CBN Pursues States and Farmers For Unpaid Loans Totaling $600 Billion

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To recoup the loans it issued as part of its development financing operations, the Central Bank of Nigeria (CBN) has launched an aggressive campaign.

State governments are at the top of the list of debtors because their monthly Federation Account Allocation Committee (FAAC) accruals are already being immediately debited each month. The charges will apply for six months.

Yusuf Yila, Director of Development Finance at the CBN, made this announcement yesterday in Abuja following a meeting of the Monetary Policy Committee (MPC), however he did not identify the debtor states.

Commercial Agric Credit (CAC) and the Anchor Borrowers Programme (ABP) were two of the intervention programs mentioned by Yila. She added: “Everyone (or state) that got that loan (ABP) is going to pay. Our BVN is theirs.

These people, to which Yila refers, are smallholder farmers who have not repaid state governments for agricultural funding they obtained via the ABP.

The CBN director further stated that the Economic and Financial Crimes Commission (EFCC) and the central bank were working together to ensure the repayment of the loans.

Yila claimed that while the ABP loan repayments were especially subpar, those of CAC were nearly perfect.

The CBN distributed over N1 trillion under the ABP, but only N400 billion was recovered. However, the bank lent out approximately N800 billion and received N700 billion under the CAC.

“We have begun recovering loans from state governments,” he said. We have been working on a debt workout program with them, and we are immediately deducting the loans from their monthly FAAC accruals.

“If a state government has borrowed N1 billion and is now in default, we would debit them N150 million per month for the next six months. Therefore, we have begun that initiative.

“As a result, all loans that were provided through any of our assistance programs must be repaid.

“There is no mercy at all. We’ve begun, and we’re in recovery mode. We have started to recover the loans here at development finance.

The ABP is one of our initiatives’ main consumption components. Over N400 billion of the N1 trillion we lent for the ABP has been reimbursed.

“Every single individual or state who took out that debt (ABP) will pay. Our BVN is theirs. In reality, we have already begun putting the Global Standing Instruction into practice (GSI).

“We’ll keep pulling the account in the bank they borrowed from or in whichever bank they have an account. We will retrieve any funds we discover in that account.

We collaborate with the EFCC. The CBN governor has given his approval for the EFCC and CBN to work together on loan recoveries.

Yila added that the performance of the loan facilities offered to both consumers and enterprises has been satisfactory.

Out of the N9 trillion intervention fund to promote economic growth, he claims that around N5 trillion is still subject to a moratorium.

Another CBN employee who did not want his name published claimed that state governments had used an intervention facility for projects but had not paid it back.

The states opted to fight back by requesting a reduction in the bank’s authority, he said, adding that “the CBN wrote to the states reminding them of payment as per our recovery drive.”

The staff member brought up the Senate’s Tuesday discussion on limiting the governor of the Central Bank of Nigeria’s (CBN) authority.

Haruna Mustapha, the CBN’s Director of Banking Supervision, spoke on the effects of the central bank’s interest rate increase on Tuesday.

According to Mustapha, “banks will reprice current loans to borrowers and will generate more profit from interest levied on loans.”

This will “be transmitted to bank clients and this will increase the cost of borrowing,” he claimed.

He added that the CBN had given banks permission to raise interest on savings accounts to 30 percent effective and that “interests on government securities will also go up.”

We raised it from 10% to 20%, and it makes sense that because we raised the MPR yesterday (Tuesday) to 15.5%, the situation will alter. The start of September,” declared Mustapha.

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