CBN Indicates the Real Sector Special Funding Plan is Still Alive
CBN Indicates the Real Sector Special Funding Plan is Still Alive

Last week, speculations said that Central Bank of Nigeria (CBN) might technically abandon its plan of funding approximately N760 billion into the real sector special credit facility. But the plan seems to be still alive.

Since July 2015, the CBN had adopted accommodative monetary policy hoping to address growth concerns in the country's economy. The apex bank hoped to effectively free up some funds for the commercial banks by decreasing the Cash Reserve Ratio, CRR, and Monetary Policy Rates, MPR, with surplus liquidity coming from the lesser CRR that totals to N760 billion, with safekeeping at the CBN.

The banks could access these funds by presenting investment proposals in the real sector of the economy that are verifiable. However in the last eight months none of the real sector operator received any loan from this fund until last week. At that time the apex bank inverted the policy resulting in an increased CRR and MPR. It was this development that generated speculations that CBN might be thinking of abandoning the prior funding plan.

However, last week in its Monetary Policy Committee, communication, the CBN signaled that it plans to go ahead with funding and stated that "the funds have not impacted the market yet because the CBN was still processing some of the proposals submitted by the banks".