Abiodun Sanusi, Nigerian Newspapers

Abiodun Sanusi, Nigerian Newspapers

Banks reject costly deposits over CBN's policy - The Nation Newspaper

Banks reject costly deposits over CBN’s policy

10.9.2019

Banks reject costly deposits over CBN’s policy

BANKS are rejecting high interest-yielding deposits as they countdown to the Central Bank of Nigeria (CBN) policy mandating them to give out

Speaking on the options before the banks and the economy, Sanusi said the strategy adopted by each bank depends on its business decision.

He said banks that are happy with their risk asset positions and not keen on lending more are already shedding deposits.

Treasury bills yields remained pressured as average yield across tenors dipped further by 51 basis points week-on-week to settle at 13.3 per cent on Friday from 13.8 per cent the previous week.

Continuing, he said that a bank that is skeptical of its risk, can reduce its deposits and still maintain the required loan to deposit ratio.

He said: “A lot of manufacturing companies suffered interest rates at 23 per cent before the end of recession. That affected a lot of the profitability and capability to payback their loans and default rate increased. With this policy, banks have started to create a restructuring and a longer term loan that those businesses deserve.

He said the population growth of Nigeria is three per cent per annum adding that any growth below three per cent means the economy is decelerating on a per capital income bases.

Sanusi said: “Once you have a high interest rate regime at the risk free level, it affects the entire economy because the bank buys their credit based on what the risk free rate is. If it is 15 per cent, definitely they would lend to corporates higher than that because of the credit risk premium they need to get for extending credit to the corporate sector which is why it has been challenging for the banks to lend at a single digit rate.

“We need to diversify our economy which means both the private sector and government need to implement policies that would reduce our consumption of importable products so that we demand less foreign currencies. We need to focus on boosting our production rate.”

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