CBN orders lending to agric sector, inflation rises on food items

The Central Bank of Nigeria (CBN) has directed deposit money banks to increase lending to the agricultural sector to check rising food prices.

This followed its 262nd Monetary Policy Committee (MPC) meeting held from Monday, July 23 to Tuesday, July 24, 2018.

It pegged the interest rate of such lendings at nine per cent per annum with a minimum tenor of seven years and a moratorium (commencement of loan repayment) of two years.

This was disclosed by CBN’s Communiqué No. 119 of the MPC meeting for July, which also revealed that month-on-month inflation on food items increased from 1.33 per cent in May to 1.57 per cent in June 2018, representing a 0.24 per cent increase.

During the same period, core inflation also rose by 0.05 per cent from 0.98 per cent in May to 1.03 per cent in June.

In view of the rising month-on-month inflation rate, amid the slowly declining year-on-year headline inflation, indications were that inflationary pressures are rebuilding in the domestic economy.

“In addition, as a way of encouraging commercial banks to increase lending to the manufacturing and agriculture sectors, a differentiated dynamic cash reserves requirement (CRR) regime would be implemented,” it said.

This, the CBN explained, is to direct cheap long-term credit at nine per cent, with a minimum tenor of seven years and two years moratorium “to aid employment generation in the Nigerian economy,” the communiqué added.

The apex bank said details of the framework were being worked out by its Banking Supervision, Monetary Policy and Research departments and would be made public soon.