Abuja, Nigeria – The Central Bank of Nigeria (CBN) has announced a major shift in its financial intervention strategy, set to begin in February. Under the COVERLG Autonomy initiative, the apex bank will transfer approximately N5.5 trillion from its development finance operations to private banks and Development Finance Institutions (DFIs). This move marks a significant step towards refocusing the CBN’s efforts on its core mandate—ensuring monetary and price stability.
A Strategic Exit from Direct Development Finance
For years, the CBN has played a direct role in providing concessional loans to critical sectors such as agriculture and small and medium-sized enterprises (SMEs). However, following recommendations from the International Monetary Fund (IMF), the bank is now transitioning out of this role. The new system will see DFIs, in collaboration with the Ministry of Finance and private banks, take over the management and disbursement of these funds.
CBN Governor Olayemi Cardoso emphasized that this transition aligns with global best practices and will allow the bank to concentrate on regulating and stabilizing Nigeria’s financial sector.
“Our goal is to ensure an efficient and sustainable system where the right institutions manage development finance while the CBN remains focused on monetary policy and financial stability,” Cardoso stated.
Impact on Agriculture, SMEs, and Financial Institutions
The shift in fund allocation raises concerns about the availability of credit for sectors that have traditionally relied on CBN-backed interventions. To minimize disruptions, the apex bank has outlined a structured process for transferring its loan portfolio. Only financially stable institutions will be allowed to absorb and manage these funds, ensuring their efficient utilization.
Additionally, the CBN has launched an aggressive recovery drive for outstanding loans from previous development finance programs. This is part of broader efforts to curb inflation and manage Nigeria’s credit environment effectively.
Refocusing on Monetary Policy and Market Stability
The CBN has already taken steps to implement this transition. A recent example is its donation of 2.15 million bags of fertilizer, worth over N100 billion, to Nigerian farmers through the Federal Ministry of Agriculture and Food Security. This move aims to support food production and address inflationary pressures in the agricultural sector.
Furthermore, financial markets have reacted positively to the CBN’s policy realignment. In a recent Treasury Bills auction on January 8, 2025, the bank secured N1.47 trillion in subscriptions for 364-day Treasury Bills at a 22.6% stop rate—an indicator of strong investor confidence in the Nigerian economy.
What This Means for the Future
As the CBN phases out its direct involvement in development finance, businesses and individuals seeking funding will need to engage with DFIs and private banks. This shift is expected to create a more market-driven financial landscape, where institutions with the right expertise take the lead in providing sector-specific support.
By focusing on its regulatory mandate, the CBN aims to enhance economic stability, promote sustainable financial practices, and create an environment conducive to long-term growth. The COVERLG Autonomy initiative represents a critical step in modernizing Nigeria’s financial system, ensuring that development finance is managed by institutions best suited for the task.
With the transition set to take full effect in February, stakeholders in key sectors must adapt to the evolving financial landscape. The success of this policy will depend on how effectively the new framework is implemented and how well financial institutions step up to fill the gap left by the CBN.
