by Tunji Andrews

The Central Bank Governor, Mr Godwin Emefiele, has announced that the apex bank would continue to make policies that would strengthen the nation’s banking sector. Emefiele said this in Washington DC when he briefed newsmen on the outcomes of the Annual Meetings of the World Bank and IMF in Washington DC.

This however may be in contrast with the realities, as even though many experts believe the banking sector needs strong regulation to avoid another financial crisis, others think they are being over-regulated and coerced.

Following the crisis that rocked the sector and the collapse of top banks in the country in 2009, the Central Bank of Nigeria introduced various reforms and policies in order to avoid recurrence. Nonetheless, this is seen by some analysts and industry watchers as coercion rather than collaboration between the CBN and the banks.

These regulations have thus far placed steeper rules for banks and also cut slim many revenue sources. The general impression is that Nigerian banks are struggling to remain profitable under the weight of heavy regulations by the Central Bank of Nigeria. In comparison with other banks on the continent, the capital requirements for Nigerian banks are higher than those of their peers in the continent, but said this was justified given the relative big size of the Nigerian economy.

Nigerian banks are required to hold a higher proportion of customer deposits in low yielding liquid assets since the CNB requires a higher liquidity threshold than other regulators on the continent. This is because the Nigerian banks not only have to hold more liquid assets than their Sub Saharan African peers by virtue of their higher liquidity ratio, but also have to keep a percentage of their deposits in a zero-interest-yielding CRR account at the CBN.

Mr. Emefiele at the annual event said, “The banks are practically financial catalysts and we know that we need to give them support. We need to encourage them. We need to do different things to encourage them to look at the direction we think will engender inclusive growth and job creation for our people. We have been in the fore front of ensuring that with strong regulations in Nigeria we will continue to strengthen those regulations to ensure that financial system stability is sustained.”

He also said, “The fact that I said that we will strengthen regulation does not mean that those regulations will be targeted at making life difficult for the banks”. Stating that there would be regulations to strengthen the financial system such that the system would be able to witness any shock, while confirming that the apex bank would continue to take certain actions given some of the lessons it learnt in the course of the meeting.

Emefiele said that at the last Monetary Policy Committee meeting there were discussions on how to support the banking sector to help the real sector of the economy.
He said the Central Bank would work out avenues to encourage banks to lend to the real sectors of the economy.

“We are talking about the manufacturing sector, agricultural sector and all that.

“You are also aware of some of the targeted interventions that we are involved in.

“We are trying to make sure that we direct people’s attention to areas that we think will contribute to inclusive growth and job creation in the economy.

“We will continue to do all those and we are pretty much optimistic that we are going to see positive results in the near future,” he said.

YEditor