Development Finance
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Refinancing and Rediscounting Scheme
Banks in Nigeria have continued to provide mainly short-term loans for trading and service activities based on their mobilization of short-term funds. Medium and long-term lending is very low and this has continued to hamper the development of the real sectors of the economy. The refinancing facility of the CBN is a special window with effect from January, 2002 for banks that are willing to advance loans for medium and long-term investments in agriculture, semi-manufacturing and manufacturing. Eligible projects under the Scheme are those with a tenor of 5 years and above.
The refinancing facility is concessionary and the rate is 2% points below the Minimum Rediscounting Rate (MRR). The window applies to facilities that must have been held for not less than one year and enables banks to access funds up to 60% of qualifying loans.
The discount window resolves two problems. It provides alternative sources of funds for lending by banks and it offers additional potential for increased business activities and profit earning. To farmers, it offer concessational interest rate on term loans for agricultural investments and afford them to conveniently repay the loans as well as to make profits. However, it may induce too much capital-intensive production.
The RRF guideline is currently being reviewed to make it easier for banks to take advantage.
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| Facts : 1/16/2006 |
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| The Cowry:The Cowry has, for centuries, served our people as an important form of currency. In 1860 the following system was in use: 40 Cowries formed a "String"; 50 Strings made a "head" and 10 heads comprised a "bag". In Lagos in 1865 one bag of 20,000 shells was exchanged for one or two English Pounds. |
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