CBN’s intervention funds fuelling inflation, World Bank warns Nigeria

The World Bank has said that the Central Bank of Nigeria’s development finance intervention is fuelling inflation in the short term and weakening the ability of the apex bank to control inflation.

According to the global bank, the CBN’s continued provision of subsidised funding to certain sectors has to slow down as it is undermining the ability of commercial banks to lend on a risk-adjusted pricing basis. It added that the apex bank’s disbursement in the private sector as its share of private sector credit rose from 6.5 per cent in 2019 to 10 per cent in 2021.

It disclosed this in its ‘Nigeria Development Update (June 2022): The Continuing Urgency of Business Unusual’. It 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.

“CBN disbursements are growing in funding the private sector, with the CBN’s share of private sector credit rising from about 6.5 per cent at end-2019 to 10 per cent by end-2021. Although some of the COVID-related tools deployed by the CBN are being phased out (e.g., the moratorium on principal repayments on CBN-funded credits lapsed in March 2022), the Central Bank has introduced new intervention facilities without a publicly available evaluation of their impact.