The plan involves reallocating approximately N5.5 trillion
from its development finance operations to a collaborative framework involving
private banks and Development Finance Institutions.
The report also highlights that this strategic realignment
is in synchrony with the IMF’s advice, which advocates for Nigeria to refine
its economic strategies and concentrate on the essential duties of central
banking.
The restructuring blueprint includes a gradual withdrawal by
the CBN from direct development finance. This role has traditionally involved
offering favourable lending terms to key sectors such as agriculture and
enterprises of small to medium size.
In December 2023, the CBN announced a suspension of new loan
applications under its intervention programmes. The apex bank tasked commercial
banks, which previously facilitated the distribution of these intervention
loans, with the responsibility of recovering outstanding loans issued under
these programmes.
The apex bank now transfers these responsibilities to DFIs
which are co-managed by the Ministry of Finance and the CBN, in addition to
private banking entities.
According to the report, the IMF endorses this transition,
indicating that it’ll enable the CBN to better dedicate itself to its
fundamental responsibilities, including ensuring monetary stability and
overseeing financial regulation.
Furthermore, the Fund advises that preferential lending
terms be reserved for scenarios where market shortcomings are present.
The report read, “The CBN’s decision to phase out its
development finance activities is welcome. These activities (N5.5 trillion)
will be transferred to development finance institutions, owned jointly by MOF
and CBN, and private financial institutions.
“An orderly transfer of the portfolio is key to avoiding
interruption of credit flows to agriculture and small and medium enterprises.
Undercapitalised financial institutions should not be eligible to absorb CBN’s
portfolio.
“The CBN’s lending programmes have been traditionally done
on concessional terms. The authorities will have to decide if new lending will
continue to be concessional and how costs will be accommodated. Staff suggests
limiting concessionality to clear areas of market failure.”
The apex bank is also working on recovering overdue loans
from its development finance interventions. This is part of a broader effort to
rein in inflation and manage credit growth effectively.
“Other measures to rein in inflation include the bank’s
re-focus on standard monetary policy instruments, rolling back its N10 trillion
quasi-fiscal operations while complying with statutory limits on its credit to
the government, and reducing rapid credit and money supply growth.
“Concurrently, the CBN has already commenced an aggressive
recovery of overdue development finance intervention loans,” the report stated.