CBN Governor Emefiele Rules Out Further Forbearance Extension for Intervention Loans

The Governor of the Central Bank of Nigeria (CBN), Mr. Godwin Emefiele, on Tuesday foreclosed further extension of the regulatory forbearance on its intervention facilities instituted by the apex bank to cushion the impact of the COVID-19 pandemic on companies and businesses.

He said the global economy has since opened up with lockdowns lifted while companies and businesses have witnessed improved revenues, hence the need for borrowers to start repaying their loans.

Emefiele, while addressing journalists after the two-day meeting of the CBN’s Monetary Policy Committee (MPC) in Abuja, said he does not envisage a likelihood of loan default resulting from the forbearance programme.

This is just as the MPC yesterday resolved to leave all monetary policy parameters unchanged, retaining the Monetary Policy Rate (MPR) otherwise known as the interest rate at 11.5 per cent with the asymmetric corridor of +100/-700 basis points around the MPR.

The MPR is the rate at which the CBN lends to commercial banks and often determines the cost of borrowing in the economy.

The MPC also voted to maintain the Cash Reserve Ratio (CRR) at 27.5 per cent as well as the Liquidity Ratio at 30 per cent.

Emefiele said the existing policy stance had so far supported growth and recovery and expressed satisfaction at the moderation in inflation rate which had declined for six consecutive months.

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In an effort to ameliorate the adverse effects of the pandemic on Nigerians and businesses, the apex bank and other financial institutions had reeled out forbearance packages for companies to help them weather the storm.

Part of the programme was the restructuring of the loan repayment plans, moratorium as well as the CBN reducing interest rates on all its intervention programmes to five per cent from nine per cent till March 2022.

The CBN had extended the moratorium twice following threats posed by the Delta variant of the virus.

However, as the forbearance regime draws to a close in March next year, the CBN governor, citing improvement in economic activities, urged businesses to resume loan repayment.

He said: “If you recall from our standpoint, we granted a forbearance regime from just two areas.

“One primarily had to do with the fact that we said all loans that companies and businesses that are impacted adversely by COVID-19, that they should be given about two years, we first started by saying one year, from 2020 to March 2021 and by February 2021, we extended it by one more year when the Delta strain of the pandemic continued. That made it two years that would expire by March 2022.

“Another aspect had to do with the fact that we said for CBN interventions, that there is a need for us to reduce the interest rate from nine to five per cent. Indeed, another aspect of the intervention or forbearance is that because we knew that the adverse consequences of COVID-19 were resulting in a reduction in the revenue-generating capacity of businesses and companies, we also granted the banks an opportunity to allow their customers to ask for a restructure of their facilities. Maybe if it’s a two-year facility, it would be extended to four years so as to reduce the burden of the cash flow on them.”

Emefiele added: “And those were the periods when there was unprecedented lockdown of the global economy. All countries with no exception were on lockdown. Travels came to zero, people were not allowed to leave their homes and in Nigeria, this persisted for about three to four months.

“Now, from around September/October 2020, Nigeria began a process of easing the lockdown and notwithstanding the fact that we still saw that around February/March of 2021 that the Delta strain now reared its head. We still said that businesses should have this forbearance.

“At this time, we believe that the global economy has opened up; the lockdowns have been lifted and of course, we know the economic damages and fatalities that were caused as a result of the that and I am so sure that not too many counties if at all will in the midst of this pandemic want to embark on a wholesome lockdown any longer.

“Particularly because most countries are all administering vaccines that they think should assist in reducing the impact of the strain of the virus.

“So we believe that in Nigeria, businesses/companies are back to business, revenues have improved and if revenues have improved then companies or businesses that took loans. If we say the loans for intervention facilities moved from five to nine, if we see that the moratorium of two years expires in March 2022 and of course, the restructure that you have benefitted remains, then naturally we should expect that companies should be able to pay back their loans.

“So as a result, we do not see any likelihood of an increase of NPLs. Indeed, we have worked so hard to bring the NPLs down from as high as nine, ten per cent about two years ago to the level that it is today which is 5.3 per cent and we are gratified that we are aggressively working NPLs down to the maximum threshold that has been set by the CBN. So I don’t think there’s any need for anybody to worry at all.”

Also commenting on the concerns over the arbitrary transaction charges by banks, the CBN governor urged bank customers to study the Guide to Bank Charges- and challenges any discretionary deductions which are not in tandem with the guide.

He said: “Talking about bank charges, the CBN insists that consumers of bank services, in this case, customers must insist and indeed, if it’s not on CBN website, I am going to ask that we place it on our website- the Guide to Bank Charges- go and read your guide to bank charges.

“You should not allow any bank to just pass on any discretionary charges on your account that is not contained in the guide to bank charges. Hold it as your bible as you deal with the bank. If you find any that is not consistent, raise an alarm.

“We have our consumer protection department and we have always advertised our hotlines and emails where you can always reach us and indeed, we have been cases in the past where people have raised an alarm and it has resulted in hundreds if not billions of naira reversal back to customers’ accounts.

