Mon­e­tary Pol­icy Spurs Lend­ing to N25tn in Nine Months

THISDAY - - FRONT PAGE - Obinna Chima

The to­tal value of bank­ing sec­tor credit to the pri­vate sec­tor rose by 2.6 per cent or N646 bil­lion to N25.466 tril­lion at the end of Septem­ber, up from the N24.819 tril­lion recorded at the end of Au­gust.

The Cen­tral Bank of Nige­ria (CBN), in its money and credit sta­tis­tics ob­tained yesterday, at­trib­uted the rise in lend­ing to the ag­gres­sive push for banks to lend to the real sec­tor of the econ­omy, which ne­ces­si­tated the hike in the min­i­mum loan-to-de­posit (LDR) ra­tio.

The cen­tral bank had raised the min­i­mum LDR to 65 per cent, with a De­cem­ber 31, 2019, up from the 60 per cent it had pre­scribed.

It re­cently deb­ited 12 banks a to­tal of N499 bil­lion for fail­ing to meet the Septem­ber 30 dead­line to meet the LDR tar­get.

The pol­icy was to en­cour­age lend­ing to SMEs, re­tail, mort­gage and con­sumer lend­ing.

The CBN had vowed to im­pose stiffer sanc­tions on any com­mer­cial bank and black­list cus­tomers that flout the pol­icy, af­ter it deb­ited the 12 banks for de­fault­ing.

It had warned that any bank found to be dis­burs­ing loans to cus­tomers who sub­se­quently in­vest such funds in trea­sury bills and other money mar­ket and cap­i­tal mar­ket se­cu­ri­ties, would be sanc­tioned and the cus­tomer black­listed.

The warn­ing came fol­low­ing in­di­ca­tions that some com­mer­cial banks, in a bid to meet the ear­lier Septem­ber 30 dead­line, gave loans to some cus­tomers to

pur­chase trea­sury bills.

The Di­rec­tor, Cor­po­rate Com­mu­ni­ca­tions, CBN, Mr. Isaac Oko­roafor, had said: “Any cus­tomer found ar­bi­trag­ing will be black­listed, names pub­lished and the banks pe­nalised. The essence of this is to stop ar­bi­trage prac­tices by the banks.

“In other to meet up the LDR pol­icy, they are avoid­ing giv­ing loans to the real sec­tor and in­stead are giv­ing loans to spec­u­la­tors who now go to buy trea­sury bills.

“The whole aim of this pol­icy would be de­feated by this kind of prac­tice. So, the CBN will deal with any bank that tries to cir­cum­vent this pol­icy.”

Fur­ther­more, the cen­tral bank data showed that broad money (M2), which gen­er­ally is made up of de­mand de­posits at com­mer­cial banks and monies held in eas­ily ac­ces­si­ble ac­counts in­creased to N27.655 tril­lion in the re­view month, higher than the N27.556 tril­lion it was the pre­vi­ous month.

How­ever, while banks’ re­serves im­proved slightly to N4.677 tril­lion at the end of Septem­ber, from N4.642 tril­lion, quasi money, which are highly liq­uid as­sets other than cash, that can be quickly con­verted, also im­proved to N16.534 tril­lion, up from N16.326 tril­lion at the end of Au­gust 2019.

But, nar­row money (M1), which in­cludes all phys­i­cal monies such as coins and cur­rency along with de­mand de­posits and other as­sets held by the cen­tral bank dropped to N11.121 tril­lion, from N11.230 tril­lion the pre­vi­ous month. Cur­rency-in-cir­cu­la­tion also re­duced to N2.006 tril­lion in Septem­ber, com­pared with the N2.019 tril­lion re­alised the pre­vi­ous month.

In ad­di­tion, de­mand de­posits, which are funds held in an ac­count from which de­posited funds can be with­drawn at any time with­out any ad­vance no­tice to the de­pos­i­tory in­sti­tu­tion, fell marginally to N9.496 tril­lion in Septem­ber, com­pared with the N9.576 tril­lion recorded the pre­vi­ous month.

The credit sta­tis­tics also re­vealed that CBN bills held by money hold­ing sec­tors re­duced to N35.30 tril­lion in Septem­ber, com­pared with the N35.215 tril­lion achieved the pre­vi­ous month.

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