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.