from the current 4%.
This disclosure was made by the CBN Governor, Godwin Emefiele, on Tuesday, September 15, 2020, at the 13th Annual Banking and Finance Conference, organized by the Chartered Institute of Bankers (CIBN) in Abuja.
Emefiele said that the banking sector should focus on increasing its support for the agricultural sector, as the coronavirus pandemic has caused disruptions on global supply chains and food supply from other countries.
The CBN boss stated that some of the opportunities in the agricultural sector that banks should explore include addressing some of the existing gaps in the agriculture value chain like storage centres, transport logistics and technology platforms, that can enable rural farmers to sell their produce directly to the markets.
Emefiele also disclosed to bankers that currently, loans to the food sector accounts for around 4% of the total credit in the banking sector. He said the pandemic had exposed the risk of relying on food and drug imports, as most countries are reluctant to export goods to other countries.
Nairametrics had reported on President Muhammadu Buhari’s directive to CBN not to allocate foreign exchange for food and fertilizer imports. He said the Federal Government would rather empower more local farmers and use agriculture as a means to create more employment among Nigerians.
Nigeria is reliant on imports, including food items, to meet its needs due to limited manufacturing capacity. It has been struggling to reduce its $20 billion annual food import bill as it finds it difficult to diversify the economy away from oil.
Emefiele told bankers that currently, loans to the food sector accounts for around 4% of the total credit in the banking sector.
CBN allows banks to pay winnings, salaries for 7 banned betting & gaming companies
The banned betting and gaming companies are now allowed to access their accounts for limited purposes.
The Central Bank of Nigeria has given some commercial banks instructions to allow betting and gaming companies suspended earlier in the month the approval to honour withdrawals from their accounts to pay for winnings, salaries and other overhead expenses.
Nairametrics saw a copy of the letter addressed to one of the banks.
- Recall on September 5th the central bank instructed banks to post a no debit on account of 38 companies some of which included betting and gaming companies for violating its foreign exchange regulations, freezing their accounts.
- In the prior memo instructing the banks to freeze the accounts the CBN did not mention that it was for forex infractions. However, this memo now confirms that’s what the ban was for.
- However, banks pleaded with the apex banks to allow the betting and gaming companies to meet urgent operational requirements.
In one of the memos seen by Nairametrics, the CBN wrote;
On Quote: “You will recall at the meeting held by the Governor of the Central Bank of Nigeria (CBN) with your bank and stakeholders of seven (7) betting and gaming companies on September 11 2020, you pleaded for clemency processing some transactions in violation of the extant foreign exchange regulations. Similarly, the betting and gaming companies intreated the Governor to allow them discharge operational expenses.”
The CBN therefore approved that cheque payments and transfers be made out of the accounts provided it was towards winnings, salaries and other overhead expenses.
On quote: “Consequently, the Management of CBN has magnanimously granted your bank the approval to honour instruments presented by the companies for payment of winnings, salaries and other overhead expenses.”
Despite the partial lifting on the ban, the CBN still maintained a “Post No Debit restriction on the account and ordered that “no other transactions should be processed for any of the companies during the period of the waiver” effectively restricting the owners of the companies from accessing to pay capital obligations.
A copy of the letter is attached below;