“So, I can say that if you are being charged by any bank for transactions that did not happen or charges that are not inside or stated in the guide to bank charges, you have to ask the bank to reverse it because it is not meant to be there.”

However, Emefiele, who read the committee’s communiqué, explained that the MPC was gratified that its policy actions in the past had started to yield positive results given the remarkable improvement in GDP which stood at 4.03 per cent during Q3 of 2021 and the 6th consecutive month moderation in inflation to 15.99 per cent in October 2021.

He said given the level of its conviction about the efficacy of its actions on macroeconomic variables, MPC felt that whereas tightening would further help to rein in inflation aggressively, it nevertheless feels that tightening will increase the cost of funds and constrain output growth.

He said on the other hand, whereas loosening will lower policy rates, ease liquidity pressures, and stimulate additional credit creation which will boost output growth.

According to him, “MPC also thinks that loosening will further widen the negative real interest rate gap and compound the price distortions in the money markets which could fuel inflationary pressures. As for whether to hold its existing stance, MPC believes that the existing monetary policy stance has supported the growth recovery and should be allowed to continue for a little longer for consolidation to achieve the MPC mandate of price stability that is conducive for sustainable growth. The Committee also feels that a hold stance will enable it to carefully appraise the implications of the unfolding global development around policy tapering and normalisation by advanced economies.”

He said the CBN’s Targeted Credit Facility (TCF) was particularly highlighted by the Committee for its contribution to alleviating poverty at the grassroots adding that the MPC urged the bank to continue its support through the TCF to ensure that more people benefit from this programme.

He also said that with the announcement to commence monetary policy normalization by the US Fed and impending interest rate liftoff by central banks in some advanced economies, the MPC called on the federal government to intensify its drive towards a counter-cyclical fiscal policy in view of the imminent tightening of external financial conditions.

Committee members, therefore, noted with concern that the gradual normalisation of monetary policy by this group of economies would dampen the recovery of several emerging market and developing economies in the short to medium term due to the sharp reversal of capital flows.

The committee also evaluated the developments in China relating to the reoccurring pandemic, power outages and crisis in the property market, noting the likely impact these could have on Nigeria as a major trading partner.

The committee, therefore, called on the CBN to ensure that the necessary buffers are put in place to shield the economy from the downside risks associated with these developments.

In general, members expressed confidence in the ongoing policies of both the monetary and fiscal authorities which in their view was the hallmark of the current recovery and restoration of macroeconomic stability in the country as well as called on both authorities to look beyond the current position and plan towards attracting sustainable investment flows to Nigeria.

We are Excited Investors Are Scrambling for First Bank Shares, Says CBN Gov

Also, responding to a question about the ongoing development at FirstBank Nigeria Limited, Emefiele in commenting on tussle for majority stake in the bank, said the financial institution was too big to be owned by a single individual.

He also expressed satisfaction that, “people are scrambling today for the shares of First Bank,” which he said had been deserted six years ago, largely because of the burden of non-performing loans.

The CBN governor said, “I think it’s good for us to cast our minds back to the position of First Bank six years ago.

Six years ago, when the CBN started its programme of looking at the bank to reposition it; let’s not forget that FBN remains the oldest bank in Nigeria – 1894. It is a strong, aggressive, domestically important bank in Nigeria.

“If anything happens to First Bank, it means something has happened to the Nigerian banking system. And that is why we are taking our guidance on how to get the bank back afoot very seriously. Six years ago like I said, because of the aggressive build-up of non-performing loans in the books of First Bank, the share price of First Bank was about N2 per share.”

Continuing, Emefiele said: “We took it on – everybody was running away from the shares of First Bank. But because we have cleaned the bank’s balance sheet now, the NPLs have dropped significantly, people are seeing that this money making machine, First Bank is back again on the race for profitability and they are now competing for the shares of First Bank.

“So, why should I quarrel that people are competing for the shares of First Bank? The last time I looked at it, it was N11.55 kobo during the weekend and I was happy to see that they are competing for the shares.

“But of course, they should all know that First Bank is so big that not one person can say he owns First Bank.

They are just one and they should see themselves as representing others in running the bank. I have read the Securities and Exchange Commission (SEC) clarifies the issue of shareholding percentages…and indeed they are the people that are supposed to do so. Our examiners have also continued to look at it.”

He said, “And I think we should take SEC’s position because SEC is the regulator of the capital market. We will take their position and they would give guidance on this subject but of course, as it affects the running and operation of the bank, we would take preeminence in ensuring that the right things are done.

“Naturally, returns are sent to the CBN about people and individual shareholders and of course, if our position is not in tandem with the position of SEC, we will talk to SEC about it and we will also advice the public but so far, I will say that we should take the position of SEC as a regulator of the capital market because regulating share price, ownership is the sole responsibility of SEC and we would not want to override SEC the regulator on these issues but we would continue to work with them and we have very good relationship with them.

“I would just say that I am very happy that people are scrambling today for the shares of First Bank.”

James Emejo in Abuja

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