The Monetary Policy Committee (MPC) is using persuasion to get banks away from parking their cash in high-yielding government securities to rather divert these funds to the private sector.
Wednesday 22, May 2019
(Bloomberg) --Nigerian policy makers urged banks to turn on the taps and increase lending to stimulate the economy or have access to a near-risk-free way of making money choked off.
Lenders in the continent’s top oil producer were burnt after sliding crude prices three years ago triggered a surge in bad debts as consumers and companies struggle to repay loans.
Godwin Emefiele, the Governor of Central Bank of Nigeria, said, “For us to achieve growth those whose responsibility it is to provide credit must be seen to perform that responsibility.”
The MPC wants the central bank “to provide a mechanism” for limiting the ability of banks to put customer deposits into government securities, Emefiele said.
The committee held its key interest rate at 13.5 per cent, the lowest level since May 2016, in a bid to contain inflation, while still retaining some room to support the economy.
Emefiele said that with non-performing loans (NPLs) down to below 10 per cent compared with 17 per cent a year or two ago, banks have space to extend more credit for consumer and property loans.
Nigeria’s economic growth slowed in the first quarter after the oil sector, its biggest foreign-exchange earner, contracted.