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CBN Announces New ‘100 for 100 Policy’, Sets Loan Caps at N5 billion

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The Central Bank of Nigeria (CBN) has capped its recently announced 100 for 100 policy loan on Production and Productivity (100 for 100 PPP) at N5 billion.

100 for 100 PPP was established to stimulate the flow of credit to the real sector of the economy in order to reverse the nation’s over-reliance on imports.  Eligible private companies with the potential to transform and catalyse the productive base of the Nigerian economy will be able to access up to N5 billion under the new CBN initiative.

The apex bank explained that any amount above the stipulated limit will require the special approval of the CBN management. In a statement signed by Philip Yila Yusuf, the CBN Director of the Development Finance Department and seen by Investors King, the central bank stated that the interest rate under the programme would be nothing more than 5% per annum, until February 28 2022 when it will return to 9% per annum.

The CBN Governor, Mr. Godwin Emefiele last month announced that the ‘100 for 100’ policy was to provide support for selected private sector companies across the country. He stated that the policy would identify, scrutinize and eventually support those who are deemed qualified for the policy. The policy would spread over 100 days for 100 companies, rolling over into another 100 private sector companies for the next 100 days.

The CBN also stated that the initiative will be funded from the CBN’s Real Sector Support Facility or any other funding opportunity that may be determined by the bank. The initiative was announced to have been designed to boost productivity and production necessary to transform the economic base of the country. Emefiele stated that it was also designed to end the country’s overarching reliance on imports, in turn boosting domestic productivity.

An initiative like this will prove very useful for the country, both in the short-term and the long-term. If the Central Bank identifies private sector companies and strengthens them, the production rate of those domestic companies will increase rapidly. This will in turn gradually reduce the need for the country to depend highly on other currencies or foreign imports, and be increasingly confident in their own products.

The loan caps and interest rates stipulated under the initiative seem encouraging to private companies that lack funding to function fully. They can take huge loans without being worried about exorbitant interest rates, and still have enough to carry out activities. Overall, this is a promising initiative for the Nigerian economy.

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How to Apply for CBN’s 100 for 100 PPP Loan

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The Central Bank of Nigeria (CBN) recently kick-started the 100 for 100 Policy on Production and Productivity, targeted at private companies willing to apply for a loan to fund a project.

Last month, CBN Governor Godwin Emefiele said that the policy would take prospective beneficiaries through a process of scrutiny before they would be deemed eligible for the loan. Selected companies can apply for loans of up to N5 billion under the 100 for 100 policy.

The CBN will use Key Performance Indicators (KPIs) to evaluate whether or not the company can have a direct impact on the nation’s economy. It was also confirmed that the policy would involve 100 companies in 100 days, before rolling over to the next 100 days. The interest rate on the loans under the policy will not be higher than 5.0% p.a. until February 28th 2022 when it will revert to 9% p.a.

The Key Performance Indicators to be considered by the CBN include: rate of growth in production output, increase in capacity utilization, increase in export volume, increase in export value, decrease in industrial raw material import volume, decrease in industrial raw material import value, and increase in a number of jobs generated.

The companies interested must submit applications to their Participating Financial Institutions (PFIs, i.e. banks partnering with the Central Bank in the policy execution), together with the necessary documents. Some of the documents required for the application include Financial statements, certified copies of the company’s registration with the Corporate Affairs Commission (CAC), three years of audited finances, evidence of the company’s worthiness, at least two credit reports of the company and directors.

Other necessary documents include a business plan of the project for which the loan is being acquired, and a detailed status report on the project’s capacity utilization, production output, efficiency level, employment level, export capacity, and value creation. Companies also need to provide projections of increased capacity utilization, production output, productivity level, employment level, export capability, and value creation in order to represent the project’s economic benefits after financing. Applicants will notify the CBN of submitted applications through a dedicated online portal on the official website at 100 for 100 ppp.

Once the lending bank receives the application, it will conduct due diligence based on business and credit. After that, the bank will forward the applications of the eligible private companies to the CBN for approval by the appropriate Private Finance Initiative Credit Committee.

The CBN will then screen and accept eligible companies for 100 days, before rolling over to the next 100 days. After that, the CBN will release the approved amount to the Participating Financial Institution for disbursement to the selected private companies. The successful beneficiaries will be published nationally for Nigerians to verify with details of the facility granted, operating sector, manufacturing activities that have been financed, and Participating Financial Institution.

 

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Credit to Private Sector Rises to N33.26 Trillion in August 2021

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The Central Bank of Nigeria (CBN) has disclosed that credit to private sector went up by N498.6billion in August to N33.26trillion from N32.8trillion reported in July 2021.

The N33.36trillion figure announced by the CBN is a new record that was fuelled by banks, among others increased lending to real sector.

CBN in its Money and Credit Statistics for the period revealed that credit to private sector in January was N30.65trillion and dropped by 0.47 per cent to N30.5 trillion in February.

However, in March, it closed at N31.44trillion and crossed the N32.1trillion mark in April to N32.12 trillion.

In addition, the CBN reported N32.63trillion and N33.36trillion credit to private sector May and June respectively.
Analysts believe banks lending to real sector played a critical role in the recent increase in Nigeria’s Gross Domestic Product (GDP).

