What Does the IFC, CBN Local Currency Lending Mean for Private Businesses?

The International Finance Corporation (IFC), a member of the World Bank Group, and the Central Bank of Nigeria (CBN) have signed an agreement to IFC increase local currency lending. This is to enable private businesses in Nigeria to grow and thrive. 

The financing arrangement according to reports, will allow IFC to manage currency risks and increase its investment in Nigerian naira across priority sectors of the economy.

These sectors include agriculture, housing, infrastructure, energy, small and medium enterprises and the creative and youth economy.

Speaking on this arrangement, Yemi Cardoso, CBN governor stated.

“This pioneering initiative between the IFC and CBN will unlock much-needed long-term local currency financing for private businesses in Nigeria at economically viable rates.

“This collaboration marks significant progress in the CBN’s commitment to delivering innovative development initiatives through reputable third-party service providers, moving beyond traditional intervention programs. It will serve as a catalyst for economic growth and advance the Federal Government’s agenda for economic diversification.” He concluded.

In his words, Makhtar Diop, IFC Managing Director while speaking on the partnership noted that:

“Expanding access to affordable local currency financing for small businesses in Nigeria is essential for IFC to address the increasing demand for diverse funding options and to better manage currency risk.

“Our partnership with the Central Bank of Nigeria will enhance lending in Nigerian naira, fostering economic growth and creating jobs across the country.”

What is the IFC?

The International Finance Corporation (IFC) is the largest global development institution focused on the private sector in emerging markets. The corporation is interested in using its capital, expertise, and influence to create markets and opportunities in developing countries.

The corporation currently operates in over 100 countries and has an active portfolio of investments in Nigeria of up to $2.13 billion. This makes Nigeria the second highest recipient  country in Africa.

Reasons For the Financing Arrangement

The IFC aims to significantly scale up its financing of critical sectors in Nigeria, with a goal of providing more than $1 billion in the coming years to private businesses in the agriculture, housing, infrastructure, energy, small and medium enterprises and the creative and youth economy.

Additionally, major reason for this financing is that all these sectors require local currency financing, and IFC’s partnership with the CBN is a key tool in expanding access to such financing for private individuals in order to address the increasing demand for diverse funding options and to better manage currency risk among private businesses.

Also, Nigeria is currently facing an economic crises which has increased the need for injection of funds to reinvogorate the economy especially through thee private sector, hence the need for these kinds of agreements by the CBN.

Significance for Private Businesses

In 2024, the IFC committed a record $56 billion to private companies and financial institutions in developing countries, leveraging private sector solutions and mobilizing private capital to create a world free of poverty on a livable planet
The IFC said it would continue to leverage innovative financial instruments and strengthen partnerships to meet the growing demand for more local currency financing in emerging markets.

Furthermore, Under this arrangement, private businesses in the target sectors would have access to funds to scale up business operations.

This would also help create more jobs in the private sector while also maximizing profit and sustainability while on the long run reducing the country’s poverty rate.

 

 

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