The decision of the Central Bank of Nigeria (CBN) to suspend new intervention programmes is reshaping debate on the role of the apex bank in economic development.
Speaking at the 303rd monetary policy committee (MPC) meeting in Abuja on Tuesday, CBN Governor Olayemi Cardoso revealed the scale of unrecovered loans from past schemes and argued that halting fresh interventions may be necessary to restore market discipline and stabilise monetary policy.
EDITOR’S PICKS
According to Cardoso, the CBN issued N10.93 trillion in interventions over the past decade across agriculture, manufacturing, aviation, power, SMEs and other sectors. Yet N4.69 trillion — 43 percent of total interventions — remains outstanding, reflecting a longstanding problem of poor repayment culture.
The apex bank’s governor noted that since taking office, the bank has recovered about N2 trillion, but the backlog remains significant enough to prevent new programmes.
Beyond the fiscal burden, the figures illustrate how intervention lending became detached from commercial principles, creating what he described as a moral hazard in which beneficiaries expected leniency or outright write-offs.
Ending Market Distortions and Returning to Core Mandates
Cardoso argued that the inability to fund new interventions is, ironically, “working” because it stops the central bank from repeating policies that distorted the market.
Over the years, many interventions were offered at subsidised rates far below inflation, undermining commercial banks’ lending incentives and weakening monetary policy transmission.
Economists have warned that the liquidity injected through these schemes often fuelled inflation and blurred the boundaries between monetary and fiscal responsibilities.
In its ‘Nigeria Development Update (June 2022): The Continuing Urgency of Business Unusual,’ the World Bank said, “The CBN’s continued provision of heavily subsidised funding to certain sectors undermines commercial banks that lend on a risk-adjusted pricing basis and needs to be dialled down.”
It added: “The Monetary Policy Committee has strongly encouraged the central bank to continue its development finance interventions, including a policy tool to help tame rising inflation. However, this stance fuels inflation in the short term from elevated aggregate demand and weakens the ability of the central bank to control inflation efficiently.”
By stepping back now, the CBN is re-establishing its orthodox mandate: price stability, a predictable interest-rate environment and stronger monetary-policy credibility.
The new approach places greater responsibility on the private sector and fiscal authorities. Cardoso said the CBN will now “use its influence” to encourage private investment rather than finance sectors directly.
While some industries, especially agriculture, may feel the absence of cheap CBN credit, analysts say the long-term benefits of a disciplined, market-based credit system outweigh the short-term pain. Private lenders, rather than the CBN, are expected to assess risk, price loans appropriately and stimulate competition.
FURTHER READING
For the first time in years, Nigeria may be transitioning away from central-bank-driven development financing towards a model where fiscal policy leads economic stimulation and the market allocates credit.
Philip Ibitoye is a Special Correspondent with EKO HOT BLOG. Click here to find daily analysis and critical insight on trending issues in Lagos and other parts of Nigeria.
Click here to watch the video of the week below:
