CBN to refund banks cash reserves to boost real sector credit growth

The Central Bank of Nigeria (CBN) has disclosed that banks which bring proposals for funding of new projects or expansion of existing ones in agriculture and manufacturing sectors will be refunded the percentage of total deposits kept as reserve cash with the CBN, otherwise referred to as cash reserve ratio (CRR).

The apex bank said that the objectives were to spur bank lending and expand credits to high-impact agriculture and manufacturing sectors capable of creating jobs, boost economic growth, and reduce dependence on imported commodities.

Speaking at the annual bankers’ dinner held in Lagos on Friday, CBN governor, Mr Godwin Emefiele, said that at its July 2018 monetary policy committee (MPC) meeting, the apex bank pledged to refund 100 per cent total CRR to banks under certain conditions.

He said, “to spur bank lending to high-impact sector, the bank, at its July 2018 MPC, pledged to refund CRR to banks under certain conditions. Banks that bring proposal for funding of new projects or expansion of existing ones in agriculture and manufacturing sectors will, accordingly, qualify for CRR refund of up to 100 per cent. It is our expectation that banks would use this opportunity to expand credits to the real sector.”

Commercial banks keep 22.5 percentage ratio of their total capital with the CBN as Cash Reserves which they are not allowed to use for any purpose. But now the apex bank said such dormant funds would be released to banks that bring proposal for funding of new projects or expansion of existing ones in agriculture and manufacturing sectors.

The governor said that given the global and   domestic   headwinds being faced as a nation, and the volatility that is being experienced in the crude oil market, the bank has no other option but to work very hard to spur job creation by reviving agricultural and industrial activities in the country.

“If we continue to support the growth of small holders farmers, as well as   help   to   revive   palm, oil   refineries,   rice   mills,     cassava   and   gelato processing factories, you can only imagine the amount of wealth and jobs that will be created in the country,” he stated.

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Given increased oil related inflows and contained import bill, Emefiele said that sustaining a stable exchange rate   is   of   overriding   importance   to   CBN,   even   as   the bank continues  to   put measures in place to shore up reserves.

Emefiele also threatened to sanction any bank, company or foreign exchange operator that engage in any act that undermines the policy of 41 items not allowed in the official foreign exchange (FX) window.

According to the CBN governor, such sanctions would include, but not limited to, prohibiting the banks from maintaining any bank accounts for such institutions or persons in Nigeria.

“CBN’s   Economic   Intelligence   and   Banking   Supervision Departments will work very hard with the EFCC to expose and sanction any bank, company or Fx operator that colludes with unscrupulous individuals /companies to undermine the policy on 41 items,” Emefiele vowed.

Given the remarkable success that has been achieved in stimulating domestic production of goods such as rice, cassava and maize, as a result of the restrictions placed by  the CBN on access to forex for 41 items,  the CBN according to him, intends to vigorously ensure that this policy remains in place.

He reiterated that, “additional efforts would be made to block any attempts by unscrupulous parties (both individuals and corporates) that intend to find other avenues of accessing forex, in order to import these items into Nigeria.