CBN MPC 2019
Trending Story

CBN exploring legal option to restrict deposit banks’ unfettered access to government security

181

 

  • As MPC holds key rates at 13.5% as inflation persists

 

Nigeria’s Central bank has been authorized to develop a legal framework that will restrict lenders’ autonomous access to government equities, having found that banks have failed to provide credit to the private sector, the major driver of the nation’s economy.

Central bank governor Godwin Emefiele told reporters in Abuja, the nation’s capital that Monetary Policy Committee (MPC) has asked the regulatory bank to provide a mechanism for “limiting deposit money banks’ access to government securities so as to redirect banks’ lending focus to the private sector noting that this would spur the badly needed growth in the economy,” in the view of “the abundant opportunities that available to banks for unfettered access to government securities which tend to crowd out private sector lending.”

Emefiele said this while announcing that the Nigerian central bank on Tuesday has decided to retain its key interest rate amid rising inflation in a nine to two vote. Two who voted against the vote wanted a further 25 basis cut.

It will recalled that the regulator unexpectedly cut the monetary policy rate, a benchmark  used by banks to fix their interest, by five points in March, cutting key rate to 13.5 percent to 14 per cent for the first time in three years.

After considering the necessary variable, MPC consequently decided to hold existing rates by a vote of 9 members out of 11 including MPR at 13.5 percent; Asymmetry corridor of +200 and -500 basis point around MPR; cash reserve ratio (CRR) at 2.5 percent and; liquidity ratio at 30 percent.

Emefiele said that the committee which he serves as a chairman found that rather than performing the responsibility of providing credit to the private sector “that is the engine of growth in the economy”, lenders have “been directing their liquidity to other sectors of the economy”, being the government securities.

According to the re-appointed governor, lending banks in the country have exceeded  the CBN’s minimum percentage of government security instruments they are allowed to invest in order to remain liquid, and “tend to direct their focus mainly on buying government securities.”

To this end,  “MPC asked CBN to think of administrative, regulatory and legal framework to be put in place to ensure that some of the credit risks associated with granting loans to the private sector that ultimately results in NPLs should be mitigated such that when banks decide to begin to lend to private sector, the probability that NPL will rise should be moderated.

“One of the inhibiting factors to growth is the fact that we have not been able to jumpstart the consumer credit and mortgage credit businesses in Nigeria. Management of the bank will think of regulations that would assist people or banks to ensure that consumer credit is improved.

According to him, MPC has frowned at that situation and has directed management of CBN to put policies and regulations in place that would restrict the banks from unlimited access to government securities. It is important and expedient that this committee gives the directive to management because this country badly needs growth.

“For us to achieve growth, those whose primary responsibility that it is to provide credit who act as intermediaries in providing credit and are catalyst to credit must be seen to perform that responsibility,” Emefiele said.

Leave a comment

Related Articles

Billionaire philanthropist Tony Elumelu mulls buying NPFL team

As part of his corporate social responsibility, billionaire banker and philanthropist Tony...

Terry G speaks on Davido, Wizkid, and Burna Boy rivalries, faces backlash from fans

Nigerian music sensation Terry G, also known as the Apako master, has...

Dani Alves pays €1m bail, set to leave Spanish jail

Former Brazil and Barcelona star Dani Alves, convicted of rape in Spain,...

World TB Day: 70 percent of TB cases in Africa now being diagnosed and treated – WHO

The World Health Organization (WHO) has disclosed that about 70 percent of...

13th AAG: Tobi Amusan wins gold in women’s 100m hurdles

The Nigerian sprint star, Tobi Amusan, won gold in the women’s 100m...

FG approves N12.7bln for mass metering of army barracks nationwide

The Federal Government says it has released N12.7 billion to provide electricity...

Women’s Day: Tinubu felicitates women, vows to prioritise their welfare, rights

President Bola Tinubu has promised to prioritize the welfare of women, protect...

All African Games: Nigeria’s Flying Eagles start their campaign on a losing note

The Flying Eagles of Nigeria started their campaign in the men’s football...

EFCC sets up task force to combat dollarization of economy, mutilation of naira

The Economic and Financial Crimes Commission (EFCC) has announced the setting up...

How Bafarawa diverted N4.6bln from ex-NSA for prayers, election, acquire luxury vehicles

A startling revelation has been made about how a former governor of...

CBN redeploys 1,500 staff to Lagos

The Central Bank of Nigeria (CBN) says it has redeployed 1,500 staff...

AFCON: Pres. Tinubu says unimpressed with Super Eagles’ performance

President Bola Tinubu has expressed his displeasure over the performance of the...

I’ve not met a man kind enough to marry —Ini Edo

In a candid revelation, renowned actress, Ini Edo, has hinted about the...

Ogun CP visits shot Nollywood actor, Ijaduade, vows to punish trigger-happy cop

Nollywood actor and Director, Azeez Ijaduade, who was shot “accidentally” by a...

Breaking: Actor, Azeez Ijaduade, allegedly shot by policeman in Ogun

In a shocking incident that has sent shock waves to Yoruba section...

Fast and furious actor, Vin Diesel, accused of sexual assault

Vin Diesel, known for his role in the Fast & Furious Series,...

Anyone asking for money this festive season lacks conscience, fear God – Comedian AY

Amid Nigeria’s challenging economic downturn, renowned comedian, Ayo Makun, popularly known as...

Octogenarian actor, Dejumo Lewis, dies

Nollywood community was on Friday night thrown into grief as the news...

I’m lucky to have you as my wife, Lateef praises Mo Bimpe on 2nd wedding anniversary

Celebrating their second year wedding anniversary, Nollywood actor, Lateef Adedimeji, has expressed...

Frank Edoho faces backlash for controversial remarks on infidelity

Renowned media personality, Frank Edoho, is under fire after making contentious comments...