CBN mulls soft credit for local milk producers

The Central Bank of Nigeria (CBN), at the weekend said it will be extending low-interest credit  to local milk producers to discourage imports after it curbed access to forex for the sector. 

The bank said in a statement that it had met with milk importers, after the currency restriction was announced this week, to offer them cheap credit to try and boost output locally instead of relying on “endless” imports.

Determined to reduce imports of products that can be produced locally and to conserve dollar reserves, the bank has also offered cheap credit to rice, tomato and starch importers for the same purpose.

Nigeria spends more than $1 billion per annum on milk imports. President Muhammadu Buhari has made diversifying the economy away from oil a central policy of his administration, but a recent recession has slowed plans having slashed government revenues and triggered a series of currency devaluations.

The government is seeking to revive the economy, but lending to businesses has remained low  prompting the CBN to announce a series of policies aimed at forcing banks to give credit to help jump start the economy.

Interest rates in Nigeria have been stuck at double digits as the central bank struggles to curb inflation, support the naira, Nigeria’s currency and keep bond yields high to attract foreign investors.

But it has been offering subsidised credit to specific sectors such as agriculture and manufacturing through its intervention programmes while maintaining benchmark rates high at 13.5 per cent.

Nigeria relies on imports for most of what its 180 million population consumes. In 2015, the apex bank had restricted access to forex for 41 items which it said can be produced in Nigeria. It said the idea to add milk to the forex restriction list arose from the success of the currency restriction policy and the large amount spent on imports.