Nigeria: CBN to Lend Directly to Companies Through Commercial Papers

Jul 25, 2018 | Vanguard; AllAfrica

Determined to make low-interest, long-term funds available to the real sectors of the nation's economy, the Central Bank of Nigeria (CBN) yesterday, announced its readiness to lend to large companies in the country by buying Commercial Papers (CPs) issued by such firms.

CBN Governor, Mr. Godwin Emefiele, disclosed this at the end of the Monetary Policy Committee (MPC) meeting, in Abuja, yesterday. The committee retained the Monetary Policy Rate (MPR) 14 per cent, along with all its parameters, in line with analysts' projections. Emefiele said that the decision to invest in corporate organizations became necessary because Deposit Money Banks (DMBs) had frustrated past incentives by CBN aimed at encouraging them to lend to the real sectors of the economy. He said that such CPs would be expected to come to the market at single-digit interest rates and for tenures, as long as, seven years. He said: "The MPC deliberated extensively on what can be done to encourage banks to lend to the private sector because of the number we looked at during the main meeting, the MPC was concerned that credit to the real sectors was sliding and there was need to incentivise the banks to lend to the private sector. "At this meeting, we saw improvement which was gratifying but we feel we must still do what we want to do. In order to achieve lowering interest rate especially to agriculture and manufacturing sectors, we will encourage large corporates to issue CPs into the market. "In order to complement the banks, we expect that those CPs will come in single-digit of 9 per cent or below 10 per cent, and for a long tenure, as high as, five years or seven years, with a two-year moratorium, and for specific purposes. "If the CBN sees those kinds of notes in the market, we will complement the efforts of the banks through any mechanism to support that by lending to that corporate at that single-digit rate. "It is not meant to be in competition with the banks, it is meant to complement their efforts. We want to see that our objective to see to it that we achieve lower interest rate of a single digit can come through this means." The CBN boss said that banks would also be incentivize to buy such CPs to be issued by the companies. Read more on AllAfrica. Source: AllAfrica