Emefiele Urges Banks to Raise Agric Lending to 10%

•FG promises strong economic recovery amidst COVID-19

By James Emejo, Folalumi Alaran in Abuja and Nume Ekeghe in Lagos

The Governor of the Central Bank of Nigeria (CBN), Mr. Godwin Emefiele, yesterday tasked the banking sector to consider an increase in the percentage of loans to the agriculture sector from the current four per cent to 10 per cent by 2024.

This is coming as the Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, yesterday expressed confidence that the Nigerian economy “will bounce back strongly within the near term with the right policy responses to the multidimensional crises” caused by the COVID-19 pandemic.

Speaking yesterday at the opening ceremony of the 13th Annual Banking and Finance Conference, themed: “Facilitating a Sustainable Future: the Role of Banking and Finance,” which was organised by the Chartered Institute of Bankers of Nigeria (CIBN) in Abuja, Emefiele also disclosed that the sum of N69 billion had so far been disbursed to over N140,000 beneficiaries from the N100 billion CBN COVID-19 support loans for households and MSMEs.

He said till date, about N255 billion had been disbursed to manufacturers from the N1 trillion intervention fund to the manufacturing sector to help stimulate economic activities to douse the impact of the pandemic in output.

He added that the sum of N45 billion had also been disbursed to pharmaceutical companies out of the N100 billion intervention fund for the health sector.

The CBN governor said banks should explore opportunities in the agricultural sector by addressing some of the existing gaps in the value chains, particularly storage centres, transport logistics, and technology platforms that can enable rural farmers to sell their produce directly to the markets.

He said: “If measures had not been taken earlier to improve cultivation and processing of staple crops in Nigeria prior to the onset of the pandemic, we would have had to deal with a major food crisis in the country. The banking sector, therefore, has a significant role to play as a facilitator of growth through its intermediation function.

“Over the next four years, the banking sector should consider ways under which it could increase its loans to the agriculture sector from four per cent to 10 per cent by 2024.”

Emefiele said the agric sector also offers significant opportunity for the nation to earn foreign exchange through the exports of processed agricultural products, stressing that with declining forex earnings from crude oil, banks should consider supporting agro-processing companies that are export-oriented.

According to him, “These measures would help to improve the productivity of farmers, increase our foreign exchange earnings, reduce post-harvest losses, increase access to finance for farmers while supporting the growth of other sectors of our economy such as manufacturing, and transportation.”

The CBN governor further observed that while COVID-19 had brought on several challenges to the economy as well as the banking sector, it offers a unique opportunity for the country to build a more resilient economy that is better able to contain external shocks, while supporting growth and wealth creation in key sectors of our economy.

He said proactive steps on the part of stakeholders in the banking and financial system in supporting the growth of agriculture, ICT and infrastructure will strengthen the country’s ability to deal with the challenges brought on by the pandemic and stimulate the growth of the economy.

Emefiele said while the news of the continued growth in the banking and finance sector in the second quarter of the year was encouraging, the ultimate strength of the financial system would depend on three pillars.

He said these include ensuring that banks have adequate capital buffers to withstand similar pandemics; developing adequate internal controls that will be able to identify potential risks and putting in place measures to contain that risk as well as being able to adapt your business model to changes taking place in the business environment.

Ahmed, who represented President Muhammadu Buhari at the occasion, expressed confidence that the Nigerian economy will bounce back strongly within the near term with the right policy responses to the multidimensional crises caused by the COVID-19 pandemic.

She said the federal government had steadfastly formulated and implemented appropriate policies in order to tackle the challenges head-on.

The minister said so far, the federal government had implemented a wide range of fiscal, prudential and monetary measures that squarely address four key necessities including ensuring sufficient liquidity, in part to support government programmes for saving lives and livelihoods, maintain the stability of the financial system, ensuring the continued delivery of financial services to the public and shore up confidence and cushion economic activity.

Ahmed said the banking system remained a critical component of the financial sector, which is not immune to the potential impact of the current economic situation as banks have had to restructure potentially bad loans in every sector of the economy.

She, however, urged the banking industry to strengthen their risk management framework and enhance good governance in order to boost their resilience to future challenges.

“Accordingly, the core of resilient banks is made up of good governance, effective risk management and compliance culture. This is not to say that Nigerian banks do not have sound governance and risk management systems in place.

“There is always scope for improvement and these are the areas that need greater attention going forward. The banking sector has a responsible role to play not only as a facilitator of growth of the economy but also to improve its profitability,” the minister said.

She further pointed out that bankers and fund managers can partner with the government in its efforts to diversify the economy and reposition the country for a sustainable future.

Ahmed, therefore, charged the banks to redouble their efforts, mobilise domestic resources and attract foreign investment to create quality job opportunities for the teeming youths as well as lift people out of poverty.

While expressing hope that the current partial lifting of the lockdown measures had provided positive indications that some businesses were getting back to pre-pandemic levels, the president, however, expressed worry that the uncertainty over the duration and intensity of the pandemic as well as its impact on the economy continued to be a cause for concern.

She added that in the wake of COVID-19, the government in concert with regulatory authorities had stepped forward with various liquidity, monetary, prudential and supervisory measures in the form of interest rate cuts, higher structural and durable liquidity, and a moratorium on debt servicing and forbearances on asset provisioning.

Ahmed said: “This framework is a well-thought-out decision taken in consultation with stakeholders and is aimed at striking a balance between protecting the interest of depositors and maintaining financial stability on one hand, and preserving the economic value of viable businesses by providing durable relief to businesses, as well as individuals affected by the COVID-19 pandemic, on the other.

“We expect the efficient and diligent implementation of the restructuring measures by banks, keeping the above objectives in mind. While the moratorium on loans was a temporary solution in the context of the lockdown; the restructuring framework is expected to give durable relief to borrowers facing COVID-19 related distress.

It is expected that post-COVID-19, the financial sector should return to normal functioning without relying on the regulatory relaxations and other measures as the new norm.”

Also addressing the gathering via video conferencing, Lagos State Governor, Mr. Babajide Sanwo-Olu, urged the banking sector to support economic recovery and growth as well as the social well-being of Nigerians.

He said the sector must make use of the lessons from the pandemic to invest in digitisation, technology and innovation to remain dynamic and globally competitive.