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CBN to restrict banks’ access to government securities

The Monetary Policy Committee (MPC) has directed the Central Bank of Nigeria (CBN) to introduce measures that will reduce deposits money banks’ access to government secured treasury bills.

The MPC frowned at the banks’ low appetite to invest in the productive sectors of the economy, prefering to lend to government.

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Thus rising from its May 2019 MPC Meeting, the committee said this practice must stop as it adds little value to grow the economy.

“The MPC has frowned at that and has directed the management of CBN to put in place policies or regulations that will restrict the banks from unlimited access to government securities,” the  CBN Governor, Mr. Godwin Emefiele told journalists yesterday during the MPC press briefing.

Meanwhile the MPC for the second consecutive time retained the lending rate at 13.50 percent, retained the asymmetric corridor of +200/-500 basis points around the MPR; retained the Credit reserve ration at 22.5 per cent; and retained the Liquidity Ratio at 30 per cent.

The MPC feels maintaining monetary policy rate at its present level was essential for better understanding of the momentum of growth before determining any possible modifications.

They also felt that retaining the current policy stance provides an avenue for evaluating the impact of the Bank’s intervention policies to support lending to the priority sectors of the economy.

The MPC reckoned the banks have abused the Treasury bill investments window and have refused to work to stimulate growth.

“Yes, according to our own regulation there is a particular minimum percentage of Treasury Bills or Treasury Security or government securities that a bank must invest in order to remain liquid. We have observed, and unfortunately and increasingly so that the banks, rather than even focusing on granting credit even to the private sector, they tend to direct their focus mainly to buying government securities,” Mr. Emefiele said.

 

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