The Central Bank of Nigeria (CBN) yesterday clarified that out of the N9 trillion interventions it had disbursed in critical sectors of the economy, about N3.7 trillion had so far been repaid by beneficiaries while the about N5 trillion was not yet due for recovery.
The revelation by the central bank came just as various stakeholders in the Nigerian power sector lauded the CBN's recent N120 billion intervention to close the wide electricity metering gap in the country.
The bank explained that most of its interventions were still under moratorium.
It also explained that its Tuesday's decision to raise the benchmark interest rate by 150 basis points to 15.5 per cent, was not "textbook economics," as but was informed by reality and the peculiarity of the domestic economy.
The CBN at the 287th meeting of its Monetary Policy Committee (MPC) had raised the Monetary Policy Rate (MPR) otherwise known as interest rate 15.5 per cent from 14 per cent, and also increased banks' Cash Reserve Requirement (CRR) by 750 basis points to a minimum of 32.5 per cent from 27.5 per cent in order to aggressively tackle rising inflation as well as mop-up excess liquidity from banks' vault to discourage speculative attacks on the Naira.
But speaking at a post-MPC hybrid media briefing to unravel the facts behind the decisions, CBN Director, Development Finance Department, Mr. Yusuf Yila, said out of the N1 trillion invested in the Anchor borrower programme (ABP), the central bank had already recovered N400 billion.
While emphasing that the CBN's interventions were not grants, but loans that must be paid back, Yila added that the CBN had actually activated the Global Standing Instruction (GSI) to recover loans from the various beneficiaries of its intervention support.
He added that the CBN was already in the debt recovery mode and had been debiting the states directly from their FAAC allocations to settle their liabilities to the apex bank, adding that the bank was also partnering with the Economic and Financial Crimes Commission (EFCC) wherever risk was perceived.
"There will be no mercy, everybody must pay back," he said.
He also said the central bank has decided to slow down the disbursement of all intervention programmes to focus only on the priority areas, particularly electricity and SMEs.
He clarified that the intervention schemes were not being shut down anyway, adding that the manufacturing sector accounted for 31 per cent of the CBN intervention efforts.
Yila said, "We've already started even before the announcement of the MPC to taper some of the programmes that we were doing. I can confirm to you that the gates have been closed. To make the monetary policy tool that has been deployed very effective, you definitely strain the money supply.
"So, indeed, we have closed the gates; only interventions that are very, very critical. MSMEs that are statutory which takes 5 per cent of every bank's profit after tax, it is not a lot to deploy to SMEs, and then supporting the electricity sector is very, very critical. Interventions have stopped as of yesterday (Tuesday).
Continuing, Yila said, "We have also started recovering loans from state governments. We have been doing a loan workout programme with them, and we are debiting their FAAC directly for the loans.
"So, if a state government has taken N1 billion and is in default, over a six-month period, we are going to be debiting them N150 million every month.
"So, we started that programme- every single loan that has been given out through any of our Intervention Programme must be paid back. There's absolutely no mercy. We are in recovery mode as development finance departments are beginning to recover most of the loan.
"Finally, we're working with the EFCC. The governor has approved for ourselves and EFCC to set up a desk to help us recover the loads where we are at risk. I mentioned really around ABP and then some of the SMEs.
"A lot of people took the targeted credit facility that we give out during the COVID-19 period. So, everybody must pay back. It is only when you pay back that we can have those funds to able to lend back. We'll move to a regime where we'll want to begin to push out funds."
However, CBN Director, Monetary Policy Department, Dr. Hassan Mahmud, clarified that the CBN was not following the bandwagon by raising rates because other countries were doing so.
Rather, he said rate increases were affected according to the peculiarities of the economy, stressing that liquidity surfeit in banks and pent-up demand would always evoke rates hike.
Mahmoud insisted that the volume of money in circulation was too much as this would continue to drive up prices, adding that the main objective of the CBN's aggressive rates hike was to make the cost of funds more expensive.
He also said as financing of government remained a major issue, the CBN was, "very mindful of this and making sure that this is highly moderated because it's also fuelling the liquidity that we have within the system."
Also, speaking at the meeting, CBN Director, Banking Supervision Department, Mr. Haruna Mustafa, expressed hope that the latest increases in MPR and CRR could be the silver bullet needed to address other macroeconomic challenges facing the country.
He said inflation remained the biggest elephant in the house, and needed to be defeated in an aggressive manner.
