COVID-19: CBN defends policies, blasts NESG

The Central Bank of Nigeria (CBN) has reacted to a statement by the Nigerian Economic Summit Group (NESG) which questioned its measures to stabilize the country’s financial system and reduce the negative impact of the COVID-19 pandemic.

CBN accused NESG of malicious intent, noting that the organisation could have raised its allegations directly instead of through the media.

Isaac Okorafor, CBN Corporate Communications Director, in a statement, said the bank took steps to increase the flow of credit to critical sectors in order to ensure faster recovery of the economy.

Okorafor listed the interventions as a 1-year extension of a moratorium on principal repayments for CBN intervention facilities; strengthening of the Loan to Deposit ratio policy; creation of a N50 billion target credit facility for affected households and small and medium enterprises through the NIRSAL Microfinance Bank.

Others were the creation of N100 billion intervention fund in loans to pharmaceutical companies and healthcare practitioners; creation of a research fund to support the development of vaccines in Nigeria; N1 trillion facility in loans to boost local manufacturing and production.

CBN recalled that regulatory forbearance was granted to banks to restructure loans given to sectors that severely affected by COVID-19, while its stakeholders’ mobilization led to the provision of over N23 billion spent on relief materials and establishment of 39 isolation centers nationwide.

The apex bank said analysts expected GDP growth to decline by 7.4 percent but that strategies by the monetary and fiscal authorities helped to reduce this decline to 6.1 percent.

The bank disclosed that N38.11billion was disbursed as loans to 44,458 beneficiaries through the NIRSAL Microfinance Bank (NMFB)

The number has risen to N59.12 billion, supporting 103,189 beneficiaries as of August 2020, Okorafor announced.

“Contrary to the NESG’s allegation that our lending process is devoid of a proper framework, it is important to note that recipients of CBN intervention funds go through an expansive due diligence process through participating financial institutions (PFI), following which an additional assessment process is embarked upon.

“On the revisions to the BOFIA Act, there are many reasons why we see a total ignorance on the part of the NESG. First, the provision they refer to as being currently conceived as part of the new BOFIA already exists as Section 53 in the old Act, which is now Section 51 in the amended Act passed by the National Assembly.

“Second, contrary to their misleading anxiety and associated reportage, the provision of Section 51 does not purport to confer immunity on the CBN Governor like State Governors. Rather, this provision protects the Federal Government, the CBN and their respective officials against adverse claims for actions or omission in good faith exercise of powers under BOFIA.”

The bank added that the alarm by the NESG raises serious credibility questions on the actions of the group, as its comments circulated across the globe harmed the credibility of the Governor and the CBN.

On border closure, CBN expressed disappointment that the NESG has not shown any tendency to deeply interrogate the real reasons for the action.

CBN restated that it was not opposed to its reopening, stressing that borders were shut due to economic sabotage involving smuggling of many fake products, drugs, small arms, and other goods.

“How can a Nigerian farmer struggle for months to plant, cater, and harvest their crops only to find that those crops cannot attract good prices because of smuggled products from across our borders? While the Federal Government is doing its best to tackle these issues and reopen the border, there must be cooperation by other countries.”

On foreign exchange, the CBN explained that it operates two windows: wholesale and retail.

It said the wholesale gives FOREX weekly to banks for their customers to sell to parents for school fees, medical bills abroad, SME traders importing small-scale inputs, raw materials, and general travellers for business and personal trips.

The statement said in the retail window, banks submit a detailed list of applicants who are then allocated foreign exchange based on availability.

CBN queried the extra transparency NESG demanded as well as what it called “price fixing” in reference to the recent directive of forex.

“Over the past several months, we have noticed an increasingly large gap between total deposits in the banking system and total credit to the economy. While total deposits stood at about N25 trillion in January 2020, total loans stood at N17 trillion. As of August 2020, while total deposits have increased to N29.7trillion, total loans were only N19 trillion.”

CBN stated that NESG has fallen short of its own standards and become a shadow of itself, adding that there are better ways to resuscitate the brand other than statements of contrived allegations.

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