A recent report released by the Central Bank of Nigeria (CBN) has shed light on the status of intervention loans disbursed by the bank, revealing concerning figures. Out of the total loans amounting to N10.3 trillion disbursed as intervention, N193 billion has been declared lost, while another N418.9 billion remains doubtful.

The report, last updated in September 2023, provides a detailed breakdown of the bank’s intervention funds over the years. It highlights that of the N10.3 trillion disbursed, N4.4 trillion has been repaid, leaving approximately N5.8 trillion outstanding. Some loans are tenured, meaning their principal repayments are scheduled for future dates.

However, the report notes that only N969.8 billion of the outstanding amount was past due, with some loans having repayment tenures extending beyond 2023. Consequently, the percentage of repayments to amounts due is calculated at 75.8%.

Further analysis in the report reveals that N289 billion of the loans are performing, N67.9 billion are classified as substandard, and N418.9 billion are labeled doubtful, with N193.9 billion declared lost.

The apex bank’s governor, Yemi Cardoso, has criticized the intervention funds initiated under the leadership of his predecessor, Godwin Emefiele, contending that the bank failed to implement the interventions appropriately.

In a significant shift in approach, the CBN announced last December a suspension of applications for new loans under its development finance intervention funds program. This suspension marks a departure from the central bank’s previous emphasis on development finance interventions.

Moreover, Deposit Money Banks have been tasked with the recovery of previously granted loans under the scheme, affecting more than 4.6 million farmers and over 1,358 projects that have benefitted from various initiatives over the years.

Cardoso has expressed intentions to steer the CBN away from development finance interventions, prioritizing its core mandate of ensuring price and monetary stability. A circular issued by the CBN in December outlined the bank’s transition towards limited policy advisory roles supporting economic growth.

“In furtherance of the Central Bank of Nigeria’s new policy thrust focusing on its core mandate of ensuring price and monetary stability, the Bank has commenced its pullback from direct development financing interventions,” a circular issued in December by the CBN said.

“Accordingly, the CBN would be moving into more limited policy advisory roles that support economic growth.

“In consideration of the above, the CBN wishes to inform you that it has stopped accepting new loan applications for processing under any of its existing intervention programmes and schemes.”

Under Emefiele’s tenure, the CBN delved into encouraging backward integration through initiatives like the Anchor Borrowers Programme (ABP), which saw over N1.09 trillion lent to millions of farmers nationwide. In total, the CBN disbursed more than N5.25 trillion to individuals and companies across various sectors.

Cardoso views this as a deviation from the central bank’s core mandate, resulting in a lack of clarity in the relationship between fiscal and monetary policies, among other challenges. He argues that the CBN’s engagement in quasi-fiscal activities diverted resources away from its primary objectives and ventured into areas where expertise was limited.

“Hitherto, the CBN had strayed from its core mandates and was engaged in quasi-fiscal activities that pumped over N10 trillion in the economy through almost different initiatives in sectors ranging from agriculture, aviation, power, youth and many others. These clearly distracted the Bank from achieving its own objectives and took it into areas where it clearly had limited expertise.”

Muhammad Sani Abdullahi, Deputy Governor of the Economic Policy Directorate at the Central Bank of Nigeria (CBN), presented projections indicating a substantial rise in headline inflation. Abdullahi disclosed these forecasts during the CITI-CEEMA Macro Conference held in London on March 20, 2024.

Drawing from insights shared during Abdullahi’s presentation, the anticipated surge in inflation, expected to soar to 32.63% in March 2024, is ascribed to three critical factors: escalated energy costs, the reverberations of exchange rate fluctuations, and persistent concerns surrounding insecurity.

Abdullahi’s presentation noted the following drivers of inflation:

High Energy Prices: The removal of fuel subsidies has triggered a ripple effect, leading to escalated expenses across various sectors including household utilities, transportation, and production costs.

Exchange Rate Passthrough: The depreciation of the naira, influenced by market-determined exchange rate policies, is anticipated to exert a passthrough effect on domestic prices, amplifying inflationary pressures.

Insecurity: Lingering security challenges have disrupted food production activities, coinciding with the conclusion of the harvest season. Additionally, inflated costs of farm inputs further exacerbate the inflationary trend, particularly in the food sector.

Despite the somber outlook, the CBN remains cautiously optimistic, foreseeing a potential reversal in the inflation trajectory commencing from May 2024. This optimism is underpinned by a strategic framework designed to mitigate inflationary pressures through various initiatives.

Key measures outlined by the CBN to combat inflation include the adoption of an Inflation Targeting Framework, enhanced communication strategies, and a pivot towards a more stringent monetary policy stance.

Notably, the Monetary Policy Rate (MPR) has been subject to a significant hike of 400 basis points, soaring to an unprecedented 22.75%. Simultaneously, the Cash Reserve Ratio (CRR) has been adjusted upwards to 45%, from the previous 32.5%. Furthermore, adjustments have been made to the asymmetric corridor surrounding the MPR, signaling a robust approach to managing inflation expectations.

In light of persistent inflationary pressures, in February 2024, Nigeria’s headline inflation rate surged to 31.70%, marking a notable increase from 29.90% recorded in January 2024. This surge persisted despite the robust adjustment of the Monetary Policy Rate (MPR), highlighting the entrenched structural impediments within Nigeria’s economy.

Murtala Sabo Sagagi, a member of Nigeria’s Monetary Policy Committee (MPC), noted the limitations of traditional monetary policy tools in addressing systemic issues such as insecurity and food shortages.

Sagagi’s remarks underline the need for a comprehensive approach including economic and social rejuvenation to effectively tackle Nigeria’s inflationary challenges. Experts have warned that without addressing these underlying issues, any monetary policy adjustments may yield limited results in controlling inflation rates.

With Nigerians barely surviving under the current inflation rate, economists warn that inflation at 32.63% will come with dire implications, permeating various facets of the economy. Such high inflation rates, they say, erode purchasing power, exacerbate poverty levels, and hamper economic growth.

In addition to businesses facing heightened uncertainty, leading to reduced investment and job creation, they warn that vulnerable populations, particularly those on fixed incomes, will be forced to bear the heightened brunt of soaring prices, further exacerbating income inequality.

However, they advised that addressing these challenges requires a multi-pronged approach, encompassing both monetary and fiscal measures, alongside structural reforms to address underlying vulnerabilities.

The Igbo Nation says “Uwa bu ahia” which means, literally, that the world is a marketplace. And in markets, frictions are fixed by providing products and services which customers buy from producers. The whole global thesis of business is anchored on the constructs that products and services must be created to overcome frictions which customers have.

But how do you create products and services? You need to build businesses which are the vehicles through which those products and services are created.

Join me at Tekedia Mini-MBA LIVE today as I discuss Why, How, What, etc to do, as resources are mobilized to create those businesses which are necessary to bring equilibrium in the marketplace. Join us here

Sat, March 23 | 7pm-8.30pm WAT | Fundamental Investing Principles and Philosophies – Ndubuisi Ekekwe, Tekedia Capital | Zoom link

Investing is Recruiting Assets

The best time to audition for a great job is when there is no advertised job. And the best time to build a fundraising pipeline is when you are “not fundraising”.

A job recruiter has limited space available for the top talent. Similarly, an investor has limited assets the person could acquire, limited by the available capital. So, what can we learn from recruiting when we’re investing?

Join me at Tekedia Institute in an hour as we examine the fundamental principles and  philosophies of investing