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CBN directs banks to give loans to agric, manufacturing firms at 9%

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The Central Bank of Nigeria (CBN) said it would support banks that fund projects in agriculture and manufacturing sectors by refunding Cash Reserve Ratio (CRR) at a single interest rate.

The CRR is a percentage of a banks’ total deposits kept with the CBN to sustain liquidity in the banks.

CBN’s Director of Banking Supervision, Abdullahi Ahmad, stated this on Thursday while speaking at the end of the Bankers’ Committee meeting in Lagos.

Ahmad said banks should be able to lend to companies that are doing new capital expenditures and expansions to factories using some of their CRR at nine percent.

He said the loans will only be available for job creation and expansion plans.

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“It would probably be the first time in the history of this country where manufacturers would be able to take fixed interest rate loans for seven years which means they would be able to plan.

“The volatility that they fear for all kinds of risks would be taken out and I think these are very laudable steps in improving and growing the economy.

“We can refund the CRR of a bank that has engaged in lending in a new project or an existing one in the agriculture or manufacturing sector as a way of utilising the CRR.

“So, anytime a bank lends to manufacturing or agric at the rate the CBN has prescribed, it would have its CRR refunded up to the amount it has lent,” he said.

In her reaction, the Executive Director, Finance at First City Monument Bank (FCMB, Yemisi Edun, said the CRR that would be loaned out would be targeted at growing the real and agriculture sectors of the economy.

“This is very positive for the economy and also positive for banks because we will be able to access these funds and earn on it. And because it will be coming at single digit rate, it will be positive for the economy,” she said.

 

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