The Central Bank of Nigeria (CBN) has N2.126 trillion in unpaid funds from its intervention program, which were sourced from the Cash Reserve Ratio (CRR) of deposit money banks (DMBs).
This is from the N2.408 trillion total loan disbursed to subnational governments and businesses across the country when the program was initiated in 2018. The paid loans represent only 11.71%- N282.04 billion of the total loans disbursed.
This is according to the CBN Development Finance report detailing the loans to different sectors of the economy over the past years.
The Differentiated Cash Reserve Ration (DCRR) intervention was established in 2018 with the aim of increasing FX earnings, job opportunities, diversify revenue base and provide sustainable inputs for industrial sector of the economy.
The program had around 499 beneficiaries which includes both state governments and businesses such as Bua Refinery and Petrochemical Ltd. Interest rate payment for the program stood at N51.47 billion with N67.3 billion as amount overdue.
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Achievements and problems of the program
According to the report, the achievements of the program include; productive use of banks’ CRR to stimulate economic development, creation of over 6million direct and indirect jobs, import substitution and increased Purchasing Managers’ Index (PMI) for manufacturing sector.
The program had several problems mitigating against its success such as forex scarcity, commercialisation of financed infrastructural projects to guarantee payments and poor optimisation of export potentials.
However, the report recommended the program be continued since it offers alternative credit funding source. It also stated that the interest rate gap should be bridged to prevent refinancing of non-performing facilities from the books of banks.
What you should know
In 2018, the Central Bank of Nigeria (CBN) released guidelines for disbursing of funds to banks for lending from their Cash Reserve Ratio (CRR). The apex bank had stated that the projects to be funded must be geared towards backward integration and import substitution.
DCRR funding aims to offer affordable financing to Deposit Money Banks (DMBs) that are keen on extending credit to customers for new and expansion projects in the real sector, specifically in Agriculture and Manufacturing.
The agricultural and manufacturing sectors received N6.002 trillion intervention from the apex bank from the total N10.3 trillion disbursed as intervention finance from the CBN over the past 9years. This represents about 57.78% of the total funds.