E-Financial
Stakeholders Lament CBN’s Interest Rate Reversal on Intervention Loans
Central Bank of Nigeria’s (CBN) decision to revert interest rate on its Covid-19 intervention facilities has drawn the ire of stakeholders as well as experts, whose thoughts are that the action will not augur well for the beneficiaries, as the country faced inflationary rate pressure among other worsening economic indicators, according to Leadership.
Economists, who spoke with on the matter, said the CBN’s decision was ill-conceived as the country’s economy has yet to recover from the devastating effect of COVID, which could heighten unemployment rate, worsen production level and reduce economic growth.
This is just as stakeholders argued it would lead to higher obligations for the beneficiaries.
The apex bank had, last week, notified all the banks and other financial institutions (OFIs) of the reversal from five per cent, back to nine per cent.
In the circular, which was signed by Chibuzo Efobi; director of Financial Policy and Regulation Department, dated August 17; and titled ‘Adjustment of Interest Rate on all Central Bank of Nigeria Interventions’, the CBN stated that all intervention facilities granted effective July 20, 2022 should be at nine per cent per annum.
It also said that existing facilities granted prior to July 20, 2020 should be at the same nine per cent per annum but effective September 1, 2022.
The monetary authority had on March 15, 2020, following the outbreak of the COVID-19, extended interest rate reduction and granted a one-year moratorium on all principal payments on its intervention facilities in an effort to reduce the negative impact of the pandemic on businesses and households.
As such, it granted all deposit money banks (DMBs) leave to consider temporary and time-limited restructuring of the tenor and loan terms for businesses and households most affected by the Covid-19, particularly the oil and gas, agriculture, aviation, manufacturing, healthcare and other sectors of the economy.
The concessionary interest rate of five per cent on its intervention facilities, the CBN had on March 3, 2021 extended by 12 months to February 28, 2022, and subsequent to March 1, 2023, before it shockingly revert it in a notification last week
Adams Adebayo, chairman, National Association of Small and Medium Enterprises (NASME), Lagos State Chapter, expressed worries that the reversal came at a time inflation rate has worsened to 19.64 per cent; dollar, over N430 at official rate and about N720 at the parallel market price.
Coupled with hike in jet A1 fuel that had pushed one-way flight ticket, for instance from Abuja to Lagos, to almost N180,000 for business class, even aa manufacturers are closing factories due to high cost of raw materials.
“This means sectors such as agriculture, power, and aviation which have enjoyed trillions of dollars in intervention funds from the central bank would have to pay nine per cent, an instant of the five per cent previously enjoyed.
“All the beneficiaries of such intervention would be adversely affected by this policy and change in terms and conditions,” he said.
According to Adebayo, small business might be headed towards a total collapse as most of such categories of business would not be able to compete favourably.
“They (small businesses) might equally downsize their staff strength to cut costs,” adding that “the termination of the facility by CBN is not in the interest of an average business manager or an enterprise in Nigeria.
Chinedu Nevo, an economist and PhD candidate at the Faculty of Business and Law, the Open University Business School, Milton Keynes, United Kingdom, said, the reversal by the CBN was ill-conceived.
According to him, Nigeria is still far from recovering from the impacts of COVID-19, especially from the economic angle.
“Actually, many sources have argued that it will take many African countries more than five years and beyond to recover from the negative effects of COVID-19.
“Thus, the reversal by the apex bank was ill-conceived. This is even worse when placed side by side with the high inflation bedeviling the Nigerian economy at the moment,” he said.
Nevo argued that, from a basic economic perspective, when interest rates increase (in this case, from five per cent to nine nine), businesses or entities with existing loan obligations have higher interest payments, less disposable income and bigger overheads.
His words, “With a simultaneously high inflation, such entities struggle to maintain their daily operations, and over time, may even risk collapse. In some other cases, the entities may only be able to pay off the interest only, rather than the loan itself.
“These are the ways that the interest rate reversal would affect the entities. In all honesty, the CBN, by this move, is not encouraging these entities to thrive. This will also affect productivity on a macro scale. In my opinion, the COVID-19 interest rate should be maintained.”
