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One of the considerations of the Monetary Policy Committee (MPC) which met last week was the level of credit to the private sector, which they found very low and unsatisfactory.
The level of credit in the domestic economy channelled to productive private sector is critically below the levels required to place the economy on the path of balanced, sustainable, and inclusive growths.
The volume of credit between November and December last year till February this year is put at N16 trillion.
“For us to push for growth, deposit money bank must one way or the other be encouraged to grant credit to those who need credit”, said, Godwin Emefiele, governor of the Central Bank of Nigeria (CBN).
Addressing the media after the MPC meeting, Emefiele said the details as to the guidelines that will be unfolded by the CBN through the deposit money banks to increase credit to the private sector to catalyze credit in the economy will be made available in due cost.
However he said it is important to know that CBN will continue to adopt more conventional monetary policy approach that will streamline with the Bank’s development finance objectives to accelerate credit to the week, “to the needy, to priority sectors of economy at a single digit interest rate with a view to ensuring that we play our own role to catalyze growth in the country”.
The greatest challenge of the 17.3 million Micro, Small and Medium-Scale Enterprises (MSMEs) SMEs in operation is the poor access to affordable financing; leading to an estimated financing gap of about N9.6 trillion.
“From time to time the banking supervision department that primarily supervises or that have direct oversight of the operations of banks put in place policies that will encourage credit”.
In recognition of the importance of financing for economic growth and given its understanding of the implication of risk management in credit allocation, the Central Bank adopted a two prong approach to resolve the insufficient credit flow to the private sector and concomitantly accomplish its development finance function.
The first of the two approaches include a de- risking of bank lending to the private sector through a wide-range of credit guarantee schemes undertaken by the Bank. The second involves direct intervention initiatives in key high impact sectors including agriculture, MSMEs, manufacturing, and power.
Banking sector credit to the private sector is expected to grow to N16.7 trillion in 2018, representing a growth of 6.34 percent from N15.7 trillion recorded in 2017 according to FSDH Research.
The improvement in the macroeconomic and business environment; improved consumers’ confidence; and the drop in the yields on the Nigerian Treasury Bills (NTBs) are the main drivers of the expected credit growth.
Reeling out the achievements of the Bank, Emefiele said the sum of N393.5 billion had been released to 478 large scale agricultural projects since inception in 2010, even as the Bank was poised to disburse up to N400 billion at only 9.0 percent interest rate under the Real Sector Support Facility (RSSF), adding that the strategic initiative was targeted at projects in manufacturing and agriculture, given the mutual interdependence of both sectors for the complete industrialization of agro-allied business.
HOPE MOSES-ASHIKE
