Emmanuel OchayiThe Central Bank of Nigeria (CBN) has halted the acceptance of new loan applications under its Development Finance Intervention Programme, signaling a transition in its operational strategy.
In a circular addressed to bank Chief Executives, Sa’ad Hamidu, Acting Director of the Development Finance Department, highlighted the CBN’s intention to move away from direct involvement in development finance interventions.
This shift emphasizes a return to more traditional central banking roles, focusing on monetary policy.
The CBN’s decision, announced through the circular, aligns with International Monetary Fund (IMF) recommendations to tighten the monetary policy stance by phasing out credit intervention programs.
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These interventions, initially designed to support the economy during the pandemic, have been linked to rising inflation rates.
Notably, the CBN has mandated commercial banks to recover outstanding loans issued under these programmes, signifying a departure from directly facilitating intervention loans.
The move has extensive implications for Nigeria’s financial sector. It may lead to increased loan provisions by banks, covering potential losses from guaranteed or on-lent loans.
Organisations benefiting from these funds might face challenges in meeting loan obligations, risking financial stability and potentially facing liquidation.
The CBN’s shift from direct intervention marks a new phase where it will focus on advisory roles supporting broader economic growth objectives.
However, the withdrawal of shareholders and diminished investor confidence in affected organisations could exacerbate financial challenges, posing risks to Nigeria’s economic stability.
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