N400bn Banks’ Funds Idle at CBN


By Emele Onu and Obinna Chima, 08.19.2010 


Banks are said to have stacked an average of N400 billion at the Central Bank of Nigeria (CBN), over the past four months, in response to the operating environment that seems to discourage lending.


President of the Chartered Institute of Bankers of Nigeria (CIBN), Mr. Laoye Jaiyeola, told THISDAY in an exclusive interview that banks have demonstrated their preference for the CBN window to lending to the private sector, because of the poor business climate that makes lending high risk.
Nigeria’s external reserves stood at $38 billion yesterday, from $38.2 billion earlier in the week. It was about $37.1 billion at the end of last month.


The reserves have fallen sharply since last year due to demand pressure. Analysts said there has been increase in forex demand by importers, as well as a reduction in accruals from oil export revenues; both factors affecting the level of reserves. At $38 billion, the CBN said the country’s reserves could still finance more than 17 months of import.


The monetary authority had, in an effort to stimulate private sector credit, reduced the standing deposit facility (SDF) from 2 per cent to 1. The move was to discourage banks from keeping their cash in the CBN coffers and by so doing stimulate lending to critical economic sectors. Notwithstanding the drop in the SDF by 100 basis points, banks continued to find solace with the CBN.


Jaiyeola said: “I tell you one thing, almost all the banks sleep with huge billions of naira. And I tell you these banks would not want to keep this money at zero per cent, if things were normal. The desire ordinarily is to deploy the fund. But banks have to ensure that when they deploy the fund, they get their money back. If the government succeeds in creating an enabling environment for business and confidence returns in the system, we will see improvements in credit activities.” The CIBN boss, who is also the Managing Director and Chief Executive Officer of Kakawa Discount House Limited, tasked governments at all levels to take up the responsibility of creating a favourable environment where businesses can flourish.


“It is the responsibility of government to ensure that every business operates in an environment where they can thrive. It is the responsibility of government to ensure that the rule of law, security and basic infrastructure are all available. People always say that banks don’t go into certain sectors. Believe you me, banks would only go to anywhere they are sure they can always get their money back and make their profit,” he added.






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