Coronavirus: CBN Sets Up N50bn Credit Facility, Cuts Rates

The Central Bank of Nigeria has announced 6 initial policies in response to the negative effect of the coronavirus on the country’s economy, as it establishes a N50 billion credit facility and cuts interest rates.

The CBN announced the measures on Monday during a press briefing on COVID-19.

In a statement issued by the apex bank, it reiterated its commitment to providing support for affected households, businesses, regulated financial institutions and other stakeholders from the negative impact of the coronavirus.

Policies Explained:

Interest Rate Reduction

The bank said it had reduced interest rates on all applicable CBN intervention facilities from 9% to 5% per annum for one-year period, with effect from March 1, 2020.

N50 Billion Credit Facility

The apex bank said it had established a N50 billion facility through the NIRSAL Microfinance Bank for households and Small and Medium Enterprises (SMEs) that had been severely affected by the pandemic, adding that it would extend it to hoteliers, airline service providers, health care merchants and others.

Extension of Moratorium

The CBN stated that  it had granted a further moratorium of one year on all principal repayment on loans , which it said was effective from March 1, 2020.

The apex bank also directed financial institutions to provide new amortisation schedules for the beneficiaries of the new intervention measures.

Credit Support For Health Care Industry

The bank said it would provide intervention loans to pharmaceutical companies to open or expand their plants in the country, adding that hospitals and health care practitioners who wished to expand or build health facilities would also benefit from the intervention.

Regulatory Forbearance

CBN said it had granted Deposit Money Banks leave to consider temporary and time-limited restructuring of the tenor and loan terms for businesses and households that were most affected by the pandemic, especially the oil and gas, agriculture and manufacturing sectors.

Strengthening Of Loan To Deposit Ratio

The bank said it would support the funding levels to maintain DMBs’ capacity to direct credit to individuals, households and businesses.

The bank added that it would consider additional incentives to encourage extensions of longer tenured credit facilities, adding that it would encourage the build of capital buffers in order to improve resilience of the sector.