An economist and Chief Executive Officer, BIC Consultancy Services, Dr Boniface Chizea said he is optimistic that banks credit to real sector, amid severe challenges are yielding positive results. According to him, “The volume of credit which seems humongous will deliver expected dividends despite perceived inhospitable investment environment. We should therefore remain confident and hopeful that desired impact must be felt if not immediately then in due course.

“We must also accept the fact that we would be challenged if we want to isolate the direct impact of the credit on the economy. So, we must remain assured that the credit is not money down the drain.”

On his part, Economist & Private Sector Advocate, Dr Muda Yusuf said the growth in credit to private sector is laudable.

He noted that the impact would depend on the sectoral spread, quality of credit, tenure of the funds and interest rate.

Yusuf said: “My guess is that a significant percentage of this have been given to large corporates, multinationals and high end medium enterprises. The CBN has done a lot in lending to agriculture, but the quality of the lending is an issue. Reports indicate high default rates in agricultural credit, especially the anchor borrowers’ scheme.

“Monetary intervention is imperative for real sector development. But it is not sufficient to guarantee the desired outcomes of growth and productivity. The context in which businesses are operating is as important as the funding, if not even more important. The totality of the investment environment must be right for sustainable real sector development to be achieved.”

He added, “Therefore, to complement the credit to the private sector, the other factors that should reckoned with include infrastructure quality, especially power, roads and railways. There are also issues around the quality of the regulatory environment, the foreign exchange policy regime, the ports situation, volatility of the naira exchange rate, the tax environment and the security situation.

“These are not things monetary intervention can solve. It takes an impactful fiscal policy intervention to fix these problems. Some of the issues border on economic reforms that need to happen. Engagements between the private sector stakeholders and policymakers is critical to achieving sustainable development of the economy.”

The Governor, CBN, Mr. Godwin Emefiele had in his communiqué at the end of August Monetary Policy Committee (MPC) meeting said the committee noted the improvement in lending to the real sector following the introduction of the Loans-to-Deposit Ratio (LDR) in 2019.

According to him, “Industry gross credit increased by N6.63 trillion from N15.57 trillion at end-May, 2019 to N22.20 trillion at end-July, 2021. The credit growth was largely recorded in manufacturing, oil and gas and agriculture sectors.”

He expressed further that the MPC members noted the unequivocal importance of credit growth to the sustained recovery of output and the moderation in price development as supply improves.

“It thus, called on the Bank to maintain adequate surveillance on banks to ensure compliance with its extant credit policy, while ensuring that they are not unduly exposed to credit risks.

“The Committee also noted the relevance of the Bank’s suite of interventions to the overall system credit, urging its continued use to fund sectors with high employment-generating capacity,” he said.

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Buhari Borrows N14.86 Trillion from CBN in Six Years

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A new report from the Central Bank of Nigeria (CBN) has revealed that President Muhammadu Buhari-led’s administration has borrowed a total sum of N14.86 trillion from the CBN through Ways and Means Advances since the administration came to power in May 2015.

Federal Government’s total debt from the CBN stood at N648.26 as of June 2015, a month after President Buhari was sworn in. The debt rose to N856.33 billion by December 2015 and N2.23 trillion by December 2016, the CBN data has shown.

Ways and Means Advances is a loan facility used by the central bank to finance the government in periods of temporary budget shortfalls subject to limits imposed by law.

Government borrowing from the central bank rose to N3.31 trillion in 2017, representing an increase of N1.08 trillion. Buhari further borrowed N2.1 trillion in 2018 to take total borrowing to N5.41 trillion.

This continues in 2019 as the Federal Government took another N3.31 trillion loan from the CBN to hit N8.72 trillion in debt.

In 2020 during COVID-19, the Federal Government borrowed N4.9 trillion to plug its fiscal financing gap, bringing government’s total borrowing to N13.11 trillion.

In the first half of 2021, the Federal Government borrowed an additional N2.4 trillion from the apex bank to take its total borrowing to N15.51 trillion (N13.11 trillion plus N2.4 trillion).

However, deducting the N648.26 billion debt met by President Buhari from the total debt of N15.51 trillion revealed that Buhari’s administration has borrowed N14.86 trillion in the last six years.

Experts have warned that Federal Government abuse of Ways and Means Advances stipulated at five percent of the previous fiscal revenues could raise risks to macro-stability in the context of weak institutional safeguards that preserve the credibility of policymaking and the ability of the central bank to control inflation.

The CBN’s guidelines limit the amount available to the government under its WMF to five per cent of the previous year’s fiscal revenues. However, the FGN’s new borrowing from the CBN has repeatedly exceeded that limit in recent years, and reached around 80 per cent of the FGN’s 2019 revenues in 2020,” Fitch Ratings stated in January 2021.

Commenting on the situation, Mr Bismarck Rewane, the Managing Director and Chief Executive Officer, Financial Derivatives Company Limited, said the government needs to securitise borrowing from CBN.

He said, “N15tn is about 45 per cent of total money supply. So, if, for example, those ways and means advances were securitised today, people will have to invest in government securities and it will reduce money supply by 45-50 per cent.

“What we need to do is to actually securitised this formally. But I think that right now, the Federal Ministry of Finance or DMO is paying interest on the ways and means advances. So, the effect is that there is a cost to the borrowing, and the central bank is receiving the interest on it.

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