Intervention Funds: CBN Bans New Loans’ Applications

• Tasks DMBs on loan recovery duty
• Banks kick over no charges on large cash deposits

BY EDMOND ODOK AND CHINYERE OBIORA – Focused on rejigging the nation’s monetary system for effective service delivery amid the biting economic hardship, the Central Bank of Nigeria (CBN) has suspended applications for new loans under its Development Finance Intervention Funds (DFIFs)

Announcing this decision in a circular to the Chief Executives of banks, Acting Director of CBN’s Development Finance Department, Sa’ad Hamidu, said the apex bank, among other things, has commenced pullback from direct development financing interventions.

According to the circular, the banks are now responsible for the recovery of loans granted so far under the DFIFs, even as available statistics indicate that the apex bank’s total disbursements under its development finance intervention currently stand at about N10 trillion.

Though the CBN is yet to officially unveil details of the amounts that are outstanding and unrecovered from debtors as of date, some industry experts put the tentative figures around unrecovered development finance loans, especially under the popular Anchor Borrower Programme (ABP), at over N580 billion.

According to the circular issued on Monday, 11th December 2023, the Deposit Money Banks (DMBs), through which the loans were disbursed, will now be saddled with the burden of recovering the loans from the affected debtors.

The circular titled; “Suspension of Acceptance of New Applications under the Existing Central Bank of Nigeria, CBN Development Finance Intervention Programme”, stated thus: “In furtherance of the Central Bank of Nigeria’s (CBN) new policy thrust focusing on its core mandate of ensuring price and monetary stability, the Bank has commenced its pull back from direct development financing interventions.

“Accordingly, the CBN would be moving into more limited policy advisory roles that support economic growth. In consideration of the above, the CBN wishes to inform you that it has stopped accepting new loan applications for processing under any of its existing intervention programmes and schemes.

“It is important that you communicate this to your customers and kindly note that the interest rates, as well as other terms and conditions on all existing facilities, remain as contained therein in their respective approval letters.

“You may also wish to note that your bank shall be responsible for the recovery of the outstanding balance on all facilities previously accessed through your bank.”

Nigerian Banks Sound, Resilient
Meanwhile, in what seems a response to allay fears and concerns over the perceived status of some commercial banks in the country, the CBN has assured Nigerians of the resilience and soundness of the nation’s financial institutions to do business unhindered.

The apex Bank’s Acting Director, Corporate Communications Department, Mrs Sidi Ali Hakama, said in a statement thus; “The attention of the Central Bank of Nigeria (CBN) has been drawn to reports in some media outlets suggesting that some licensed commercial banks in the country had failed the CBN’s Capital Adequacy Ratio (CAR) for international authorization.

“We wish to clarify that the Nigerian banking industry remains resilient as key financial soundness indicators were within the regulatory thresholds as captured in the CBN’s most recent Economic Report of 2023.”

Customers Smile As Banks Rue Deposits’ Charges Embargo
In a related development, it is different strokes for different people following the CBN’s recent announcement suspending charges on cash deposits above the regulatory limits of N500,000 for individuals and N3,000,000 for corporate account holders.

While it is all smiles for banks’ customers, Forefront News check indicates that the commercial banks are rueing the new directive effects on their daily operations in what insiders described as a “massive loss of easy revenue sources”

However, coming against the backdrop of growing cash scarcity and empty ATMs across the country, the directive suspending deposit charges would be in place till April 30, 2024, according to the CBN.

The latest directive on deposits was conveyed in a circular dated 11th December 2023 and signed by Acting Director, Banking Supervision of CBN, Dr. Adetona Adedeji with the title; “Re-Processing Fees on Cash Deposit’.

The circular read in part: “Please recall the processing charges imposed on cash deposits above N500,000 for Individuals and N3,000,000 for corporates as contained in the “Guide to Charges by Banks, Other Financial Institutions and NonBank Financial institutions’ issued on December 20, 2019, under reference FPR/DIR/GEN/CIR/07/042.

“The Central Bank of Nigeria, hereby, suspends the charging of processing fees of 2% and 3%, previously charged on all cash deposits above these thresholds with immediate effect. This suspension shall remain in effect until April 30, 2024.

“Consequently, all financial institutions regulated by the CBN should accept all cash deposits from the public without any charges going forward.”

History of Policy Reversal
Forefront News recalls that in a move that it claimed was meant to reduce cash in use, the CBN, in September 2019, slammed charges on bank customers making cash deposits and withdrawals saying the move was aimed at reducing cash in use.

Among the charges were three percent (3%) processing fees for withdrawals and two percent (2%) processing fees for lodgments of amounts above N500,000 for individuals.

On corporate accounts, the Deposit Money Banks (DMBs) began charging five percent (5%) processing fees for withdrawals and three percent (3%) processing fees for lodgments of amounts above N3,000,000.

Similarly, the year 2022 had the CBN further directing that over-the-counter cash withdrawals by individuals should not exceed N100,000 per week with corporate entities’ limit pegged at N500,000 only.