He said though the impact of the CBN monetary policy decision would be, "bitter-sweet" the overall objective is to rein in inflation.
He said the CRR serves both monetary and prudential functions and will have far-reaching implications for the economy going forward.
He said the decision of the MPC was complimentary to what had been done to rein in inflation, stressing that, "they are not conflicting policy goals, they are complementary and they are working in line with our earlier intention."
On her part, the CBN Director, Trade and Exchange Department, Dr. Ozoemena Nnaji, said the central bank was ramping up its policy on increasing foreign exchange supply by looking at other avenues of attracting investment from the diaspora into the Nigerian economy.
She said, "As long as we keep increasing supply, we would continue to see the narrowing of the gap. You also know that we have an election coming up and some of these elections would require some kind of exchanges and things but we are ramping up our supply and that's what the central bank is doing so that supply can go up and the differential in rate will continue to narrow."
CBN's N120bn Intervention: Experts Seek Focus on Local Meters Manufacturers, Laud Apex Bank
Meanwhile, various stakeholders in the Nigerian power sector have lauded the intervention of the CBN over its recent N120 billion intervention to close the wide electricity metering gap in the country.
The apex bank had begun the disbursement of the fund for the procurement and installation of the electricity meters across the country under the National Mass Metering Programme (NMMP) in the phase zero of the scheme.
The NMMP is geared towards mass metering of Nigerians by providing loan facilities to the Electricity Distribution Companies (Discos) for the procurement of meters for customers and assembling of the power devices by Nigerians.
But a number of experts have observed that the best results which would impact the economy the most is to begin local manufacturing, rather than continuing with importation.
President, Nigerian Consumer Protection Network and Member National Technical Investigative Panel on Power System Collapses, Kunle Olubiyo, in his comments, expressed his support for local production of the electricity asset.
He expressed concern over the cost of meters as well as the tendency of some distribution companies to short-change consumers by importing meters which may not even read accurately.
Olubiyo added that quality would be easier to control if the priority of the CBN is in the area of local manufacturing or assembling of meters, saying that bureaucracy in the existing metering scheme was creating rooms for exploitation.
He added: "Privatisation is still in its infancy. All over the world there are fiscal and non-fiscal incentives, like metering intervention by CBN. CBN can provide sovereign guarantee. CBN should encourage indigenous manufacturers of meters, not importers."
In his intervention, PricewaterhouseCoopers's Partner, Energy, Utilities and Resources, Habeeb Jaiyeola, said the support rendered by the CBN in addressing the gap was critical.
According to him, the CBN intervention would facilitate investment and ensure that the electricity market thrives, stressing however that the fund was a loan with a set period for repayment. "Its application has to be strictly monitored to ensure project objectives are achieved," he noted.
Also, an expert, Joseph Tsavsar, said metering of customers became an issue because of the liquidity crisis the distribution companies are experiencing.
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He explained that that crisis was due to inability to recover costs, in relation to generation capacity that is transmitted to the Discos against what was provided in the privatisation agreement.
Also, the Executive Director, Power Up Initiative, Adetayo Adegbemle, said there was the need to ascertain the accurate number of consumers connected to the national grid and their demography.
"Without this, any intervention policy will always be short," he argued.
He stressed that the CBN could provide funds for local meter manufacturers and for development of a metering ecosystem, aimed at resolving Nigeria's metering problems, but advised that it should also be independent of the Discos.
He further expressed concern over the delay in kick-starting the second phase of the NMMP scheme.
Adegbemle said: "If we have used two years to implement phase zero already, which is barely a million meters, how long will it take to implement the remaining five million?
"We need to licence the Independent Meter Providers (IMSPs), let NEMSA test and approve all meters, and let consumers be able to get their meters off the shelves.
"Remove the metering components in the tariff and pass a regulation that outlaws power connection without meter. You will be surprised at the rate at which the metering gap will be closed. Another advantage is that we will be able to have third party data," he maintained.
To reduce the metering gap, ensure transparent billing system and close the debt profile in the power sector, the CBN had launched the N120 billion programme where about 6 million meters were expected to be delivered to consumers.
So far, only about 900,000 meters have been given while stakeholders are asking the CBN to overhaul the scheme in a manner that will halt the importation of meters and focus on local manufacturing.
The Nigerian Electricity Regulatory Commission (NERC) had recently increased the price of meters to cover for rising inflation, foreign exchange rates, associated increases in customs costs and increase in container freight costs.
