The ambitious Anchor Borrowers’ Loan Scheme, initiated by the Central Bank of Nigeria to boost cash flow for agricultural production in the country, is encountering hurdles due to beneficiaries’ difficulty in repaying their loans upon maturity.
This situation has caused a delay in government funds and denied other potential applicants access to the program.
The newspaper’s findings reveal that out of the N1.1 trillion disbursed by the CBN to Anchor Borrowers’ Scheme (ABS) beneficiaries since its inception, only slightly over N546 billion has been repaid, leaving an outstanding balance of N577 billion.
The significant amount being held by borrowers, which includes commercial and microfinance banks, state governments, farmers’ associations, individuals, and corporate entities, has raised concerns within the Presidency.
There is growing worry that the program’s intended goals may be jeopardized if these funds are not promptly retrieved from the debtors.
Informed sources disclosed that President Bola Tinubu, who has been regularly briefed on the situation, is deeply troubled by the withholding of such a substantial sum of money. This money could otherwise be channeled to support other farmers seeking loans to enhance food production.
In response, the President has summoned top security agencies in the country to take all necessary measures to recover the substantial government funds from defaulters by September 18, 2023, in order to make these resources available to genuine farmers seeking loans to bolster food production.
Investors King learned that during a meeting with security agencies in Abuja, the President was visibly upset upon learning that one of the CBN’s subsidiaries was among the defaulting banks, obstructing vital funds meant for farmers to enhance production and ensure food security in the nation.
At the meeting, which reportedly took place at the Presidential Villa earlier in the day, it was revealed that a subsidiary of the CBN and a commercial bank had misappropriated N255 million, which was intended for disbursement to farmers and others in dire need of loans to enhance their production.
Some beneficiaries have refused to repay the loans as stipulated, citing inadequate returns on their investments and requesting additional time to meet their obligations to the apex bank, disregarding the terms of the initial agreement.
Speaking on the issue, a top security official, speaking anonymously, confirmed that many bank directors and managers had been interrogated regarding the substantial loan saga. Many of them admitted their involvement in securing these loans and the alleged breaches related to repayment.
“I can confirm that we have sent notices to all the defaulters, and numerous bank officials have confessed to their roles in the significant loan scandal. They have expressed their willingness to take the necessary steps to repay the loans,” a source familiar with the development stated.
“We have also communicated with all the debtors, and some of the banks, whose top managers have already been summoned and questioned, have assured us that they will settle the outstanding amounts in their names by the September 18 deadline,” the source added.
Notably, several farmers’ groups participated in the Anchor Borrowers’ Programme, a comprehensive CBN initiative aimed at promoting agricultural production. These groups include the Maize Farmers’ Association, Soya Beans Farmers’ Association, and Cotton Farmers’ Association.
However, investigations revealed that while the Maize Producers Association received a N39 billion loan from the CBN under the ABP, they have managed to repay only N23 billion so far. Cotton farmers, who borrowed N14 billion, have returned only N5 billion.
When contacted, most of the spokespeople for the security agencies in Abuja declined to comment on the presidential directive to recover and return the funds to the CBN.
Nigerian Banks’ Borrowings from CBN Surge 835% in a Month, Raising Liquidity Concerns
The Nigerian banking sector has witnessed an unprecedented 835% surge in borrowings from the Central Bank of Nigeria (CBN) in the span of just one month, igniting concerns over the nation’s liquidity stability.
Data reveals that banks’ dependence on the CBN has reached new heights, with their borrowings skyrocketing from a relatively modest N323.97 billion in August to N3.03 trillion in September. This remarkable increase underscores a growing reliance on the CBN’s support in times of financial stress.
This surge in borrowing activity has primarily been attributed to the CBN’s stringent monetary policies aimed at curbing inflation and managing the demand for foreign exchange. These policies have, in turn, squeezed commercial banks, compelling them to tap into the CBN’s Standing Lending Facility (SLF) for immediate liquidity needs.
Despite the escalating dependence on CBN funds, the Monetary Policy Committee (MPC) of the apex bank insists that the Nigerian banking sector remains fundamentally robust. MPC member Adenikinju Festus highlighted key indicators, including Capital Adequacy Ratio (CAR) and Non-Performing Loan (NPL) ratios, which still align with prudential standards. Furthermore, liquidity ratios have improved, and returns on equity and assets have risen.
However, the banking industry’s persistently high operating costs are raising alarms. In comparison to international standards, Nigerian banks are grappling with substantially higher operating expenses, prompting concerns about their long-term sustainability.
In a parallel development, the CBN’s Development Finance Department has disbursed a total of N9.714 trillion to various sectors of the economy over the past three years, with manufacturing and industries receiving the largest share at 32.6%.
Other sectors, including energy, agriculture, services, micro, small, and medium enterprises (MSMEs), export, and health, have also benefited significantly from these disbursements.
While the CBN remains committed to fostering sustainable economic growth, the surging dependence of Nigerian banks on short-term borrowings from the central bank is casting shadows on the sector’s long-term stability.
As Nigeria grapples with these liquidity concerns, the financial industry and regulators face the challenging task of charting a course towards a more resilient and sustainable banking environment.
