Follow Us on Google
The credit facility provided by the CBN to micro, small, and medium-scale enterprises in agriculture and manufacturing could backfire, warns the World Bank.
Aside this, it could also affect the apex bank’s oversight role in the banking sector, its objectives as an operator of development financing schemes and its interests as a shareholder in development finance institutions.
These warnings are contained in the bank’s report titled Nigeria Economic Update.
It states: “The CBN interventions could undermine the effectiveness of the credit transmission channel of monetary policy and the signalling role of changes in the Monetary Policy Rate.
“The interventions could crowd out private-sector funding by discouraging banks from venturing into under-served markets without subsidies when the schemes are not properly targeted, as well as creating expectations for borrowing at single-digit rates.”
In the Nigeria Economic Update reported, the global bank explained that the development could also reduce the CBN’s operational surpluses, a share of which was normally transferred to the Federal Government as part of its independent revenue. It was also stated that financially supporting the MSMEs could diminish transparency and accountability in the allocation of public resources by circumventing the government’s standard budgetary process, the bank said.
