Nigeria debits banks N460bn for missing regulatory targets

Isola Moses | ConsumerConnect

For missing regulatory thresholds in line with the country’s monetary policies on cash-reserve and loan-to-deposit ratios, the Central Bank of Nigeria (CBN) has taken N460 billion ($1.2 billion) from the Deposit Money Banks (DMBs) as additional cash reserves, according to close sources on the matter.

Report states that the accounts of about 25 commercial lenders held with the CBN were debited by the Bankers’ Bank as the regulator Thursday and Friday (June 4 and 5, 2020), the people said, asking not to be identified because the matter is confidential, according to Bloomberg.

The CBN’s latest action reportedly followed a similar move in April 2020, when the regulator took N1.47 trillion from almost 30 lenders (banks) for falling short of cash-reserve and loan-to-deposit ratios, according to close sources at the time.

Central Bank of Nigeria Headquarters, Abuja, FCT

Recall that the Central Bank of Nigeria in January this year increased the cash-reserve requirement to 27.5% from 22.5% to curtail excess liquidity in the banking sector, which it said could stoke inflation.

In 2019, it equally boosted the loan-to-deposit ratio 65% with a view to acclerating lending.

However, report relates that some banking and finance industry analysts have said these are “contradictory policies that are almost impossible to meet.”

Mr. Godwin Emefiele, Governor of CBN, in May was said to have kept the cash-reserve ratio at 27.5%, which is considered more than 10 times that of South African banks, while unexpectedly reducing the benchmark interest rate to try and help avert a recession in the nation’s economy.