Guaranty Trust Bank, FBN Holdings, FCMB Group, and Fidelity Bank Report N478.93bn in Non-Performing Loans
Rising Non-Performing Loans Hit Nigerian Banks in H1 2023
Non-performing Loans (NPLs) rose to N478 billion in four major banks in the country in the first half (H1) of the year.
Guaranty Trust Bank Holding Plc (GTCO), FBN Holdings Plc, FCMB Group Plc and Fidelity Bank Plc reported billion in NPLs in the period under review, representing a 16 percent increase from the N413.36 billion filed on December 31, 2022.
A breakdown of the report shows FBN Holdings with approximately 4.3 percent NPL ratio and a gross loan portfolio of N5.26 trillion reported an increase in NPLs from N204.29 billion in 2022 to N226.24 billion during the first half of 2023.
This represents an increase from the 5.4 percent NPL ratio and N3.79 trillion gross loans & advances reported in the previous financial year.
GTCO, in its financial disclosure, reported N115.29 billion in NPLs as of H1 2023, up from N102.37 billion in 2022.
The bank’s presentation to investors and analysts highlighted that the Group’s IFRS 9 Stage 3 loans decreased to 4.6 percent (Bank: 3.6 percent) in H1-2023 from 5.2 percent (Bank: 4.7 percent) in 2022. Notably, the highest NPLs were observed in the Individuals and Others sectors, at 20.9 percent and 30.96 percent, respectively.
Fidelity Bank on the other hand reported N84.73 billion in NPLs as of H1 2023, up from N61.37 billion while FCMB Group declared N52.66 billion in NPLs during the same period, an increase from N45.01 billion in 2022.
Banks in Nigeria have continued to grapple with non-performing loans, leading them to write off such loans. Concurrently, lenders have been debiting the accounts of debtors who have been reluctant to meet their obligations, all aimed at reducing the volume of non-performing loans.
In response to this challenge, the Central Bank of Nigeria (CBN) introduced the Global Standing Instruction (GSI) guideline in 2020. The GSI empowers banks to recover outstanding principal and interest from any account maintained by the debtor across all financial institutions in Nigeria upon default.
In a recent report, Kingsley Obiora, a member of the Monetary Policy Committee, noted that despite a decrease in the Capital Adequacy Ratio (CAR) to 11.2 percent in 2023 from 14.1 percent, it still exceeded the prudential requirement of 10.0 percent.
The Liquidity Ratio (LR) also remained above the regulatory minimum, increasing significantly from 42.6 percent in June 2022 to 48.4 percent in June 2023.
The Nigerian banking sector faces significant challenges with rising non-performing loans, but regulatory measures and prudent management strategies remain in place to maintain stability and protect the interests of both banks and their customers.
Nigeria Grapples with $8.25 Billion Undisbursed World Bank Loan as of July 2023
Investigation has shown that Nigeria faces the challenge of an unutilized World Bank loan amounting to $8.25 billion as of July 2023.
This information has been meticulously gleaned from the World Bank’s official Summary Statement of Loans/Credit/Grants, accessible on its website.
This substantial sum comprises $7.45 billion from the International Development Association (IDA) and an additional $1.12 billion from the International Bank for Reconstruction and Development (IBRD). The funds encompass loans that have been approved but remain unsigned, alongside those loans for which commitments have been signed.
Over the years, both the IBRD and the IDA, integral parts of the World Bank, have extended financial assistance to Nigeria.
The IBRD specializes in lending to governments of middle-income and creditworthy low-income nations, while the IDA offers concessional loans, known as credits, and grants to the world’s most impoverished countries.
As previously reported, the disbursement of these loans could potentially elevate Nigeria’s debt owed to the World Bank from $12.72 billion to a staggering $21.15 billion, marking a substantial increase of 66.27 percent.
These findings are in line with the audited financial statements of the World Bank for the fiscal year 2022, which disclosed that the bank had yet to disburse approximately $8.12 billion to Nigeria as of June 30, 2022.
Explaining the reasons behind the delay in disbursing the loans, particularly those with signed loan commitments, the bank, in its 2022 financial statements, attributed it to the fact that “loans are not effective, and disbursements do not commence until the borrowers and/or guarantors fulfill certain actions and provide required documentation.”
Data sourced from the Debt Management Office reveals that as of March 31, 2023, Nigeria’s outstanding debt to the World Bank stands at $14.33 billion.
A detailed breakdown indicates that this figure includes a $13.84 billion IDA loan and an additional $488.35 million loan, as outlined in the DMO’s external debt report.
In recent developments, the Federal Government of Nigeria has publicly stated its reluctance to seek further loans from both domestic and foreign sources.
This declaration came in the wake of the government’s decision to remove subsidies on petrol and harmonize exchange rates. Minister of Finance and Coordinating Minister for the Economy, Wale Edun, clarified this stance following the inaugural Federal Executive Council meeting held in Abuja.
However, Edun went on to emphasize that the government remains committed to fulfilling the loan requirements outlined in the 2023 budget. The overarching objective is to reduce reliance on borrowing for recurrent expenses, focusing instead on securing loans for capital expenditures, which offer returns and are self-financing.
In the face of these financial intricacies, Nigeria’s fiscal policies continue to evolve, reflecting a steadfast commitment to achieve financial sustainability and economic growth.
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