Cheta Uzah, a lecturer at the Department of Banking and Finance, Rivers State University Port Harcourt, also responded that the Nigerian economy has yet to recover from the devastating effect of COVID.
He noted, however, that the apex bank is struggling to deal with the double digit inflation that has resulted from the enormous amount of government borrowing and spending during the COVID period.
“The expansionary monetary policy by the CBN has resulted in massive debts, worsening devaluation of the naira and poor levels of economic growth,” Uzah said.
According to him, the impact of the interest rate reversal on CBN’s intervention facilities would be that fewer small and medium scale investors will be less likely to apply for the intervention loans since higher interest rates would mean higher payment of interest on the loans.
He said, “If fewer businesses are taking loans to expand their business, it means the fewer opportunities of these businesses to employ new workers, increase production of goods and services..
The don added, “As such, unemployment would get worse, production should reduce and economic growth is likely to decline. To make matters worse, the higher level of insecurities caused by bandits, herdsmen, kidnappers, Boko Haram and Militants is making the business environment difficult.
“The higher levels of inflation and declining value of naira is likely to ensure many small and medium scale businesses shutdown as the difficult business environment makes them unprofitable.”
Nigeria had entered into recession following negative growth rates of -6.10 per cent and -3.62 per cent recorded in the second and third quarters of 2020, before it narrowly
Now, there is a likelihood that the country might enter into another recession this year if all monetary policies are not properly tightened.
According to the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), there is an urgent need to implement policies to prevent Nigeria falling into a third recession by the end of this year, pointing the direction of declining trend in the nation’s economic growth, which had remained worrisome.
Banks in Nigeria closed 29.4 million accounts as of March 2025, according to the latest report by the Nigerian Interbank Settlement System (NIBSS).
The figure represents a sharp year-on-year increase of 30.43 per cent from the 22.54 million closed accounts recorded in March 2024.
It also reflects a steady rise in account closures over recent months, with 33.29 million closed accounts reported in February 2025 and 29.43 million in January.
The report also revealed a significant increase in dormant accounts, which surged to 33.39 million in March 2025, up from 19.79 million in the same period in 2024, a 71.3 per cent rise in inactive accounts over the past year.
Despite the spike in closures and dormant accounts, the number of active bank accounts rose from 219.64 million in March 2024 to 320.05 million in March 2025, representing an increase of over 100 million, or 45.7 per cent.
NIBSS defines a dormant account as one that has seen no deposit, withdrawal, transfer, or point-of-sale transaction for a period of six months.
The surge in account closures and dormancy follows the Central Bank of Nigeria’s directive issued in December 2023, mandating commercial banks to restrict Tier-1 accounts not linked to a Bank Verification Number (BVN) and National Identification Number (NIN) by March 1, 2024.
In response to the directive, BVN enrolment increased from 61.6 million in April 2024 to 66.23 million by July 2025, as more Nigerians rushed to meet the CBN’s compliance deadline.
The Joint Committee of the House of Representatives on Public Accounts and Public Assets has threatened to issue a warrant of arrest against Mr. Olayemi Cardoso, governor of the Central Bank of Nigeria (CBN), over repeated failure to honour its invitations regarding the probe into non-compliance with the Fiscal Responsibility Act 2007 and Finance Act 2020.
Olayemi Cardoso,, Gov, CBN
In a joint statement released on Friday and signed by Hon. Bamidele Salam and Hon. Ademorin Kuye, chairmen of the committees, the lawmakers decried the CBN governor’s continued disregard for legislative summons.
The committee is investigating the non-remittance of operating surplus as well as the mismanagement of unclaimed dividends and dormant account balances.
According to the committee, the Office of the Auditor General for the Federation reported a liability of N5.2 trillion in unremitted operating surplus due to the federal government from 2016 to 2022; a claim corroborated by the Fiscal Responsibility Commission in a separate submission to the National Assembly.
The committee cited provisions of the Finance Act 2020, which mandate that unclaimed dividends from publicly listed companies and dormant bank account balances older than six years be transferred into the Unclaimed Fund Trust Fund. The fund is to be managed by a Governing Council led by the Minister of Finance and the Debt Management Office (DMO).
