Coronavirus: CBN to Provide Temporal Support for individuals and institutions
New policy measures have been introduced to provide alternative support for individuals and institutions to cushion them during the harsh economic impact of COVID-19, the Central Bank of Nigeria (CBN) has stated.
The new policy measures will help buy affected households, businesses, regulated financial institutions, and other stakeholders some time to fulfil the obligations they owe the financial sector.
In a press release signed by the Director of Financial Policy and Regulation, Kevin Amugo on Monday, March 16, 2020, the following policy measures are expected to adhere to effective March 1, 20202;
- EXTENTION OF MORATORIUM:
All CBN intervention facilities are hereby granted a legal authorization to debtors to postpone payment for one year on all principal repayments.
This means that any intervention loan currently under moratorium is hereby granted an additional period of one year. Accordingly, participating financial institutions are hereby directed to provide new repayment schedules for all beneficiaries.
- INTEREST RATE REDUCTION:
Interest rates on all applicable CBN intervention facilities are hereby reduced from 9 to 5 per cent per annum for 1 year
- CREATION OF A N50 BILLION TARGETED CREDIT FACILITY:
Also, the CBN has established a facility through the NIRSAL Microfinance Bank for households and small and medium-sized enterprises (SMEs) that have been particularly hard hit by Covid-19, including but not limited to hoteliers, airline service providers, health care merchants, etc.
- CREDIT SUPPORT FOR HEALTHCARE INDUSTRY:
To meet the potential increase in demand for healthcare services and products, the CBN has made available loans for pharmaceutical companies intending to expand their drug manufacturing plants in Nigeria. This loan is equally made available to hospital and healthcare practitioners who intend to expand or build health facilities to first-class centres. This is in addition to growing the size of existing interventions to the Agricultural and Manufacturing sectors in Nigeria.
- REGULATORY FORBEARANCE:
The CBN hereby grants all banks, accepting deposits to consider temporary and time-limited restructuring of the tenor and loan terms for businesses and households most affected by the outbreak of Covid-19 particularly Oil & Gas, Agriculture, and manufacturing.
The Central Bank is also working closely with Debt Management Banking (DMBs) to ensure the use this forbearance is targeted, transparent and temporary, whilst maintaining individual DMB's financial strength and overall financial stability of the system.
- STRENGTHENING OF THE CBN LDR POLICY:
Given the success of Loan to Deposit Ratio (LDR) Policy in growing credit to the economy and reducing interest rates, the CBN would further support industry funding levels to maintain DMBs' capacity to direct credit to individuals, households, and businesses.
The Central Bank of Nigeria is considering additional incentives to encourage the extension of longer-tenured credit facilities. This means that a company can take out an umbrella loan for generating capital over an extended time.
However, DMBs are encouraged to continue to build capital buffers to improve the resilience of the sector.
The Central Bank says it is ready to provide liquidity backstops as and when required given its role as Banker to the Federal Government and lender of the last alternative.
Finally, the CBN says it shall continue to monitor developments and will issue further updates as may be appropriate.