CBN to Boost Domestic Credit

The Central Bank of Nigeria (CBN) is to boost domestic credit by facilitating funds to banks through Development Financial Institutions (DFIs).
DFIs are financial institutions that provide long-term finance for enterprises and countries for development purposes.
Tunde Lemo, deputy governor, Banking Operations, CBN, Tunde Lemo, said it was a move by the CBN to ensure that banks resume lending to the private sector.
He pointed out that funds from the DFIs would be deployed by banks to refinance their deposits that are mainly short-term, to enable them reach out to more prospective borrowers needing longer tenured facilities.
He said the CBN is encouraging the development of corporate bonds to take care of the long-term finance needs of companies and by that enable banks to concentrate more on short-term lending they are cut out for.
He said that with the proposed Asset Management Company (AMC) buying up the bad loans of the banks, they would regain financial capacity for credit. According to the deputy governor, monetary policy objectives as regards interest rate, inflation and exchange rate are expected to remain the same. He stressed that changes in the monetary policy rate (MPR) is not likely in the next months.
Remi Babalola, minister of State for Finance, said Nigeria was on track to meet the target of 6.1 per cent and 11.2 per cent for Gross Domestic Product (GDP) inflation respectively this year. He pointed out that funds from the DFIs would be deployed by the banks to refinance their deposits that are mainly short-term, to enable them reach out to more prospective borrowers needing longer tenured facilities.
Babalola said Nigeria’s macroeconomic environment is bright and the outlook promising with significant progress already made in addressing the challenges in the Niger Delta and sustained improvement in the price and production of oil.
“The expected 2010 real GDP growth rate of 6.1 per cent and a target inflation rate of 11.2 per cent remain feasible as the government increases investments in critical infrastructure, implements sectoral reforms, maintains macroeconomic stability and puts in processes that would ensure lasting peace, security and development in the Niger Delta,” he said.
He disclosed that the federal government would soon commence the implementation of the 2005 power reform. The implementation of the reform, which was initiated by the administration of former President Olusegun Obasanjo was halted by the President Umaru Musa Yar’Adua government.
“The implementation of the power reform will commence soon to enable the government meet its power targets for the year.”
“Fiscal developments during 2009 continued to support macroeconomic stability as well as increased spending on critical infrastructures, adding that the trend was expected to be sustained in 2010.”