Contrary to this, the CBN maintains that the Financial Institutions Act 2020 empowers it to manage dormant balances.
However, the committee noted that the Attorney General of the Federation has issued a legal opinion affirming that the Finance Act 2020 remains the valid law guiding the management of such funds.
Following extensive submissions, the committee resolved that the CBN must remit N3.64 trillion, representing 70% of the undisputed N5.2 trillion operating surplus, within 14 days from receipt of its June 27, 2025, directive, pending final reconciliation of the disputed amount.
Additionally, the apex bank was directed to submit a detailed report on the total sum of unclaimed dividends and dormant account balances by June 30, 2025.
The CBN was also ordered to transfer these funds into the Unclaimed Fund Trust Fund within 14 days and furnish the House with evidence of the transaction.
The lawmakers expressed frustration that, despite the clear directives and ample time, the CBN governor has failed to respond or appear before the joint committee to provide an explanation.
“In view of this continued defiance, the Committee will be compelled to exercise its constitutional powers to compel Mr. Olayemi Cardoso to appear before it,” the statement warned.
Moody’s has upgraded the outlook on Ecobank Transnational Incorporated’s long-term issuer and senior unsecured debt ratings to stable from negative.
In the latest rating commentary, made available to media on Thursday, Moody’s also affirmed the pan-African banking group’s B3/Not Prime long- and short-term issuer ratings; B3 senior unsecured debt rating; b2 notional Baseline Credit Assessment and b1 Adjusted BCA.
ETI’s subsidiaries operate across 38 countries, including 35 African countries, and total assets of $28.9bn as of March 2025, details from the rating note highlighted. Moody’s said the decision to change the outlook to stable on the long-term issuer and senior unsecured ratings reflects ETI’s resilient financial performance.
The rating upgrade also takes into consideration higher dividends being upstreamed to ETI, resulting in lower double leverage and reduced refinancing risk.
The rating adjustment also reflects an expectation that the recapitalisation process of Ecobank Nigeria Limited will be completed by the end of 2025, with limited impact on the group’s financial fundamentals.
“The stable outlook also captures our expectation that a series of capital-boosting initiatives and actions to cure Ecobank Nigeria’s total capital position will be completed before the end of 2025”, according to the ratings agency.
In May 2025, ETI received shareholder approval to raise $250 million in Additional Tier 1 (AT1) capital and announced the launch of the transaction effective 9 July 2025, of which a portion is expected to be downstreamed to Ecobank Nigeria as AT1 capital during Q3 2025.
Ecobank Nigeria’s plan to raise $200m in AT1 capital was noted in the rating note. The ratings analysts said they consider
“We also note that Ecobank Nigeria’s recent successful offer to tender $150m of its February 2026 $300 million notes and consent to remove the capital adequacy ratio covenant from this bond’s terms alleviates risks of an event of default in Nigeria that would trigger cross default at the ETI level. Over the past year, ETI has shown resilience in its financial performance, which supports our change in outlook to stable. Liquidity risks are being moderated by the group’s gradually improving profitability during 2024 and Q1-2025.
“This has translated into a 22 per cent increase in dividends upstreamed to ETI during 2024, these being received from 22 dividend-paying subsidiaries compared to just 14 in 2021,” the rating commentary revealed.
In turn, albeit high, ETI’s double leverage ratio, which measures the liquidity risk taken on by the holding company, as a result of it borrowing in order to invest in the equity of its subsidiaries, has eased to 168 per cent as of December 2024 from 173 per cent in 2023.
Additionally, the stable outlook reflects reduced liquidity risk at the holding company level with the refinancing of short-term liabilities in 2024 with longer-term funding.
Moody’s said this is underpinned by demonstrated market access, notably through senior unsecured notes issuance of $400m in October 2024 and a tap increase of $125m in May 2025, maturing in October 2029.
ETI’s B3 long-term issuer ratings affirmation reflects the affirmation of the group’s b2 notional BCA; the affirmation of the group’s b1 adjusted BCA as captured by a one-notch uplift for affiliate support, reflecting Moody’s assessment of a moderate probability that the firm’s major institutional shareholders would extend support to the group. Moody’s said asset quality for the group has improved over recent years.
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